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These Emotions Will Hinder Your Finances

When it comes to saving money, a good attitude is key. DailyWorth tells us about six emotions that can hurt your financial future.

We are often our own worst enemies, especially when it comes to money and what to do with it. As a financial adviser, I’ve found that the biggest obstacle to my clients’ financial success was not market performance, my pick of investments, or a lack of income on their part, but rather their emotions. Whether it was unhappiness, guilt, fear, shame, or greed, these feelings fueled negative behaviors and made my job extremely challenging. And while these same emotions likely led them to consult me for guidance in the first place, ironically, they were also what often held them back from being guided.

RELATED: Financial Fears That Cost Us

We grow up with experiences and role models that shape how we view and what we feel about the world around us, and these experiences almost always dictate our decisions and behaviors. My clients and I regularly struggled to help them overcome their stubborn emotional urges. Chances are, you are struggling too. To help, I’ve highlighted the most problematic behaviors, the emotions behind them, and how to get out of your own way to achieve your financial goals.


Read on for more.

The Procrastinator

We all procrastinate. Especially when it comes to things we don’t like or understand. Financial planning is commonly one of those things. Most of my clients were long overdue in meeting with a financial adviser by the time they got to me, but then they continued to procrastinate after our work began. I found it nearly impossible to get some clients to fill out and return required paperwork on their own, send in money, or get information I requested.

As frustrating as it was, I learned that this seemingly lazy behavior was really the by-product of their subconscious fear of having to be financially responsible and, in a way, grow up. Problem is that the longer you wait to take control of your financial future, the more insecure it will be.

The solution: To help make the planning process easier and quicker, I would make paperwork and other info-gathering steps a joint effort with my clients. I would also check in regularly and give them deadlines to help keep them accountable and on track. If you are guilty of procrastinating with your financial planning, set deadlines for yourself, get a family member or friend involved (if you don’t have an adviser), and set dates with them to check in with you on a regular basis to help keep you accountable.

The Overspender

Most of us overspend every now and then, if not regularly. Why? Because we are trying to feel better about ourselves or fill an emotional void (usually unsuccessfully). I had a client who spoiled his child because he grew up poor and didn’t want his son to. I had another client who spent way too much on a lavish lifestyle to make up for her insecurity surrounding being perpetually single.

The solution: Splurging on occasion is OK, but living beyond your means is not and makes any successful financial planning nearly impossible. As I instructed my clients, first and foremost, you must stop using credit cards. Physically remove them from your wallet and hide them to avoid temptation. In addition, gaining clarity and creating structure around your future goals by going through a financial-planning process should help you stay focused on what’s most important and avoid unnecessary overspending.

The Liar

Even if you haven’t lied to your doctor, you’ve probably lied to your financial adviser, or would if you had one. Most of us fudge the truth from time to time, and some of us more frequently. Strangely enough, we are much more likely to be forthcoming with our health problems than with our financial problems. Shame and embarrassment are common culprits.

The solution: When a client would lie about their finances — whether it was overstating their savings, understating spending, or denying debt — it would render my calculations inaccurate and my recommendations potentially unsuitable and unrealistic. If you lie to a doctor, your chances of being properly diagnosed and treated are all the more compromised. Similarly, lying to your financial adviser (or yourself) will throw your entire financial plan off track and make the odds of achieving your goals slim to none. Understand that your path toward good financial health starts with being honest about your bad habits.

The Know-It-All

One of the main reasons people (should) hire financial professionals is to gain objective, expert, personalized guidance. Yet many clients have a bad habit of acting like the expert and trying to reverse roles with their advisers. As an adviser, it was extremely challenging and frustrating to help someone who didn’t seem to want to be helped and distrusted everything I said. It’s one thing to be cautious and question advice; it’s another thing to be overly cynical, emotional, and argumentative, which can easily lead to progress paralysis or irrational decision-making. I once had to ask a client: what is the point of us working together?

The solution: If you think you are well-educated in matters of finance and investing, that’s great — hopefully you are leveraging that knowledge to your financial advantage, either on your own or through an equitable partnership with a professional. But if you are going to bother paying for advice, you should only do so if you trust that person enough to follow it.

The Worrier

Many people are wary of the financial industry and with good reason. Investing is risky enough without the added risk of greedy crooks at the top pulling strings. The problem is that the stock market is one of the only places available to grow our money enough over the long term to outpace inflation and support our income needs later in life.

The solution: Every day that a fearful client would stall on investing her money meant wasting precious time when it came to achieving her goals. In these situations, I would suggest that the client start small, slow, and simple, investing a relatively minimal amount of money initially in a broadly diversified, passive index fund and setting up an automatic monthly investment plan to gradually add to her account. Then I would check in with the client every quarter to review her progress and gauge her comfort level, making minor adjustments if necessary.

Worrying too much about losing money or making the wrong decision can lead to investment paralysis, which means losing money anyway (due to inflation). The investments you choose matter less than the time you spend invested. Just get started.

The Chaser

When the market or a certain fund or stock is hot, the average investor tends to chase it. In many cases, they buy in too late, only to see it sharply decline in value soon after. Take Apple stock, for example. After witnessing Apple explode last year, many eager, shortsighted investors jumped in, just in time for the 30-percent decline over the past year. Unfortunately for them, Apple stock is now considered a relative “bargain” by many industry experts (if you can afford to spend over $400 per share).

The solution: Financial advisers frequently have to combat and temper some clients’ emotionally charged lust to buy the latest trendy investment. In most cases, it is for their own good, though they usually don’t believe that at the time. Do yourself a favor (and your adviser, if you have one) and focus more on your long-term growth goals, rather than quick gains (which really could end up being quick losses). Also, don’t pick investments simply based on recent performance; instead, carefully consider their longer-term histories and how well (or not) they fit into your overall portfolio.

Jocelyn Black Hodes

Check out these smart tips from DailyWorth:

Seven Ways to Create Your Own Money Love Story

Eight Ways to Stop Overspending Now

Is Your Mind-Set Keeping You From Getting Rich?

Top Eight Mistakes Investors Make

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