Why That Advice Column and Those Online Financial Calculators Do Not Work for You

IMG_2621

Are you one of the cool kids?

“You know how advice is. You only want it if it agrees with what you wanted to do anyway.”
–John Steinbeck

I was kind of a personal finance nerd well before I took the courses needed to be able to sit for my CFP® exam. OK, let’s be honest, I am a nerd. There is no “kind of” about it. Personal finance was just one of the things about which I was nerdy. So is avoiding ending sentences with prepositions.

When we were working towards paying off our mortgage, I would listen to podcasts of the Dave Ramsey Show while I was walking the dog (to see why I do not like his advice for people who are no longer in debt, read “Six Areas Where I Disagree With Dave Ramsey’s Investing and Retirement Withdrawal Advice”).

I genuinely like his get out of debt advice. However, I was looking for something a little more. I wanted to know what happened once that mortgage was paid off. What should we do with the rest of the money that we received from the sale of my first company? Would we have enough to retire? How would we know?

Some of the calls were close, but none of them mirrored our situation. I’d listen to the call and be left wanting.

I’d think

What about me? What about our situation?

As Sandi Martin puts it, listening to those podcasts was the equivalent of being told to eat my vegetables over and over again. Yes, we know we need to eat our vegetables, but how much protein does an X year old male who weighs Y with a body fat percentage of Z% who works out 3 times a week and walks 4 miles a day and has a resting metabolic rate of A calories per hour really need?

In other words, the food pyramid (which is, in my layman’s opinion, pretty terrible) doesn’t do for you what a nutritionist will do for you.

Do you know who’s behind you not taking action on those pithy soundbites and generic calls to action?

Why Monkey Brain Doesn’t Believe Online Finance Calculators and Advice Columns


Continues Below




Yup, it’s our old friend Monkey Brain.

For those of you who are new here, Monkey Brain is what I call the limbic system – the part of the brain that we share with our simian counterparts. Monkey Brain likes pleasure now and hates eating his vegetables…unless they’re sopping in butter! In order to keep you from doing what your rational, thinking self knows you should be doing (like eating your vegetables, steamed), he comes up with stories and reasons for you not to do things. Professional PhDs who study the brain call these psychological and behavioral biases.

One of these biases is called the in-group bias. Back in the good old days when we were running around chasing wooly mammoths and living in caves, we probably didn’t stand much of a chance mano y mammoth without a little help. Alone, we were likely to end up as Mammoth Chow™. However, with the help of our friends and family, we could probably surround the mammoth and dine on delectable filet of mammoth and mammoth tartare that evening.

We wanted to hang around the cool kids who were accurate with their slings and spears, and, furthermore, we wanted the cool kids to think that we were pretty cool too. If we were brought along in the cool kid group, then we had a pretty decent chance of not going home either a) hungry, or b) as a smear mark under a mammoth hoof.

Because of this desire for acceptance, we tend to believe what others who are like us say and think, and, on the flip side, look for people to spend time with whose beliefs and actions mirror our own.

It’s the modern day equivalent of wanting to hunt in successful packs. Fortunately, most beliefs, even if they’re wrong, won’t wind up getting us killed like they would back in the good old days 20,000 years ago.

When it comes to our personal financial safety and security, when we really, actually focus on our finances, we tend to be more risk averse than we think we are – that is, when we aren’t just turning a blind eye to our finances and telling ourselves that it’ll all work out some day.

That’s because Monkey Brain focuses on those dire outcomes, imagines them happening, and completely throws probabilities out the window. Plane crashes involving fatalities are much less likely to happen on a per event basis than car crashes involving fatalities, but whenever we hit the slightest bit of turbulence, many of us are white-knuckling the arm rests and looking for the flight attendants to bring us a couple of adult beverages, stat! Hit a pothole, and we don’ t have the same reaction, even though they are quite analogous.

Therefore, when it comes to thinking about our own financial situation, we tend to err (greatly) on the side of caution.

This fear causes a very direct impact on our in-group bias.

It causes the in-group to shrink.

No longer are we willing or subconsciously able to draw parallels between someone else’s situation and ours. It’s because that person isn’t exactly, perfectly like us.

In other words, our in-group shrinks to a population of one – ourselves.

Therefore, unless we can get advice that is specifically tailored to our personal situations, with all of their (perceived) quirks and unique qualities, we’re going to discount that advice and say “yeah, that’s for the caller from Peoria, but it doesn’t apply to me.”

Even with the simple online calculators, with their patina of credibility (which they don’t have, mind you…it is impossible to calculate your retirement number off of three inputs), don’t really drive us to action because there’s a little voice in the back of our heads saying “but that doesn’t really capture my situation.”

If online calculators, advice columnists, and radio personalities could take in all of our information, crunch the numbers, and then come up with specific, personalized advice that reflected our unique situation, then we would be much more likely to take that advice and go with it, because it was addressed to the only in-group that matters.

It would be addressed to us.

Would you be more willing to believe an online calculator that was a lot more detailed and personalized, or would you still listen to Monkey Brain? Let’s talk about it in the comments below!

About Jason Hull, CFP®

Jason Hull, CFP®, is the Chief Technology officer of myFinancialAnswers, an online comprehensive financial planning service.

Close