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in si de ha lto n. co m O ak vi lle B ea ve r | T hu rs da y, N ov em be r 1, 20 18 | 24 SATURDAY NOVEMBER 3 10 am - 1 pm Fennell Campus - All Programs THURSDAY NOVEMBER 8 5 pm - 8 pm Stoney Creek Campus for Skilled Trades and Apprenticeships Find out more at mohawkcollege.ca/openhouse Join us at our OPEN HOUSE EVENTS Why is much of finan- cial behaviour so ridicu- lous? Excuse me if this sounds a little insulting, but many people realize they have a very poor track record when it comes to managing their finances. As it turns out, the an- swer to my question is a short one. Because we are human. Many people think we have special skills at mak- ing financial decisions, but the cold truth is we do not. Conventional wisdom said that humans made de- cisions rationally. Facts were considered, out- comes anticipated, and then the correct decision would naturally follow. Then along came Pro- fessor Daniel Kahneman. A psychologist from Princeton University, he is known for his work in the psychology of judgment and decision-making. His work helped advance the field referred to as beha- vioural economics. Professor Kahneman's research was deemed so significant that in 2002 he became the first non-econ- omist to win the Nobel Prize in Economic Sci- ences. Kahneman uncovered the truth about humans - we are instinctive, not ra- tional. Based on his find- ings, if we want to make better decisions we need to be aware of this fact. We need to recognize our deci- sions are usually based on emotions and learn to overcome our limitations. One way around this could be through educa- tion. A guiding principle of financial planning is to plan for the long-term; in fact, most people react to short-term news and senti- ments of the day, which de- rails their long-term strat- egy. Understanding how the human brain works can be of significant advantage to everyone on how to make better financial decisions. Think what you want to accomplish. It could be: paying down debt, saving for your children's educa- tion, planning for retire- ment, or perhaps a combi- nation of these objectives. Have the discipline to logically think of what is important, and then write down your objectives. What steps do you need to take to achieve your finan- cial planning goals? And again, put that in writing. Respect your own abili- ty to problem-solve your fi- nancial planning objec- tives. At the same time, be cautious and understand success is at risk due to your normal human emo- tional characteristics. Peter Watson, of Peter Watson Investments MBA, CFP®, R.F.P., CIM, FCSI, offers a weekly financial planning column, Dollars & Sense. He can be con- tacted through www.peter- watsoninvestments.com. HUMAN BRAIN NOT BUILT FOR SMART FINANCIAL DECISIONS OPINION A GUIDING PRINCIPLE OF FINANCIAL PLANNING IS TO PLAN FOR THE LONG-TERM, WRITES WATSON PETER WATSON Column