Most people are overconfident in their judgment. A just-released Wall Street Journal survey indicates that when asked if they’ve made a serious financial mistake in the last five years, over 50 percent of respondents answered: Yes. A follow-up question yielded a more stunning result – 50 percent of them reported that they were confident in their ability to make sound financial decisions.
It would seem that if someone has made a major financial error in their lives, it would beckon a reevaluation of their thought processes and decision making – at least when it comes to money matters. But it doesn’t.
We’re not just overconfident in our judgments and abilities to make decisions, we also tend to recall events and circumstances that support what we believe; and we scan our environments until we find something worthy. We see what we believe instead of believing what we see. As a result, we’ll give credence to evidence that we’re right and reject or rationalize away evidence to the contrary. Such an approach will build only a false sense of confidence resulting in ineffectiveness for us.
Here are some options for avoiding these thinking traps:
- Before making any decisions (particularly critical ones), put your beliefs aside and check for evidence that you’re doing the right thing. Ask yourself: Why might I be wrong?
- Seek out the counsel of people you really trust. You know who they are, they’re the ones who will call you out when they believe defensiveness is getting in your way and won’t care if you hang up on them or go away angry.
- Accept and embrace that even when giving due diligence to options 1 and 2, you’ll still make mistakes. Take correctively action swiftly and move on just as fast.