Human beings aren’t known to make the wisest decisions when we are under emotional pressure. It’s easy to shout that sound and somewhat obvious advice at the character on the TV screen when they are making all the wrong decisions under pressure (think: any horror movie ever) but put ourselves in their shoes and we might be making those same questionable decisions. For most of us, there are few subjects that evoke as much emotion as our finances. How can a financial adviser help ease that emotional burden?
Why does money make us so emotional?
It’s not the money itself, but more the idea of what it could do for us, that gets us all fired up. Money really has a different value to each of us, and we even choose to spend it based on an emotional outcome. It can make us feel worried, angry, elated. Add someone else into the mix and the crowd mentality takes over; expressing your anxiety to partners and loved ones usually results in them taking on that same fear and amplifying it. Throw in a dash of media hype and speculation, and even the most level-headed of us could find ourselves making some pretty hasty decisions. So, how could you make consistently objective decisions on your finances, especially when investing exposes your money to market fluctuations? A financial adviser could help.
How does a financial adviser alleviate the stress?
By understanding your attitude to risk, a financial adviser will be able to help you make decisions that you are comfortable with from both a financial position and a human one. When emotions are such a key driver in the decision-making process, having an adviser will bring you some emotional discipline and take a more impartial view of the situation.
Why do I need discipline?
When it comes to planning your financial future, you need to stick to the plan. If you deviate from the plan, you are reducing your chances of achieving your goals. Aside from the obvious advantage of a plan that has been put together with the help and advice of an expert, a financial adviser has the critical role of helping you remain on track with the plan, even when your nerves are in the driving seat.
In turbulent times, anxiety could drive you to sell up; you may end up buying back as things have calmed down, but as a result prices have rebounded. Planning is long term, and sometimes it can be hard to separate the long-term plan from the panic in the here-and-now. A financial adviser is able to keep the long-term goals at the forefront, and help you rebalance your emotional response.
But what if I don’t get fearful when it comes to investing?
It isn’t just fear that drives us; sometimes it can be greed. Don’t feel bad, we all experience it from time to time, and if we see prices skyrocketing in comparison to our slow and steady investment, it can be tempting to jump on the band-wagon. But this emotion often means you arrive at the party too late, buy when prices are high, and then performance has already peaked, and you see little gains. Exercising some discipline and sticking with the plan can be difficult; your financial adviser can help to keep you on the right path. It’s easy to think we always make sensible and impartial decisions when it comes to something as important as our finances, but don’t underestimate the power of your emotions. Working with a financial adviser could be the difference between hasty investment decisions and regrets, and a long term financial plan you comfortably achieve.
NB: The value of the investment can go down as well as up and you may not get back as much as you put in.