If you’ve been feeling more pessimistic lately, you’re not alone. Even the most optimistic among us are noticing an air of doom and gloom. Many people feel the other shoe is about to drop, whether it’s the next pandemic, social unrest, political upheaval, supply chain disruption, or economic decline. The media constantly reminds us that our health, well-being, and financial future are at risk — 24/7.
However, it’s not just the media that draws us to negativity; we’re drawn to it by nature. Psychologists have found that humans tend to focus on negative information, which can shape our worldview and influence our decisions, including those regarding our finances.
The challenge is that negativity can lead to more negativity. While it’s important to be cautious, it’s equally important not to let pessimism overshadow your financial goals. A defeatist attitude can limit opportunities and hinder growth potential, which is especially important for building wealth.
Understanding the psychology of negativity is the first step to avoiding bias in your financial decision-making.
Why We’re Drawn to the Negative
The human brain naturally responds more strongly to negative information than to positive. This survival mechanism, known as negativity bias, helps us stay alert to potential dangers. Essentially, our brains are wired to notice negative events or threats more readily because they could pose a danger. [1]
The constant stream of negative news from various media channels, including social media, can influence how we perceive the world. This can sometimes lead to a more pessimistic outlook, creating unnecessary anxiety and stress. We may feel that negative events are more common than they are, overshadowing the many positive developments around us.
In other words, it can be argued that it’s not as bad as it seems. The sky isn’t falling, things aren’t getting worse every day, and the world isn’t crumbling around us. In many ways, the world is becoming a better place with a brighter future. Embracing a more balanced perspective can help us recognize the positive trends and developments shaping our world.
Emotions and Money
As financial advisors, we support clients in pursuing their financial goals by assessing their financial needs, developing comprehensive plans, and recommending appropriate investment strategies. Our guidance is based on a proficient understanding of managing money, mitigating risk, and positioning for growth potential. But that’s only one part of our job. Equally important is our ability to listen to clients and build their financial confidence as they make critical decisions for their future. Addressing negative bias is a key component of this process.
Decision-making is inherently emotional. Our choices are influenced by past experiences, observations, hopes, fears, and survival instincts. Money can be particularly emotional because it’s tied to feelings of self-worth, guilt, envy, and more. We work hard for it, measure success by it, and recognize the significant consequences of our financial choices. This emotional weight often leads to ‘what if?’ and worst-case scenario thinking.
Media Literacy as Financial Literacy
Today, financial literacy and media literacy go hand in hand.
It is important to recognize that the media significantly shapes public perceptions of wealth and safety. The media’s focus on sensational and negative news can skew perceptions, making people believe the world is more dangerous and less prosperous than it actually is. That is not to say there isn’t room for improvement. Still, the focus on negativity often overshadows positive trends and achievements that demonstrate substantial advancements in global living standards and safety.
Consider how this bias impacts your personal financial decision-making. If it can affect society and government policies, it can certainly influence your individual choices.
We believe that media literacy, including recognizing negativity bias, is essential for building wealth today. It empowers individuals to be more discerning and make informed financial decisions. By being aware of how media influences perception, you can better navigate your financial journey with confidence and clarity.
Strategies for Overcoming Negativity Bias
Contrary to what many believe, high-net-worth individuals aren’t any less susceptible to negativity bias than anyone else. Individuals with significant assets often develop fears based on perceived risks in market volatility. When a comfortable lifestyle, successful reputation, family wealth, and legacy all depend on your decisions, emotions can understandably run high.
A skilled financial advisor can play a pivotal role in helping high-net-worth clients overcome negativity bias. Here are a few strategies we recommend considering:
Maintain Perspective
Focusing on long-term goals rather than short-term fluctuations can help you clearly see your financial objectives. Your advisor can help you stay grounded by regularly reviewing your financial plan and reminding you of the progress you’ve made toward your goals.
Make Informed Financial Decisions
It’s essential to base your financial choices on comprehensive data and sound analysis. Your advisor can provide insights and recommendations backed by extensive research and experience, helping you navigate complex financial landscapes confidently.
Be Aware of Media Biases
The media often emphasizes negative news, which can distort your perception of the financial world, making it seem like negative events are more prevalent than they are. Your advisor can help you understand the broader context by providing a balanced perspective, helping you focus on factual information that directly impacts your financial strategy.
Understand the Disconnect
There is often a gap between the objective improvements in global standards and the subjective perception of the world’s state. Your advisor can help bridge this gap by highlighting positive economic and social trends that may not receive as much media attention. This understanding can foster a more balanced and optimistic outlook on your financial future.
Moving Forward with Confidence
Understanding and addressing negativity bias is crucial for making sound financial decisions as you work toward your long-term goals. By recognizing how negative news and emotions can influence your perception, you can take proactive steps to maintain a balanced and informed perspective. Partnering with a skilled financial advisor can help you navigate these challenges, providing strategies to focus on long-term objectives, make data-driven decisions, and filter out media noise.
A more positive outlook can open doors to new opportunities and ensure that your financial journey is guided by clarity and confidence. If you need assistance in overcoming negativity bias and optimizing your financial strategy, please reach out to us. We’re here to help you every step of the way.
Sources:
1. https://www.healthline.com/health/negativity-bias
Balanced Wealth Management is a financial advisory firm that serves pre-retirees based in East Greenwich, Rhode Island. The firm creates and maintains wealth for its clients through long-term effective asset management. Their advisors aim to build client relationships based on trust, knowledgeable professional advice, continual communication, and swift personal service. They can be reached at (401) 398-2000, via email at info@balancedwealth.com, or on the web at www.balancedwealth.com.The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This material was prepared by Crystal Marketing Solutions, LLC, and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate and is intended merely for educational purposes, not as advice.