Seven Habits
Making the right financial decisions should be a balance of emotion and logic.
If we all made decisions based purely on logic, then our brains would be microprocessors. No impulse buying, no fear, panic, hope or greed.
But our minds are better balanced than computers. We tend to rely on gut instinct before making decisions. Security, freedom, winning, wanting, ego, accomplishment and power – all of these are emotional factors that drive the decisions we make in nearly every area of life. Only later do we try to justify our decisions using the logical side of our brain. (I deserve that chocolate…I’ve had a tough week.)
These emotional drivers are especially important when it comes to financial planning. But making decisions this way could result in rash decisions that hurt our financial future.
Understanding the complex money relationship between emotions and logic can help you feel more comfortable about your financial plan. And it can help make the planning process more rewarding.
The Seven Emotional Drivers.
Here are Seven Emotional Drivers related to financial planning that can help you make better decisions:
- The need to feel financially secure.
- The need for emotional security.
- The need to feel free.
- The desire to win, to excel, or to be the best.
- The need for a strong sense of self-esteem, dignity and self-respect.
- The desire to accomplish something worthwhile.
- The need to feel powerful, and have mastery over events and people.
Think for a moment about your key Emotional Drivers. Most of us will have one primary driver and perhaps one or more secondary drivers. Whatever your key Emotional Driver – whether it’s the need for financial security for you and your family, or the desire to feel free – make sure your financial plan taps in to that need.
Let’s take a closer look at your financial plan and see which one is your key emotional drivers:
Do you feel secure?
Do you understand the products you have in terms of how they protect your family? If you don’t, take some time to ask questions, do some research and learn. That way you can have a solid feeling of financial security for you and your family.
Do you feel confident your plan meets your goals?
Make sure you know what you own and why. Do the elements of your plan line up with your personal goals and dreams? After all, that’s the reason we make these plans in the first place.
Does your plan give you peace of mind?
Develop a plan that will meet your life goals. This is called values-based financial planning. The basic premise is that money should help you accomplish what you want to get out of life, not the other way around.
Do you feel like you’re making progress?
Celebrate important achievements and financial milestones. Of course, you need to have those milestones in place.
Do you feel you’re in charge? Or are you second-guessing yourself?
Make decisions or changes based on your goals and dreams. Don’t try and time the market.
Are you achieving your goals?
Having a sound financial plan based on your needs and goals helps you feel like you’re making progress. It’s important to have regular reviews with your financial planner to ensure that you’re making progress towards your goals – whether it’s providing financial independence for you and your spouse or leaving money to your favourite charity or to your family members.
Building a financial plan based on your personal values can help you feel confident and secure about your future. And it can help lessen the worry when markets get bumpy.
So take the time to think about your key Emotional Drivers. And once you understand what your key drivers are, spend some time looking at your financial plan. If your plan doesn’t line up with these important factors, it’s probably time to reconsider your decisions.
That’s when a visit to a qualified personal financial planner can help set your financial plan on the right track…. And give you peace of mind in this very important area.
