Joule Financial

Here are a few things I have learned about this so far: -In one of my upper level finance classes at the University of Kentucky, my professor started our grades at 100% on day one of the year. Rather than starting from 0%, we started at 100% and every point we lost throughout the semester would reduce our grade. It was an interesting concept, but a... ll other things being equal, my grade at the end of the semester should be the same as if I had started at 0%, right? Not so much, this class performed, on average, 12% higher in final grades than the other classes learning the same material but using the standard grading. The culprit: loss aversion, which is the concept that we are hardwired to be more sensitive to potential losses than potential gains. At Joule, we realize the importance of loss aversion, so we walk our clients through potential worst case scenarios and focus on the cost of potential losses rather than the excitement of potential gains. -We have been utilizing a new planning program at Joule that helps us dynamically create plans and scenarios for our clients. The program spits out the best possible mathematical strategy based on assumptions and our client's information. It would be easy for us to just look at numbers and say,"Here you go, this is what you should do. The hard part is to understand the psychology that can impact the numbers. The numbers say that you should invest that $200,000 you got from selling your house, but in practice, you would probably sleep better at night if you paid off part of your new mortgage instead. The math may say that it is better for you to not move from Wisconsin to Florida, but you may not care when you are scraping a foot of snow off your windshield to go to the grocery store. The numbers say that you should stay at your high paying job, but if you are miserable going to work every day, who cares about the numbers? The point is that the numbers are extremely valuable, and we must consider them, but it is just as important to consider the psychology and make ...Read More