The Perils of Self Diagnosis

There are many facets of life where, once we develop a baseline of core competency, we can conduct on our own without much relative risk or downside consequences. These areas might include such life activities as time management, socializing, meal planning and nutrition, household chores, lifestyle choices, etc.

Other areas though have higher consequences if we don’t seek objective counsel from professionals. For our wellness these may be medical, psychological, and spiritual. For our homes they could include plumbing, remodeling, electrical work, landscaping, etc. For our autos they would be, well, really, anything.

If we extend this paradigm to our financial life, we can consider that items such as budgeting and saving are easily self conducted. Those 2, while seemingly easy to perform, really come down to self discipline in the form of delayed gratification and in the form of selective spending.

The more complex any of the above aspect becomes though, the higher the stakes if we get it wrong.

Within the sphere of our financial lives, something as seemingly innocuous as insurance or employee benefits can sabotage our financial health and well being if we make assumptions about what is sufficient for us.

Also in this sphere is our assumptions about our future financial needs. Having conversations with our friends or reading a book about investment models is a great place to start, but not to end.

I am upfront claiming bias regarding what I am about to say: Making assumptions regarding what is optimal for any area of your financial life has possible consequences that reverberate way beyond just that specific area. For example, self diagnosing your own tolerance for losing money in any part of your portfolio, whether for long term goals (eg retirement and education) or for short term goals (eg buying a home).

This scales out to assumptions about what the right mix of asset classes should be (International emerging bonds? Domestic mid cap stocks?) as well as type (Mutual Funds? Exchange Traded Funds?).

While you may get it right in self diagnosing what is best for you, you want to ask yourself what the consequences are of getting it wrong.

The value in working with an external 3rd party is not only getting objectivity about your goals. It’s also in having the conversations that challenge assumptions and explore areas of your financial life that you may not have considered or given much weight to.

Self diagnosis makes so much sense in some areas of our lives. But in order for any of us to live our best life, we need to be able to know where low risk self diagnosis ends and where external 3rd party diagnosis starts.