Traditional economic theory has assumed that people make decisions in a so-called rational way, and therefore, they will calculate costs and benefits, and focus only on decision-relevant criteria. That's not how people make decisions at all. When we are experiencing emotions, imagine it's like a weather system: it affects everything.
– Dr. Jennifer Lerner Professor of Public Policy and Management, Harvard Kennedy School of Government
We’ve built our new Behavioral Wealth Management model to handle these kinds of situations. When you’re under stress, we help you understand what’s happening via specific techniques to reduce your stress reactions. Our mission: help you think clearly, consider all your options, and make choices you’re less likely to regret.
The stock market may make you sick
According to a 2013 study, “daily fluctuations in stock prices have an almost immediate impact on the physical health of investors, with sharp price declines increasing hospitalization rates over the next two days. The effect is particularly strong for conditions related to mental health such as anxiety,” and may increase U.S. health care costs by as much as $650 million annually.
The Tulip Bulb Bubble
In the 1600s, flipping tulip bulbs became so popular among Dutch investors that the price of a single bulb, (the Semper Augustus), was higher than that of an entire house. (Care to guess what happened next?)
Researchers who study the effect of stress on learning, memory formation, and decision-making are finding that stress can actually change your brain. Some studies suggest that chronic stress may even shrink your brain over time.
Money thoughts can create expensive decisions
Stanford University researchers found that subjects primed with thoughts about money were willing to pay more for a bottle of wine than subjects who were primed with other thoughts.7
Competition also ups the ante
In another Stanford experiment, researchers auctioned off a $20 bill. The winning bid received $20 and the loser had to pay the bid amount. So what was the winning bid? $28. What a bargain!8
Chronic stress can lead to “cortisol dominance,” which, over time, can degrade your attention span, memory, and ability to learn. Definitely something to avoid when possible.
The high cost of stress
Scientists estimate that up to 90% of illness and disease is related to stress, with estimated annual costs of $100-300 billion to the U.S. economy.9
Money arguments can predict divorce
Financial stress is considered the #1 cause of divorce in the U.S., and the frequency of your disagreements can predict your fate. If you disagree about money about once a week, you’re 30% more likely to face divorce than your friends who disagree only a few times a month.10
Relax – doctor’s orders
Stress is considered a significant health problem. It’s been directly linked to life-threatening conditions such as cardiovascular disease, diabetes, high blood pressure, and stroke. It may also affect our immune system.
Lower Quality of Life
Stress has been known to cause other physical, emotional, and behavioral problems, from muscle tension and migraines to increase alcohol intake to unwind, feelings of frustration, worry and exhaustion. Talk about a downer!
A gut-level response
Your stomach and digestive tract aren’t considered essential when your body is in fight-or-flight mode, so blood drains from these organs. Hello, nausea: high stress moments can make you lose your lunch.
When wealth advisors look and sound the same, how do you choose? A coin flip? Pick your neighbor? Why leave such an important decision to chance? Instead, join us at an upcoming workshop. Hear recent research, discover new insights, and experience JOYN’s transparency and expertise firsthand.