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External Influences can Derail Financial Planning

Published by: Jeff Hall, CFP®,CIMA® Date: June 14, 2013

I love being a dad. Our firstborn is currently 21 months old, and if you’re a parent you know that this period of childhood can be a lot of fun. Children begin communicating in their own way, developing their own personalities, and emulating their surroundings. My wife shared with me recently that she found my son “driving to work” in his Little Tyke car drinking from his sippy cup like he’s seen dad do so many other times. He is well into his own lifelong journey of absorbing information from his day-to-day life that will affect how he makes decisions. No pressure mom and dad!

As adults, our external influences play a significant role in our thinking and all of us let them impact our financial decisions. If not identified and understood, they can become blind spots which create personal biases. For example, my career in finance began with some nice suits and a job with a major brokerage firm. Almost immediately I was perceived by others (and in my own mind) to be a financial pro. I felt I was too financially advanced to use a simple tool like living off a budget. Around that time everyone was excited about the potential of technology stocks. I remember hearing “this time is different” to describe the financial landscape. Why invest wisely and diversify when it was supposed to be different? My lack of experience and practical training completed the trifecta, and I set myself back financially for many years. I let experiences and surroundings influence my decision making.

My story isn’t isolated. Most people have challenges relating to money that come from their surroundings. Consider the work environment of a physician. He or she is typically the most educated person in the room, works in an industry with a universal standard of putting other’s interests first, and has spent more time, energy, and resources than most other professionals perfecting their craft. It would be difficult for any of us to work in that environment and not feel like other professional industries (like financial services) hold themselves to this same high standard. But as we all know, there is no universal Hippocratic Oath, not everyone commits themselves to the highest levels of competency, and honesty doesn’t lurk around every corner. As much as we want it to be, our perception is not always the reality.

It’s a daily battle not to let our surroundings influence what we do. However, from a financial standpoint, I’ve learned that the following is a great prescription for winning with money:

1) Don’t make huge bets because “this time is different.” How many of us are still waiting to see what “different” looks like?
2) Don’t follow the “herd.” Everyone else’s goals shouldn’t necessarily be ours.
3) Don’t buy things you don’t understand. If it sounds too good to be true, you can bet there are some significant costs on the other side you probably don’t know about.
4) Keep it simple. Simplicity, not sophistication, should be our pursuit because the more complex something becomes, the more it can create unnecessary worry.

Understanding the influences and experiences that shape our financial decision making is important so we are able to make common sense decisions based in fact and not on personal bias.

Jeff Hall, CFP® is a partner and Senior Financial Advisor with Rather & Kittrell. He is available at