Here are tips to keep political bias from hurting your financial decisions

Most of us like to think of ourselves as purely rational when thinking about money. How often do you hear someone brag about paying too much for something? (It happens, I know, mostly as a way of telling you that you have enough money that the price doesn’t matter.)

But we’re only human, and where we stand on social and political issues affects how we feel about the economy. Studies indicate that “party affiliation not only affects how people assess the economy but what they spend money on,” says economist Diane Swonk.

The Brookings Institution last year reported that Democrats maintained a steady view of inflation in 2021 and 2022, while Republicans expected much more inflation. A University of Michigan study indicates that consumers have lower expectations about inflation if their preferred party is in the White House. And the partisan gap is growing: The difference in expectations of Republicans and Democrats about inflation has increased in recent years.

With this year’s presidential election sure to be even more contentious than usual, chances are our feelings about our favored candidate are likely to cloud our judgment about the economy. The increased polarization and uncertainty “acts as a tax on the economy,” Swonk says. “Households and firms hunker down and delay decisions until the fog of the election lifts.”

So this figures to be a banner year for bias. Having biases keeps you from making decisions that are in your best interests, so trying to eliminate them can help you financially. I know some people are happy to be biased, and that’s OK, too. But if you want to work on becoming more rational and thoughtful about your decisions, here are three approaches courtesy of consultant Howard J. Ross in the Harvard Business Review:

• Employ priming: Understand what your biases are and be aware of them as you make decisions. In a group setting, when people discuss their biases, the odds of limiting them increase.

• Introduce structure: Following a consistent process in decision-making can help keep bias at bay. For example, if you’re interviewing candidates for a job, you’re less likely to be biased if you follow the same process and ask each candidate the same questions instead of winging it.

• Create accountability: Take notes on financial decision-making and how successful the choice was. Do you show any biases in your investment selections, and are they holding you back? Look over your portfolio for any patterns. For example, do you show any preferences in the types of companies and mutual funds you invest in? Maybe you don’t believe you think about whether the CEO or fund manager is a man or woman, but taking a dispassionate look at your choices might reveal patterns.

You can’t eliminate all your bias. But if you can at least take some steps to hold them at bay, you stand a chance of making more decisions that will make you happier in the long run.

Evan R. Guido is the founder of Aksala Wealth Advisors LLC, a 2018 Forbes Next-Gen Advisors List Member, and Financial Professional at Avantax Investment ServicesSM. Evan heads a team of retirement transition strategists for clients who consider themselves the “Millionaire Next Door.” He can be reached at 941-5005122 or eguido@aksalawealth.com. Read more of his insights at heraldtribune.com/business. Securities offered through Avantax Investment ServicesSM, member FINRA, SIPC. Investment advisory services offered through Avantax Advisory ServicesSM, insurance services offered through an Avantax-affiliated insurance agency. 6260 Lake Osprey Drive, Lakewood Ranch, FL 34240.