“What we have to remember is that investing has a price, but it's not a dollar and cents price. The price is fear, volatility, and risk. In order to actually win with investing, you have to be willing to pay that price as much as it hurts. If you sit on the sidelines, you won't have to pay that price. But you're going to look around you and say, ‘Wow, I wish I invested, because everybody else is way ahead of me.’”
Matt Stead, Financial Advisor, George Liakakis, CPA, and Mike Callahan, Partner, continue the discussion on The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness by Morgan Housel.
When starting a financial plan, many people encounter the psychological challenges of investing and saving. Taking an analytical approach to your financial plan isn’t realistic because as humans, we process our risks, wins, and spending desires emotionally. Financial advisors agree that the ability to stick to your plan long-term is the deciding factor of success. One of the hardest things about sticking to a financial plan is creating savings habits and holding on to investments, even when the market is performing poorly. It’s important to create a diversified financial plan that feels comfortable to the individual.
Sticking to the plan is important, but life is unpredictable. Financial plans are living documents. Changing goals, like deciding to have children, can have a huge financial impact, and a financial plan should be able to account for these changes and flex as needed. Saving now helps to handle surprise changes down the road. In addition, weathering a financial collapse, like the 2008 recession, could hinge on having made good investment decisions. Making investments that are diversified and relatively safe could make the difference in a time of need.
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