Your brain is constantly expanding creating millions of associations with your current and past experiences. For instance, when you were picking a name for your child your conversation may have looked like this:
"How about Johnathan?"
"No way! I dated a John in high school and it did not end well."
"Mike?"
"Mike reminds me of that creepy coworker at my last company."
These people were not likely in your mind until the name-game started, but your past associations led to your distaste. The thought of naming your child John would be a constant reminder of that high school experience. You may have met many other Johns that were completely normal, but the one that sticks out was not.
Research has shown that our brains naturally store more negative experiences throughout the day than positive, as they are often the most needing of our attention and therefore, the most vivid. Over time this can have a great effect on our overall happiness and emotional balance. Constantly taking in more negative experiences, as you may guess, can lead to a more negative attitude.
Why does this matter financially? Behavioral finance studies conclude that the pain you feel from an investment loss is two times greater than the joy you feel from investment gain. I speak with many people who are so worried about the next 2008-like crisis, that it impedes their ability to make proper investment decisions today. What's more disheartening is the damage this does to their child's financial life.
"My father never invested in stocks because he lost a lot of money one time and I won't either."
Those that tend to have a negativity bias toward investing typically have very vivid memories of times the stock market let them down. Considering 31 of the last 40 years the S&P 500 produced positive results, shouldn't we have a more positive bias?
Overcome negativity bias
Research shows that teaching yourself and your child to overcome negativity bias can have a great impact on happiness, emotional intelligence and financial success. Here are a few tips:
1. Check-in on your thoughts
Being conscience of your thoughts is the first step in changing your mood and associations. Try to bring more positive experiences to the forefront of your mind each day. The more vivid you make the experience, the more likely your brain to store it.
When you have a positive financial experience, take a few extra seconds to truly enjoy it. Perhaps you received a bonus for your hard work on a project or your investments made 12% this year. The more often you allow these positive experiences into you mind, the less affected you can become by the negative.
2. Link the positive with the negative
While you are taking the time to enjoy that positive outcome, let a past negative experience come into your mind at the same time. Do not let the negative experience take over, but allow your brain to associate the positive experience with the negative. If you have 31 years of positive investment results stored in your brain, the 9 negative years seem less daunting.
3. Make it a habit
Make it a habit to think about the positive parts of your day and help your child do the same. As you tuck him into bed, ask him to recall the positive experiences of the day and how they felt. Helping your child gain a better understanding of the brain and focusing on the positive, gives him a head start toward emotional balance; a great characteristic leading to better financial decisions down the road.
No comments:
Post a Comment