Do you make decisions based on logic?

In his book “Predictably Irrational”, Dan Ariely details how humans believe that they are rational and make decisions based on logic and reason, however, in reality, we are totally illogical and act on emotion. In fact, a case can be made that humans use the logical part of our brain to justify the irrational decisions we make.

Behavioural Finance looks at the decision-making process that we go through when making an investment. One of the strongest factors influencing our decision making is loss aversion. We’d rather choose something of lesser value or quality that we know will not negatively impact us rather than choosing something that has the potential to positively impact us. Guaranteed products play right into our loss aversion behaviour.

A guaranteed investment is fairly straightforward. Most guaranteed investments are fixed for a 5-year term, capital is guaranteed, and the return is not allowed to drop below a certain percentage. It sounds like a winning formula until you look a little deeper. The investment is a business transaction and the asset managers need to ensure that they are getting paid and earning the return that they need to. What do the asset managers do? Well, they often smooth the returns.

For example, you take out a guaranteed investment for $10,000 that says that your return cannot be negative. Your money is invested in a variety of investments including cash, bonds, equities, and property. The upper limit of the return is set up by the asset manager at 5% per annum. In this hypothetical example, after five years the investment would have grown to $12,762.82, however, the actual return on the investment was 7% or $14,025.52, with 2% going to the asset manager.

Some investors seek comfort in these products even if for a short term when markets are volatile. Extensive research done over decades shows that, over time, investing in equities delivers the best return.

However, there are certain situations when a guaranteed product is beneficial for an investor. A guaranteed investment protects investors against downside risk, but at the cost of any upside. The guaranteed investment does have a place in a retirement plan for most investors that have not saved enough for retirement, or early retirees that have years ahead of needing an income. The bottom line is that medicine has evolved, and people are living longer so some investors get comfort in this type of investments, but there is a price to pay so always check with your financial advisor and consider your risk aversion.

Do you avoid?

Funny, huh, how some folks think that avoiding challenges will bring them peace?

You know that it does not work, so how can you stop avoiding the challenge you’ve been avoiding?

Create awareness by asking, “What am I doing right now?” Throughout the day, set reminders or put little notes that remind you to ask, “What am I doing right now?” The answer might be, “Checking Facebook,” or “Switching to a new browser tab,” or “Eating some chips.” Something simple and mundane like that, but just ask yourself what you’re doing, to start to bring awareness.

Next, ask yourself, “What am I avoiding?”  Some of us, when things get difficult or uncomfortable, automatically switch to something else.  Ask what you’re avoiding: some fear, some difficult task, some difficult emotion, some discomfort, or just staying present in the current moment? Name what you’re avoiding.

Take appropriate action. Now that you’ve faced and named it, you can act like an adult and can decide what the best action is right now and one action is to:

Chunk it or separate it into smaller steps.

After dividing the problem into feasible parts, work through the easiest steps first. For example, when I am starting to create a new PowerPoint on a senior issue, I first break down the task into “gathering the research, reading the research talking to experts, pulling out the main points to cover, developing the take-aways, creating a list of resources, developing an outline, finding images,  and then creating a draft.“

Access your inner wisdom.

We all have the voice inside our heads that tells us when we are moving in a direction that we know is wrong. We need to take the time to listen to that voice. This voice, some call inner wisdom others call a conscious allows us to consider the consequences and what’ll be most helpful in the long term. By listening to this voice, you take into account your emotions, logical thinking and intuition.

Be accountable to yourself or others.

For instance, if you’re socially anxious, and have been invited to a party go and speak to two new people even if that feels scary.

Seek support.

If you don’t have the skills or knowledge you need to seek support by seeing a therapist, reading a book, taking a class or talking to a friend who has experience dealing with similar situations.

Our minds want to run from whatever discomfort, pain, the difficulty we’re facing … and this is a good strategy for temporarily not having to deal with difficulty and pain. However, this means we are at the mercy of our fears. We are like little children who don’t want to do any hard work but want the latest shiny fun thing.

Life moves on and, in the end, we usually have to deal with the challenges that we have put off, but by putting them off, some of them just get worse. Too late, we realize that it would have been better to face them early on.

Of course, not all problems will just evaporate using this method, but I can tell you that you’ll be able to face many more things as you practice this method. You’ll get better at dealing with discomfort, instead of running from it as most people do. You’ll get better at not procrastinating, and doing uncomfortable tasks and become more at peace. As if the peace you now know didn't come from earlier challenges that were faced, and mastered. Oh, you forgot about that, well that is not really that funny, is it?

Housing Solutions for Social Isolation.

The idea for this workshop came from "Tech-enhanced life" and I have talked of this before in earlier posts, but I think it is still relevant as we move into a year of perfect vision.

Some exceptional opportunities in housing can help fight isolation and loneliness among seniors.  Particularly as grow older, housing options affect our physical and our mental wellbeing.

Some of the options being explored in some jurisdictions may have hope for those who are on their own. Some of these are:

All-age residential hotels.  The idea of ‘all-age’ living facilities, compared to more age-segregated communities is a good idea for seniors.  More specifically, there is an atmosphere of more powerful energy, as well as the increased opportunities to connect with different ages and learn new things than in a segregated community.    

Accessory unit rentals.  As our family situations change, because of age, our current house could become too big us.  Accessory units (or ‘granny units’) on the property can be rented out, or maybe separate living quarters can be made of current house space.  Housing rental could also be exchanged for home maintenance, help, and companionship.  Graduate students would be good candidates for this option. This would require cities to approve zoning changes and there might have to be some screening set up to protect seniors, but it might work and keep people in their homes longer.

Co-housing.  is where residents (old and young) share living facilities.  The benefits for older adults are shared help, companionship and contact with younger generations.  However, such facilities are few in a number of areas, and efforts need to be made to ensure residents are harmonious with each other.

Dancing and Ageism

Every two weeks, on a Saturday night, we go out with another couple for dinner, and then we usually go for a special coffee. We have fun and enjoy their company and we laugh and we always find things to talk about. Every time we go, my wife wonders what we will talk about but we always find something to talk about, sometimes we talk of family, sometimes we talk of music, sometimes the talk drifts to grandchildren. 

We have a nice routine, so we were surprised when the other couple suggested that we not go for special coffee, but go to the local Legion. We thought it would be a great idea, so we went. The Legion has a different band play every Saturday. The band was very good and it played the kind of music that made everyone want to get up and dance.

Now my wife and I have taken dance lessons and when we were younger we were pretty good dancers, or so I thought. As we sat having our special coffee, the dance floor filled and we were amazed at the skill level of the dancers. I said to my wife, they all look like they are professionals, or at least have just come from a dance class. Needless to say, I was intimidated and decided that I would watch and my wife and the other couple had the same idea.

We were very impressed by the level of the dancers. Now they were not young, I am in my early 70's and all of the dancers looked older than me. The dance floor rocked and the dancers were having a great time when the bandleader said it was time for a line dance number. Within one minute ever dancer was in line and the line performed like a well-rehearsed chorus line. As the dance continued, this lady moved to the front of the line and it was very evident within a few minutes that all of the other dancers were taking their cues from her. She had energy and spirit and was a delight to watch. When the song was over, she went and sat down, and the people at the next table said to us, she is doing pretty good for a 96-year-old. 

We all looked at each other and nodded, and I realized that I was shocked at how old she was and how well she did on the dance floor. As I thought about my reaction, I realized that I was being ageist. I had judged this woman on her age and because she was older than I thought I wondered how she did it. 

I should not have let my ideas about how a 90+ person should act, influence my ideas about how well she danced. She was doing what I hope I will be doing at 90+ having fun and not caring what others think.