Why do we fear losses more than we value gains?

The answer lies in our evolutionary past. Our ancestors may have enjoyed occasions when food was in abundance, but periods without enough to eat were potentially fatal. These primal forces still have a powerful influence on our decisions today.

Loss Aversion

Economists have identified loss aversion as a major factor in financial decision-making, in that most people would rather avoid losing money than acquire more. The psychological impact of losing is thought to be twice as powerful as the pleasure of gaining.

“Death is not the greatest loss in life. The greatest loss is what dies inside us while we live.” 

We all make irrational decisions everyday simply to avoid losing.

We buy things we don’t need (or groupons we won’t use) because a sale’s ending soon. We grab an item of clothing because there’s only one left and someone else might take it—even if we aren’t really sure we want it. We keep gym memberships we aren’t actively using if we know we won’t be able to get that same rate again.

And then there are the bigger things.

We turn down opportunities that could be rewarding to avoid the risk of losing something else that feels good enough. We use our time in ways that feel unfulfilling because we fear losing time on a decision that might be wrong. And we fail to invest in ourselves, even though we’re aching to expand, because it can feel painful to part with our money.

We can’t ever know for certain that a risk will payoff, but we can choose to recognise when the fear of loss motivates our actions, and make a conscious effort to overcome it. If we don’t, it can severely limit our potential for growth, happiness, and fulfillment.

Change how you see the inevitability of loss.

The reality is that loss is inevitable.

We will all lose relationships, situations, and states of being that we enjoy and love. Even if we practice non-attachment, on some level we will get comfortable with people and circumstances.

You could say that this is what makes life beautiful and meaningful—since nothing lasts forever, each moment presents unique possibilities worth fully appreciating and savoring.

Some losses feel devastating when we experience them—and sometimes, the gain isn’t proportionate to the loss.

But somehow, we survive in the wake of almost every storm. Whether we thrive is up to us. That’s a choice we need to make proactively, not in response to what we fear, but in response to what we genuinely want to feel and do in this life.

Some food for thought, I hope our readers enjoy reading our blog posts if you do please share.

1st Financial Foundations team

Source: Lori Deschene