Take an aspirin and call me in the morning
Doctors are under constant pressure to give a patient a quick fix – “Prescribe me something that will make this go away – quickly.” Rather than spending a few months uncovering a psychological problem, they can, and would much rather, take a pill to make the ‘pain go away’. We live in a world where instant gratification is available for almost everything – If only investing had a quick fix. One of the reasons so many investments go pear-shaped is because there are people constantly seek that quick fix. They follow every investment tip they hear round the braai, give day trading a bash, throw money at charlatans promising above average returns, fire advisors who don’t give spectacular returns and pile into over-heated stockmarkets.
FOMO – Fear of Missing out. They hear how much money their friends are neighbours are making (usually BS) and pile into markets when smart investors are cashing-in their profits and protecting their capital. Unfortunately psychology and investment are inextricably linked. If you mix emotion and investing you are going to get hurt. If your advisor plays no other role than ‘saving you from yourself’ then leaving unemotional investment decisions up to her will save you thousands. Financial advisors may not be able to take their own advice (a common problem across all professions) but when it comes to their clients they are able to inject their objectivity. It is this same objectivity you get from a doctor that saves you from yourself when you try and DIY your medical symptoms (and end up with a diagnosis of a brain tumour instead of a hangover).
Whether you like it or not, your behaviour is going to be the best predictor of your long term financial success, irrespective of your occupation, education or social standing. I know the old criticism of prediction is that it is like driving a car looking through the rear view mirror, but the future is based on promises and intentions – and we all know how fragile and meaningless those can be. Give me a solid reputation rather than a glitzy prospectus any day of the week. Have a look at your financial behaviour. Are you a net saver or net spender? (Read this Blog HERE for more information). How many get rich quick schemes have you hopped a ride on? Do you know how much you need to retire on and whether you’re on track to do that? Do you know your monthly disposable income instantly? How often do you get a new car or house? Do you use your credit cards or they use you? The quickest investment fix you can make (and it isn’t that quick) is to change your attitude to money. Get some help to turn yourself into a net saver instead of net spender and you’ll never have to worry again.
One reason people are attracted to quick fixes is that they don’t know if they have enough for the future, assume they don’t and try and play catch-up. Don’t assume. Find out exactly your current and future status, and what you need to do to get your future finances back on track. Once you have a plan, meet with your advisor every six months to make sure you stay on track. If that isn’t working, set up some financial coaching every month to give you a hand wrapping your brain around some different behaviour.
Action: Do a projection of your current savings into the future and stop assuming you’re okay/not okay. It is most useful if the projection uses ‘present value’ of money – because that is what we understand today. There are a number of apps that will give you a hand with this, I can also give you a hand.
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Author Dawn Ridler