We all make tough decisions, but choices relating to money send many of us running in the other direction. Unfortunately, ample evidence indicates that aversion toward financial decisions leads many of us to put off things like funding our retirement, saving at a sufficient rate, or just doing a better job managing our credit card debt. All of these things can hurt our long-term financial health.
Economists and behavioural scientists have proposed several explanations for this phenomenon. For example, financial products are often quite complicated, and we may feel we lack the necessary expertise. We may be overwhelmed by too many choices - such as what ETFs to pick for our retirement fund.
But as valid as these reasons may be, my co-author Jane Park and I felt that there was more to the story.
Money matters
Take me, for example: I have an MBA with a concentration in finance and a doctorate in business, yet I still hate dealing with financial decisions. Whenever I get a statement from my bank, my instinct is to shove it in my desk drawer.
Clearly, knowledge regarding financial products or subjective perceptions of competence do not explain this type of behaviour very well. What is going on here?
Our research suggests the culprit might be our stereotypes about money matters. We discovered that people perceive financial decisions - more so than decisions in many other equally complex and important domains - as cold, unemotional and extremely analytical; in other words, as highly incompatible with feelings and emotions.
This may not be surprising considering how media gurus routinely caution people against allowing feelings to get in the way of our personal finances, and how popular culture often portrays Wall Street and other financial professionals as “cold fish” who are morally and emotionally apathetic.
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Emotional thinkers
Consistent with this notion, we conducted several studies to examine how people’s perceptions of their own thinking style might influence their tendency to avoid financial decisions.
In our initial study, we asked about 150 people to fill out an online survey, which involved several sets of questions. First, we asked about their tendency to rely on emotions in decision-making generally. We then tried to ascertain their tendency to avoid decisions in a range of domains, such as finance or health. We also asked specific questions reflecting engagement in everyday financial decisions like: “Do you read your bank statements?” or “Have you ever tried to figure out how much you needed for retirement?” Finally, we looked for evidence of financial literacy with questions such as: “Do stocks or bonds normally fluctuate more over time?”
We found that the more people perceived themselves as emotional thinkers, the higher their tendency to avoid or neglect their personal finances. For example, people who ranked high on emotional decision-making were less likely to have ever tried to figure out how much they needed to save for retirement, read financial statements, or know the fees and interest rates on their credit cards.
Interestingly, this relationship did not extend to decisions in other areas, such as buying clothes or making health care decisions. It was also unrelated to respondents’ financial literacy or feelings of competence.
In four more separate studies, we led half of the participants to view themselves as emotional decision-makers and the others as more analytical. We did this by asking them to reflect on a prior decision in which they used either emotions or analytical thinking. In each study, we measured participants’ propensity to avoid, or engage in, financial matters by asking them to choose between two types of tasks – one involving financial decisions and the other one not – or by offering them an opportunity to take advantage of a financial workshop.
We found that when people were led to view themselves as emotional decision-makers, as opposed to analytical, they became more likely to avoid tasks in which they had to engage in financial decisions and instead preferred to work on other tasks that were equally difficult and time-consuming.
They were also more likely to decline our offer to participate in an educational workshop on personal finance, which could potentially improve their financial well-being.
In other words, our studies show that the more people perceive themselves as emotional beings, the more they feel alienated from money matters. This appears to be because they perceive the type of person they are - warm, emotional - as incompatible with how financial decisions are made - cold, unemotional.
We found that these perceptions of incongruity - namely, that financial decisions are just “not me” - account for a significant portion of the tendency to shun financial decisions regardless of people’s actual knowledge about financial matters and their confidence in their ability to make sound financial decisions.
A lifestyle hack
So is there a way to get around this problem? The good news is yes. We found that study participants were less likely to avoid financial decisions when those exact same choices were reframed as decisions about their lifestyle.
For example, in our survey, when we asked participants to think about choosing annuities for their retirement portfolio as “a decision about your life in retirement” instead of “a decision about financial investments for retirement”,seeing themselves as emotional thinkers no longer resulted in decision avoidance.
That’s a hack you can use to tackle a money matter you’ve been putting off. Try to picture the pleasant outcome you are creating down the line, not the difficult decision facing you right now.
These insights could also help employers, policymakers and financial product providers to present information in ways that make us more likely to engage – instead of run screaming. Advertising financial services as being about life outcomes, such as lifestyle goals in retirement, instead of as “financial investments,” may reduce people’s tendency to shun these decisions.
Considering that the cost of doing so is ridiculously low, this may be worth a shot.
Aner Sela is an associate professor of marketing at the university of Florida
Associated Press
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
The specs
Engine: 3.0-litre six-cylinder turbo
Power: 398hp from 5,250rpm
Torque: 580Nm at 1,900-4,800rpm
Transmission: Eight-speed auto
Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
Torque: 985Nm
Price: From Dh439,000
Available: Now
Specs
Engine: Electric motor generating 54.2kWh (Cooper SE and Aceman SE), 64.6kW (Countryman All4 SE)
Power: 218hp (Cooper and Aceman), 313hp (Countryman)
Torque: 330Nm (Cooper and Aceman), 494Nm (Countryman)
On sale: Now
Price: From Dh158,000 (Cooper), Dh168,000 (Aceman), Dh190,000 (Countryman)
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
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Paatal Lok season two
Directors: Avinash Arun, Prosit Roy
Stars: Jaideep Ahlawat, Ishwak Singh, Lc Sekhose, Merenla Imsong
Rating: 4.5/5
Test
Director: S Sashikanth
Cast: Nayanthara, Siddharth, Meera Jasmine, R Madhavan
Star rating: 2/5
Scream%20VI
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The specs
Engine: 2.0-litre 4-cylturbo
Transmission: seven-speed DSG automatic
Power: 242bhp
Torque: 370Nm
Price: Dh136,814
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
The story in numbers
18
This is how many recognised sects Lebanon is home to, along with about four million citizens
450,000
More than this many Palestinian refugees are registered with UNRWA in Lebanon, with about 45 per cent of them living in the country’s 12 refugee camps
1.5 million
There are just under 1 million Syrian refugees registered with the UN, although the government puts the figure upwards of 1.5m
73
The percentage of stateless people in Lebanon, who are not of Palestinian origin, born to a Lebanese mother, according to a 2012-2013 study by human rights organisation Frontiers Ruwad Association
18,000
The number of marriages recorded between Lebanese women and foreigners between the years 1995 and 2008, according to a 2009 study backed by the UN Development Programme
77,400
The number of people believed to be affected by the current nationality law, according to the 2009 UN study
4,926
This is how many Lebanese-Palestinian households there were in Lebanon in 2016, according to a census by the Lebanese-Palestinian dialogue committee
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