Award-winning author Morgan Housel, in his book "The Psychology of Money," stated, “Your personal experiences with money make up maybe 0.00000001% of what’s happened in the world, but maybe 80% of how you think the world works.”
One can easily imagine that individuals who lived through the Great Depression of the 1930s likely have a different view of investing in stocks than millennials who have lived through some of the largest expansions in U.S. history.
We all approach our worldview with our own biases that help to form our opinions of who we are and what our role in the world is. The same goes for our financial biases. Some of us are savers and some of us are spenders (the majority of us fall somewhere in between); some of us balance our checkbook each month while others look at our online banking accounts daily and figure that’s good enough. Why do these views matter today?
They matter because of the amount of uncertainty combined with the extreme volume of information available. Thomas Jefferson often said that “knowledge is power.” While this axiom is generally held to be true, one must be realistic about the “knowledge” that we absorb.
Do we tend to gather information from diverse viewpoints, even some that counter our own? Or do we stick with what we believe to be true and look for information that validates that truth?
I am not attempting to make an argument for gathering information from one source over another, as I, too, have my own bias. What I am attempting to communicate is that, during uncertain times, it is in your own best interest to gather sufficient information that allows you to resolve your questions with minimal bias.
Bias is neither good nor bad in itself, but is often a byproduct of our lived experiences, cultural backgrounds, beliefs, and value systems. These are very personal and individualistic experiences and would likely never be representative of the population in general.
Likewise, your finances and financial health are unique to you and your family, often based on the same lived experiences that are mentioned earlier. As a result of this truism, I would argue that knowledge can be power. The interpretation of the information you gather with the understanding that the absorption of this information includes the view from a biased lens will lead to truer knowledge than the mere gathering of information otherwise would.
So is there inflation currently? You bet there is — that is an economic fact. Is this increased inflation the result of political action or inaction? Or is it the result of a perfect storm that included COVID, supply-chain issues, and consumer pent-up demand to spend money?