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“Anchoring bias” is a cognitive bias whereby humans unconsciously rely on an initial number or piece of information when making future decisions.
4 ways 'anchoring bias' can hurt you financially
Posted from cnbc.com
Personal Finance
Investing
Shopping
Mental Health
Posted 10 mo ago
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My anchoring bias is to know someone or something is always trying to separate me from my money. The world is a big carnival
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LTC Eugene Chu
..."4. In negotiations, anchor bias is a tricky tactic
Companies and people use anchoring as a common negotiating tactic, relative to salary negotiations or a sale, for example, Klontz said.
For example, during the hiring process, a company may try to anchor a prospective hire to a low initial salary offer. Any increase from there may feel like a win for the prospective worker but be on par with what the employer had initially hoped.
Ultimately, the key to countering anchoring bias is to continually question your financial instincts.
“Assume these things are being used in a nefarious way to separate you from your money,” Klontz said. “Always be second-guessing yourself.”
..."4. In negotiations, anchor bias is a tricky tactic
Companies and people use anchoring as a common negotiating tactic, relative to salary negotiations or a sale, for example, Klontz said.
For example, during the hiring process, a company may try to anchor a prospective hire to a low initial salary offer. Any increase from there may feel like a win for the prospective worker but be on par with what the employer had initially hoped.
Ultimately, the key to countering anchoring bias is to continually question your financial instincts.
“Assume these things are being used in a nefarious way to separate you from your money,” Klontz said. “Always be second-guessing yourself.”
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I've always tried to keep an open mind on things and make decisions on the outcomes of others I know, however, financially I am a bit conservative. An example is right now I have some excess cash in Savings that I should dump into at least a CD but have been sitting on it for at least 6 months or more. I know that a savings account is most likely going to give me the least return, but there it is.
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COL Randall C.
An easy method to at least get a bit better than what you'd have in your Bank's Savings account is if you link it to an online savings account. Then you can transfer money easily but still maintain access. You can easily find many that are giving a 4.75% or better return, which is better than most CD rates you'll find (unless, of course, you go to some of the online bank CD rates .. those you can get as high as 5.25% right now).
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