Why financial planning is not common sense.

A 10 to 20-minute read – depending on your speed.

Most of us look for common-sense answers to various questions in life.

In this Insight, we’ll explore why that is often a bad idea, particularly when it comes to money.

Of course, common-sense answers to simple questions can be helpful. But with complex questions (like making plans for our lives and our finances), common sense thinking can lead to enormous mistakes.

Here, we’ll explore why we fall into the common-sense trap and what we can do to avoid it.

Surely, it makes sense to use our common sense?

It’s certainly common to believe that common sense is a valuable and rare personal strength.

The French philosopher Voltaire bemoaned its scarcity in society when he said, “Common sense is not so common.”

The mathematician René Descartes clearly shared that view when he joked: “Common sense must be the most common commodity because everyone is convinced they have it!”

What’s odd is how some attribute this (alleged) scarcity of common sense to us having too much information or education!

Writer Gertrude Stein said, “Everybody gets so much information – that they lose their common sense.”

Victor Hugo allegedly claimed, “We have common sense despite our education, not as a result of it.”

However, not everyone is so enthused about the value of common sense.

Writer and Philosopher Henry Thoreau said,

There is no common sense. It is just common nonsense.

Albert Einstein said,

Common sense is just the collection of prejudices we acquire by age eighteen!

And the psychologist and Nobel Laureate Daniel Kahneman is no fan of common sense either.

In his book, ‘Thinking Fast and Slow’, Kahneman describes common sense as being more about judging than thinking.

And that’s clearly true.

How often do we fact-check what we read or hear?

Or do we tend to make snap judgments about an idea based on whether it feels or sounds right and whether it agrees with our current beliefs?

Rhetorical question!

Psychologists call this trap confirmation bias.

And some describe it as the mother of all behavioural biases, so we’ll return to this (and other) biases in future insights.

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For now, perhaps we can agree that we are not always the best person to judge our own ideas!

And we can create many problems for ourselves and those we care about if we believe in flawed ideas.

So, is the answer to keep an open mind?

For financial advisers, planners and coaches

This educational Insight is one of many we’ve created for you to use under license in your business to help more people make better financial decisions – and see the value of professional advice.

You can brand these licensable insights to your business style and add your own firm’s calls to action.

If you have any questions, please email me at hello@paulclaireaux.com