Don’t Let Comfort Cost You: Status Quo Bias

Many of us are naturally inclined to resist change, especially when it comes to our finances. This tendency is known as status quo bias, where we prefer things to stay the same, even if changing our approach might lead to better outcomes. Whether it’s holding onto underperforming investments, sticking with outdated financial strategies, or avoiding necessary adjustments to retirement plans, this bias can negatively impact your financial well-being.

3 Reasons We Resist Change

Status quo bias stems from deeply ingrained psychological tendencies – here are three of the most common:

  1. Fear of Regret
    You might be afraid that making a change could lead to a worse outcome. By staying the course, you’re avoiding the risk of future regret.
  2. Comfort with Routine
    There’s comfort in the familiar. Changing financial strategies sometimes requires stepping outside of your comfort zone. As a result, you might stay the course, even when it’s not in your best interest.
  3. The Complexity Trap
    The sheer complexity of a major financial decision can lead to decision paralysis, where you opt to do nothing simply because it feels easier than wading through the choices.

The Impact of Keeping the Status Quo

Sticking with the same strategy can feel safer, but it can be costly in the long run. Here are some ways this bias can affect your financial health:

  • Sticking with Underperforming Investments: Holding on to investments that are no longer serving you, simply because it feels easier than reevaluating your portfolio, can erode returns and prevent you from reaching their long-term goals.
  • Delaying Necessary Adjustments: Whether it’s updating your estate plan, reassessing your retirement strategy, or revising insurance coverage, sticking with what’s comfortable can result in missed opportunities for improvement and protection.
  • Ignoring Market Shifts: The financial landscape is always evolving. Holding onto old strategies without adapting to new market conditions can mean missing out on growth opportunities or taking on unnecessary risks.

How to Break Free from Status Quo Bias

Our goal is to help you overcome the barriers that prevent you from making the right financial decisions. Here are some strategies that might help:

  1. Embrace Incremental Changes
    Change doesn’t have to be drastic. Making small, manageable adjustments to your investments or financial strategies can help you ease into a new approach.
  2. Review Your Financial Plan Regularly
    Life changes, and so should your financial strategy. Scheduling regular reviews with your advisor can help ensure your plan evolves alongside your needs and the market environment.
  3. Focus on the Bigger Picture
    Try to separate your emotions from your financial decisions. Instead of focusing on potential short-term discomfort, consider how a change might benefit you in the long term.
  4. Leverage Expert Guidance
    Sometimes, having a second set of eyes on your financial plan can provide the objectivity needed to overcome status quo bias. As your advisor, we can help you see the opportunities that change can bring.

Status quo can also affect more than just your investment choices—it might also keep you tied to a financial advisor who no longer fits your needs. If you’ve ever wondered whether a fresh perspective could serve you better, don’t let the comfort of familiarity hold you back. Reach out to us for a consultation. 

If you are approaching retirement, download our free retirement toolkit, which includes our retirement book and several useful guides that cover the most important financial considerations for retirement.

If you have questions about your retirement strategy, call us at 602.343.9301 or schedule a meeting with one of our advisors.

This content is provided for informational purposes only. It is not a guarantee of future success, is subject to change, and is not intended to serve as the basis for an individual’s financial decisions. Strategy Financial Group does not provide specific legal or tax advice. Please consult with a qualified professional for guidance on your individual situation. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Investment advice is offered through Strategy Financial Services, LLC, a registered investment adviser. Insurance products are offered through Strategy Financial Insurance, LLC, an affiliate of Strategy Financial Group, LLC.