How To Strengthen Your Financial Intuition

Have you heard the saying that you need to “trust your gut?” That sounds like a great idea, it really depends. There are times to trust your instincts or your gut and times when you should not. Let’s explore.

• Intuitive Experience - Your intuition or instinct is based on internal beliefs that may or may not be factual. The best way to determine if it is factual is to match the feelings with experiences that you’ve had in the past. If your former experience tells you that your decision needs to be A, but the data points to B, you may need to look deeper to decide. 

• Instinctive Data Matches - When you instinctively make a choice, it’s essential to check the metrics. If your data matches your instinct, you’re probably making the right choices. You don’t need to do much more studying because, in this case, the match is unmistakable due to your experience and the data.

• For example, if you are planning your financial future and the data says you need to save 20 percent instead of 10 percent, and your feeling was that you should save more before you looked at the data, you have a simple choice to make now. 

• When It’s a Moral Imperative - There are times when your experience and the data match, but you know you need to make a different choice due to your principles, morals, or values being challenged. If you know something is morally wrong for you to do even if the data states to do it or your gut is telling you to do it, you may need to change your choice, or you may need to find a new situation to involve yourself. 

For example, if you run a business during a downturn in the economy, the data may tell you to lay off your employees, but your gut tells you this is wrong. Now it’s up to you to look further into the numbers to find out if you can meet your own moral imperative to keep your employees on even though it’s not the best business decision in the short term.

There are times you should not trust your instincts and times when you should. It is a matter of experience matching the data that you generate. When you combine your internal intuition that is based on experience with facts, you can’t lose.