THE “Rational” AND “Adaptive” Expectations Theory

Two Well Known But Doubtful Economic Theories

Courtesy: www.CertifiedMedicalPlanner.org

[By Staff Reporters]

1 – RATIONAL EXPECTATIONS state that one will conform to what can logically be expected in the future. That is, a person will invest, save or spend according to what s/he rationally believes will happen in the future. An investor thinks a stock is going to go up, and by buying it, this act actually causes the stock to go up.

LINK: https://www.springerpub.com/dictionary-of-health-economics-and-finance-9780826102546.html

DOUBT: An investor notices that a stock is undervalued, buys it, and watches as other investors notice the same thing, thus pushing the price up to its proper market value. This creates a self-fulfilling prophecy that helps bring about the future event. So, RE can be changed to explain everything, but it tells us nothing.

2 – ADAPTIVE EXPECTATIONS suggest that people form their expectations about what will happen in the future based on what has happened in the past.

DOUBT: Past data is only one of many factors that influence future behavior. In the financial world, change is the only true constant.

ESSAY: https://medicalexecutivepost.com/2013/04/24/more-on-money-psychology/

ESSAY: https://medicalexecutivepost.com/2014/08/08/on-financial-psychology-and-money-scripts/

ASSESSMENT: Your thoughts and comments are appreciated.

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BUSINESS, FINANCE, INVESTING AND INSURANCE TEXTS FOR DOCTORS

1 – https://lnkd.in/ebWtzGg

2 – https://lnkd.in/ezkQMfR

3 – https://lnkd.in/ewJPTJs

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Do Three Men Still Make a Tiger?

Moral Suasion, Investing and the Corona Pandemic

Courtesy: http://www.CertifiedMedicalPlanner.org

By Dr. David E. Marcinko MBA

People will believe anything if enough people tell them it’s true.

This thought comes from a Chinese proverb that if one person tells you there’s a tiger roaming around your neighborhood, you can assume they’re lying.

LINK: https://www.springerpub.com/dictionary-of-health-economics-and-finance-9780826102546.html

If two people tell you, you begin to wonder. If three say it’s true, you’re convinced there’s a tiger in your neighborhood and you panic.

MORE: https://www.omsj.org/science/three-men-make-a-tiger

INVESTING: https://www.caseyresearch.com/daily-dispatch/three-men-make-a-tiger/

MONEY PSYCHOLOGY: https://medicalexecutivepost.com/2018/09/19/money-beliefs-and-luxury-lifestyle-tv/

INVESTING: https://medicalexecutivepost.com/2013/04/24/more-on-money-psychology/

Assessment: Your thoughts and comments related to the Corona Virus Pandemic, Money and Investing psychology are appreciated.

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BUSINESS, FINANCE, INVESTING AND INSURANCE TEXTS FOR DOCTORS

1 – https://lnkd.in/ebWtzGg

2 – https://lnkd.in/ezkQMfR

3 – https://lnkd.in/ewJPTJs

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On Financial Psychology and “Money Scripts”

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What they Are – How they Work?

  • By Brad Klontz PsyD CFP®
  • By Ted Klontz PhD
  • By Eugene Schmuckler PhD MEd MBA CTS
  • By Kenneth Shubin-Stein MD CFA
  • By David Edward Marcinko FACFAS MBA CMP®
  • By Sonya Britt PhD CFP®

Money Scripts are unconscious beliefs about money that are typically only partially true, are developed in childhood, and drive adult financial behaviors.

Money Scripts may be the result of “financial flashpoints,” which are salient early experiences around money that have a lasting impact in adulthood. Money Scripts are often passed down through the generations; and social groups often share similar Money Scripts. The animal brain stores associations around money based on early experiences, which can result in rigid and often problematic money attitudes.

And so, we argue that Money Scripts are at the root of all illogical, ill-advised, self-destructive, or self-limiting financial behaviors.

Money Scripts

The Research

In research at Kansas State University [KSU], researchers identified four distinct Money Script patterns, which are associated with financial health and predict financial behaviors

The 4 Money Scripts

  1. Money Avoidance
  2. Money Worship
  3. Money Status
  4. Money Vigilance

When Money Scripts are identified, it is helpful to examine where they came from. What three lessons did you learn about money from your mother?

Examination

A simple technique involves reflecting on the following questions:

  • What three lessons did you learn about money from your father?
  • What is your first memory around money?
  • What is your most painful money memory?
  • What is your most joyful money memory?
  • What money scripts emerged for you from this experience?
  • How have they helped you?
  • How have they hurt you?
  • What Money Scripts do you need to change?

More: Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

Financial Planning MDs 2015

Doctors and Money “Disorders”

Behavioral Finance –  Are You Guilty?

By Rick Kahler MS CFP® ChFC CCIM www.KahlerFinancial.com

As a young adult, what could you spend money on that would be a wise investment in your financial future? A home? Medical school education? A money management class?

Well, all of these may be good ideas, but there’s something else you can buy that could make an even greater difference in your long-term financial health: counseling.

Behavioral Finance

What does psychological counseling have to do with money? Sometimes; a lot!

For example, I was recently interviewed by a reporter for an article about money disorders. The conversation reminded me just how many problems can result from dysfunctional money beliefs and behaviors. Money disorders can impair people’s functioning and disrupt their lives just as significantly as disorders like alcoholism or other addictions.

Common Maladies

Some common money disorders include the following:

  • Compulsive Spending is a consuming focus on spending. It can include buying things you can’t afford as well as shopping where no money is actually spent
  • Financial Enabling is a codependent attempt to help others that actually does more harm than good. A pattern of bailing kids out financially is a good example.
  • Hoarding is compulsively buying and storing things that you don’t need or will never use.
  • Financial Infidelity is keeping money secrets (such as spending, saving, or investment mistakes) from your partner because you would be ashamed to have them find out.
  • Financial Incest is inappropriate sharing of worries or financial details in ways that violate the boundaries between children and adults.
  • Workaholism, especially medical professionals, is a consuming focus on work or earning to a point of damaging your relationships.
  • Under-spending is frugality taken to extremes, such as inadequate spending on health care, nutrition, shelter, or clothing even when you can afford them.

Not about Money

How many of the above “disorders” are you guilty of?

All these disorders have one thing in common: fundamentally, they aren’t about the money. A given pattern of behavior around money can be someone’s unconscious response to emotional pain, in the same way addiction or anger might be.

For that particular person, the money behavior may just happen to be the medicator that works to cope with deep emotional stress. While one person may find relief in alcohol or drugs and another may find it in work, someone else might use shopping or hoarding as a way to feel better and function in the world.

An Addiction?

Just like addictions, however, money disorders only relieve pain for a short time. In the long term, they only cause more pain. The result is an escalating cycle of destructive behavior that has many negative consequences, including financial ones.

Rag Mags

To see how emotional health and financial health are linked, all you have to do is read a celebrity magazine or look around at the people you know. I’ve seen high-earning doctors and other medical professionals who have a negative self-worth because they can’t control their spending. We all know people who bounce from one financial mess to another, never seeming to learn from their money mistakes. Some very capable and intelligent doctors struggle financially and in their careers because of emotional issues that have nothing directly to do with money.

Counseling

Counseling to resolve emotional issues may seem to be a low-priority expense that comes far down the list after basic needs like housing, food, and transportation. Yet for anyone who struggles to overcome destructive patterns of behavior—even those that aren’t directly about money—counseling can pay off in very real monetary ways.

Assessment

Emotionally healthy and confident people make better choices about relationships, careers, and other major aspects of their lives. They also make better choices about money. This is why counseling is more than an investment in your emotional health. It can also make a measurable difference in your financial health.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or
speaking engagements. Contact: MarcinkoAdvisors@msn.com

Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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