The Ostrich Bias
The ostrich bias is a tendency to close oneself off from the information aka stick their heads inside the sand just like the ostrich does. What does this mean in finance?
The effect occurs when the person spends without much of thought and they do not know their finances. They have no idea what comes in and what goes out. They also do not know where the money is going. They hide from the truth, they bury their heads into the sand hoping the money problems will just go away and subside on its own.
When these people are exposed to discomforting information instead of suffering through the resulting anxiety they choose instead to outright ignore the information. Imagine when investors are in dangerous or risky financial situations but choose to pretend that these situations do not exist 🤨
The symptoms include
1. Remain ignorant to stock market swings
No doomsday articles bothers them, because they did not read them. Money stayed invested through wild ups and downs in the market. They did not even know what was going on.
2. Spend based on estimates of bank balance
The typical pattern is to spend more than they have. The positive side of this is when they don’t have much money in the bank balance they don’t spend much.
3. Ignore “great bargains”
They don’t hoard coupons or redeem codes. They pay the actual price even when the sale is on. They don’t look out for discounts nor break their heads with customer service.
The best advice for ostrich money managers is to evolve into a Hawk (being very vigilant about the spending, earning and tracking the flow).
🥂 to knowing!
