How behavioral finance can derail your savings plans

PHOENIX — Behavioral finance can play a role in anyone’s decisions.

Chasing trends, such as a crypto win or a viral TikTok stock tip, is something to be wary of when mapping out a financial plan and trying to save over time.

Financial advisor Stewart Willis explained on the Asset Preservation Hour that the fear of missing out (FOMO) and social media-herding can potentially derail a person’s financial success when it comes to retirement planning or making investments.

“You see in the stock markets where people see their friend that isn’t very bright, getting rich, buying some goofy stock or crypto, and they’re like, ‘Hey, if this goofball can get rich, I need to be there too, right?'” Willis said.

“The problem is sometimes you’re already too late to the party. That party may be over already. And just remember, lightning strikes every once in a while, and it’s random.”

Willis added it’s also important to make sure stocks and investments are up to date in order to avoid the endowment effect, which is when an investor overvalues their own stock, such as a stock that was inherited from a family member.

Being organized and building a cash-flow plan can help maximize returns, including on taxes. That can help you save money and figure out your income needs beyond today’s investments and spending.

Who to turn to for financial planning needs?

Asset Preservation Wealth & Tax is the place to turn to for financial planning. They can help map out your needs when it comes to retirement, trusts, taxes and gift planning.

Asset Preservation will help minimize the risk of behavioral financing, taking emotional spending out of your plan. They will help you analyze stocks owned and determine how much they’re worth, while keeping them up to date and making sure your financial portfolio is organized.

Receive a free portfolio review online or call 602-449-0146 for more information. 

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