Do you Financially Plan with Your Heart or Your Head?
What do commercial writers know that most people don’t know?
People are not nearly as rational as they think. Every advertiser knows they only need to give the public just enough rational information for the crowd to do what their heart wants to do.
That emotional thinking happens, especially in financial decisions.
There is a reason the adage ‘Buy Low and Sell High’ is on every investor’s lips. It is because most investors decided with their hearts to buy something because everyone else was buying it. And so they purchased the stock sky-high.
Then, when the stock dropped, and everyone panicked, they panicked right along with the crowd and sold. They sold far lower than they should have.
I just read an article that said science concludes that logic is only about 5% of our decision input. Of course, the rest of the decision is made by our emotions. And most of those choices come from the 95% of our brain we call our subconscious.
The subconscious is the unspoken voice that screams ‘DANGER-DANGER’ whenever you feel uncomfortable. Its main goal is to avoid pain and maximize pleasure. Sadly, this part of the brain is hardwired to ‘survive’ and will sabotage any attempt to ‘thrive.’
My job as a CERTIFIED FINANCIAL PLANNER™ is to understand your goals when you are thinking with your best brain space. Legitimate concerns are addressed, but panicked fears are put on a shelf. When we come to an agreement on the goals, I have my marching orders from which to work.
So how do you avoid these emotional pitfalls? First, know what you don’t know.
I read an interesting study that said most investors think they’re ahead of the curve. In fact, research shows that nearly 2 in every 3 investors say they know more about finances than at least 70% of the population. Yet, 56% can’t pass a financial literacy test. They get at least 6 out of 10 questions wrong.
This is where professionals like us come in. You may study these things off and on, but my entire education and day-to-day life revolve around discussions on how to maximize financial growth for my clients. We use research, processes, and systems to make decisions. These protect us from our own overconfidence.
The second point is to plan a course and stay the course! Our training is to help people find the right plan in line with their goals and then keep them on the right path when the Sirens start calling.
So, where do emotions come into play when deciding where and how to invest? They come in when you can confidently acknowledge that you have a good plan, and you trust your planner.
Your feelings can pull all around. But when you are secure in the plan and planner, you have some rationale to hold on to.
This is why I love what I do. I get to have passionate discussions with passionate people and then go and dispassionately crunch the numbers.
Then at the end of the day, I get to walk my clients into a better financial future where they can embrace their passions without letting their emotions pull them into bad financial choices.
Let me state this again: The reason ‘buy low and sell high’ is such a cliché is because most people emotionally ‘buy high and sell low.’ The people who make money over the long term are looking for options that aren’t popular and emotionally ‘hot’ to the masses.
Let your heart paint the picture. Let your head pick a good CERTIFIED FINANCIAL PLANNER™. Then, let their head crunch the numbers and pick a path.
Then your heart can be used for what it does best…love your family, enjoy your hobbies, and celebrate life.
I would love to be that financial planner for you. Please reach out, and we will find a time to discuss your situation.