Something is behaving differently at this time of year

As individuals, we usually have a bias towards ‘now’. But at this time of year that bias changes in an important way and it’s to do with our length of focus. Our natural bias is to focus on the ‘short term’.

January as the ‘start of the year’ creates a macro environment that helps us take a longer-term view. This presents an opportunity when it comes to our aspirations and the financial plans needed to achieve them. But do we take advantage of this? Why not use this ‘seasonal nudge’ to help with your personal and financial planning.

In survival terms, a threat that is happening to us now is more important to focus upon, than one that was in the past, or one that might happen in the future.

Other behavioural biases draw us towards the ‘now’ too. The availability bias means we focus more upon information that is readily available to us, and this applies to memory. The recent past is more readily recalled than events that occurred over a longer period of time. In terms of the future, the longer into the future we look the more uncertainty there is. But we are biased towards seeking certainty – it’s safer. So, we naturally tend to focus more upon the shorter term rather than the long term.

In our modern lives, we are still heavily influenced by these evolutionary behavioural biases. We spend less time focused upon longer term considerations, such as the income we may need in retirement, and more on what we need to spend today.

However, these natural biases tend to be a little less powerful at this time of year, which presents us all with opportunities. Before we get into what those opportunities are – what is it about this time of year that makes these biases less strong for a while?

Firstly, we are usually taking things a bit easier, and possibly experiencing a change of scene and routine. Hopefully, we are with our wider families more than our work colleagues. This tends to reduce our focus on our normal work and domestic day to day tasks and duties and can give us a different perspective.

Secondly, the influences and commentary that surrounds us, including all the media, is more aligned to having an annual focus, such as reviews and reflections on the past year . We tend to make our resolutions and predictions for the next year rather than anticipating what is going to happen today, tomorrow or this week.

What opportunities does this temporary focus upon the longer term afford us?

It is that whilst this time of year is traditionally one to not think about longer term money matters, the very opposite might be true. It might just be the time to think about it a little more. Because the change of scene, routine and influences around you give you a longer-term perspective. Therefore, you can more readily reflect upon your purpose, and your aspirations for yourself and your loved ones. And a big part of that is likely to be how your finances are organised for the longer term.

Don’t miss the opportunity to seize this time of year to help your financial betterment!

Approver Quilter Wealth Limited, Quilter Financial Limited, Quilter Financial Services Limited & Quilter Mortgage Planning Limited. 14 December 2023

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