Three Easy Ways To Increase Your Chance Of Financial Success
While understanding the complexities of stocks, bonds, and taxes is a key determinant in financial success, changing your behavior may be the most important step in achieving your financial goals. You obviously don’t control whether stocks, bonds or taxes will go up or down, but you do control your behavior. So here are three simple ways to change your financial behavior.
Budgeting once a year and other infrequent activities are less likely to bring success than automated actions. Automating payroll deductions makes it much easier to habitually save and stick to a plan. So limit financial decisions that require your recurring intervention. So give some thought to what you might automate to increase your savings or make sure you pay your bills. Would you like to buy a boat, a second home, or achieve a long-term goal? Automating saving for it maps the route to get there. And don’t just think in terms of automating savings and payments; automating financial education by signing up for a series of webinars or newsletters might also help. The easier you make it to learn about wealth management, a topic you might not otherwise research regularly on your own, the more likely you are to be engaged in the subject and achieve your long-term goals.
Another idea: Whenever you make a major financial decision, write yourself a note about your decision. By jotting down your analysis at the time you make a decision, you’ll create an introspective record that, over the years, will help reveal successes and failures.
Finally, the burgeoning social science of behavioral finance can help you learn about your money personality and innate traits. For example, would you rather receive a new car that’s drivable but nothing fancy or a new fully-loaded model of the same car in 12 months?
How about a car that’s nothing fancy today or one with or a car with some but not all of the options in 12 months? Your answer to questions like this reveals your predisposition toward deferring rewards today to achieve a long-term plan. Increasing self-awareness can guide you in determining how likely you are to tolerate losses in bear markets, whether you are overconfident about your financial decision-making abilities, and reveal blind-spots and biases and avert self-sabotage in achieving your goals. If you want to measure your financial personality traits by taking a behavioral finance assessment or would like to talk about other steps you can take to ensure healthy financial behavior, please contact us.
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