Is Misremembering the Past Affecting Your Financial Future?

Everyone carries around their own unique version of history. Could your personal interpretation of history (particularly financial market/economic history) be standing in the way of progress toward your most important goals?

In The Lessons of History, Will and Ariel Durant write, “Most history is guessing, and the rest is prejudice.” If prejudice is too strong a word for you, try “nostalgia” instead. You might want things to be like they were in the past, but history won’t permit it.

Can Your Memory Be Trusted?

You and I are getting older every day and the past is further and further away. The ever reliable author/podcaster Morgan Housel opines that if you become too focused on how things were in the past, it can cause you to overworry about the present.

Recalling your personal financial history, the good and the bad, is a good way to cross-check your memory with actual experiences. If you go through this recollection with a spouse or loved one, you probably will find some differences in your memories and theirs.

Since the 1970s, scientists have been studying the limits of human memory. What you remember about the past is known as episodic memory. These time travel type recollections might be totally true, partially true or even memories that are distorted from what actually happened.

Researcher Dr. Sophie Siestrup studies the interplay of brain and behavior. She points out that the brain can often trick you into a false memory. Some of her research findings show that episodic memory changes over time.

When you recount a story to a friend about how a particular investment performed in the past, is that story factual or is it a convenient illusion? Your memory is malleable. Scientists believe that the brain sometimes fills in the blanks relying on images and words that spark your memories. The brain tries to predict next actions based on your previous experiences.

How Does Your Memory Impact Your Choices?

When you see or hear things over and over this can influence your memory. Think about a song you hear often or a commercial that appears over and over. Even if you don’t like the song or commercial you can recall it easily. Repetition and familiarity can confuse your choices

Age and stress can also impact how you remember previous events. If you are making financial decisions based in part on false memories this can be problematic for your financial future. It’s important to recognize that your pre-existing biases have an impact on how you remember personal financial history.

One financial decision leads to another and this chain of choices needs to be firmly focused on reality. This is one area where you truly need a second set of eyes, a trusted advisor to help you distinguish between imagination and reality.

When your memories don’t match actual past experiences this might be a case of your brain updating old belief systems based on new information. This is one way your brain nudges you to learn new things.

Building a sustainable financial life focused on your most important long-term goals requires good decisions. Good decisions flow from good planning. Grounding your decisions in reality is the first step. Start there. Ready for a real conversation?

Disclosure

Apollon Wealth Management, LLC dba J.E. Wilson (Apollon) is an investment advisor registered with the SEC. This document is intended for the exclusive use of clients or prospective clients of Apollon. Any dissemination or distribution is strictly prohibited. Information provided in this document is for informational and/or educational purposes only and is not, in any way, to be considered investment advice nor a recommendation of any investment product or service. Investing involves risk, and while remaining invested can support long-term goals, it does not guarantee a profit or protect against losses. Advice may only be provided after entering into an engagement agreement and providing Apollon with all requested background and account information. Please visit our website https://apollonwealthmanagement.com for other important disclosures.