How to Avoid Making Financial Decisions Out of Fear

Have you experienced this before? You open your statement for your investments and feel the rush of excitement when you learn that you made money. Or maybe you’ve been on the other side, where you open that statement only to learn that your investments aren’t doing that well. If you’ve felt either of these before, you may be at risk for emotions guiding your financial decisions.

 

It can be easy to let fear and other emotions inform our financial decisions, but if we don’t check our emotions at the door, the decisions we make may be ones we later regret. For example, some examples of emotionally-informed financial decisions are to stop investing money when the market is low out of fear of it dropping even lower, investing too much money when a particular stock is already on the rise, and pulling money from your investments early.

 

If making financial decisions out of fear and other emotions should be avoided, what do we do instead? Here are 5 strategies to help:

 

1. Know your income strategy.

This tells you where your income is going to come from in the next year, two years, five years, and beyond! Knowing what your projected income will be helps you make decisions today to not only stay within your income but also to calm any fears around meeting your daily needs for the long haul.

 

2. Have an overall investment strategy, not just a statement-to-statement strategy.

The market will go up and down. You are going to have some months that look like a “good” month and some that look “bad.” But you have to look at the ebb and flow of the market across your entire strategy, not just one month.

 

3. Plan for taxes.

We like to say that you aren’t the only account holder in your finances. The US Government is also there with you to take out taxes. (So fun, right?) If you aren’t planning for the piece of the pie that taxes will take away, it’s important to start planning for any potential taxes now so you won’t be caught off guard when they are due.

 

4. Be sure to have a health care plan.

Whether you currently need it or not, you will likely need some level of health care in the future. Making sure your health is a part of the plan today will help relieve so much stress and emotions around your future health decisions.

 

5. Include legacy planning.

It can feel odd to make a financial plan for after you are gone, but it’s the best way to be sure your loved ones receive the assets you’ve worked for and to calm any fears you have about their future as well!

 

“Here  at 210 Financial, we like to say that we are emotionally tied to our clients, not their money. We stand outside of those emotions. The market will go up and down. But we are measuring success by income, taxes, and level of risk.” – Phil Cooper, 210 Financial Founder

 

If you don’t have these strategies in place, a great first step is to set-up a meeting with a financial advisor who can help you make a plan. It’s okay to have emotions about our finances, but it isn’t a great strategy to let those in-the-moment feelings drive your decision making. When it comes to finances, putting that plan and strategy in place ahead of time will allow you to remain steady and confident when your portfolio goes up or down.

 

Want more information? Schedule a complimentary meeting, attend one of our local events, or give us a call at 309.263.1333!

 

Content prepared by Austin Savage Co.

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and 210 Financial are not affiliated companies.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. Our firm does not offer tax planning. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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