Would you like a short-cut? To reduce the number of errors your mind has control over.
The biggest risk to your retirement is not market movements nor inflation.
We explored cognitive biases which affect your financial decisions in our previous post. You can read the post by clicking here>>
Repurposing emotion for more favourable outcomes!
Back in my university days, I had a few anger issues. Probably from many years of being teased and bullied in my high school years. I thought I’d try my hands at martial arts, Tae Kwon Do to be exact.
It was a great outlet. Yes as you would expect we were taught to fight. But also restraint and discipline. I applied myself in the sport at the time. To the extent, I entered my first and last fight. I lost the first round and then came back to win in the last two rounds.
After that fight, I was invited to train with the Victorian state team which at the time included some Olympians. It was three hours of torture every Sunday morning.
The one valuable lesson learnt was managing emotions in stressful situations. Being prepared and having automatic reactions for any situation. Knowing exactly what to do when someone attacked you for example.
Imagine for a moment your face to face with a would-be attacker. They rush at you with full force, arms out, knife in hand. Rather than take the full impact head-on. You sidestep your would-be attacker. Deflecting his outstretched arm. Leading him to rush past leaving him open to a counter-attack.
Your working with a powerful force, not against it. A valuable lesson for making improved investment decisions.
In financial terms. Daniel Crosby (author of “The Behavioural Investor”) calls it, bumper sticker thinking.
Workarounds for managing your mental shortcuts.
The twenty fives times the income you need in retirement is a great start. Or, the 4% rule. Easy calculations for working how much money you’ll need to fund your retirement.
Protecting your money from it’s worst enemy, YOU!
If you can’t manage your investment behaviour. Your retirement portfolio will suffer. Your lifestyle will suffer.
If you get this behavioural part right. You set yourself up for success.
Your strategies or retirement portfolio designed to optimise your wealth. Which allows you to live your best life. The one you can live with and sleep well at night. One you can put in place.
So that you are not making costly mistakes when the markets collapse around you.
The one strategy or retirement portfolio that is right for you. There is no one size fits all.
Strategies to make better more informed financial decisions!
- Investing is a risky business. It’s ok to say you don’t know what will happen. After all, no one really does. That’s why we diversify. (not have all your investment eggs in one basket)
- Be flexible. You need to have the ability to nimble to make changes as your life unfolds.
- Don’t overcomplicate it. At times, when emotions kick in, you can overthink it. If you can’t sleep at night, you’re taking too much risk.
- Gather intel. Seek out the evidence. Look for alternative points of views. Don’t stick to people you share similar ideas with.
- Consider the opposite views. Look more widely and consider all angles. List out the pros and cons.
- Create a personal benchmark. Living your best life is the only thing that matters. Don’t compare yourself to investment market benchmarks or the Joneses.
We never compare our clients against markets. Sure, you want good returns. We track their own personal benchmarks. You need money to retire. So you can live your best life. You need money for overseas holidays for the next five years.
That might be in the form of mapping out your cash flow for retirement. Outlining the experiences you want to have that are important to you. This becomes your personal benchmark.
How we manage behavioural risk with clients?
Having a robust system in place helps manage any behavioural risks. We do this by relentlessly following the process, which leads us to the strategies and then to the tactics.
At the forefront is always, what does your best life look like and what’s important for our clients.
A simple process for helping:
#1 Take a step back. Slow down and little and don’t rush into a decision. Take a considered approach.
#2 Examine the decision from all sides without emotional influence.
#4 If you take this course of action what does success look like?
#5 What would failure look like?
#6 What’s the alternative?
Consider how you might do this more elegantly.
So there you have it. A simple process for making better financial decisions.
While many financial planning practices sole focus is on your investments. Many restricted by the investments they can use or influenced to recommend certain products. How can they really be working in your best interests?
We pride ourselves on not selling product. We truly take the time to understand you prior to making any recommendations. And when do, it’s a good fit for the life you want to live. Not the other way around.
If this something that interests you, feel free to jump into my calendar below and book a call.
Click here to book your complimentary “Safeguard Your Retirement Strategy Call” now.
Here’s to living your best life!
Glenn Doherty – CFP – Money Mentor | Taking the stress out of planning your self-funded retirement | Founder of Jigsaw Private Wealth