Investing and Behavioral Risk

investing decisions

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So, you bought that stock and expected it to return a pile of cash to pay your current debt.  How long has it been, four months?  You watch it every day.  It’s a good day when it goes up, if it goes down, it clouds your mood.  Today, it’s down 12%, maybe it’s time to sell?  You sell the loser and put the diminishing dollars into the bank or, worse yet, into another stock that you expect to skyrocket.  Within a few months, you’re disappointed again.  The cycle repeats.

 

Here’s a sobering thought.  If you’re not happy with your investment returns, it’s your fault.  If you’re new to investing, you would best follow research-based advice – it will alleviate future regrets.

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Self-Evaluating Your Financial Behavior, Part II

financial behavior

THIS POST MAY CONTAIN AFFILIATE LINKS.  SEE MY FULL DISCLOSURE FOR DETAILS.

 

This is a continuation on evaluating your financial behavior.  See Part I for identifying your goals, gathering your financial records, and getting real with money attitudes.

The backdrop for each step describes what a financial planner would direct you to do; the self-study action is included.

These last three points put the plan in motion.

4)Develop and Present a Recommendation

Financial Planner Action: Communicate a plan, make recommendations, and identify alternative options.  At this phase, the financial professional may sense resistance and ambivalence from their client.  Financial psychology* suggests engaging the client in dialogue that fosters the client’s positive changes.  This method of conversing provokes the client to recap their goals and why the goals are important.  Instead of being directed by an outsider, which is typically not well-received, the client feels a sense of empowerment and autonomy.

Self-Evaluation:  This is where you decide what changes you’re going to make and is most likely the part where your well-intentioned launch could lie like an unhatched egg.  You’ve reached this segment, but your avoidance may kick on.  Vacuuming dust bunnies and pulling weeds might look exciting compared to figuring out how to manage your wallet.  If you sense hesitancy, acknowledge it, but don’t judge yourself.  Identify your resistance and figure out ways around it.  You should be sitting on that egg like a stubborn hen, not avoiding it.

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Self-Evaluating Your Financial Behavior, Part I

financial behavior

THIS POST MAY CONTAIN AFFILIATE LINKS.  SEE MY FULL DISCLOSURE FOR DETAILS.

Self-Evaluating Your Financial Behavior, Part I

If you were to sit down with a financial planner, you might expect to state your goals and come away with directions for allocating your money.  You might expect to be sold a life insurance policy or have your money transferred to accounts that are under the control of the advisor.

A CFP® follows specific steps to align the client with a sound financial plan.  These steps involve establishing a relationship, gathering data, analyzing the current financial status, developing a recommendation, implementing the suggestions, and monitoring the plan.

A comprehensive evaluation of your financial status should integrate your underlying money motives and help you understand how you are managing yourself and your money.  This is critical knowledge because you are the only person that will take the necessary actions.

Dr. Brad Klontz is my hero on this topic.  Dr. Klontz combines behavioral finance and financial psychology into standard financial planning procedures. He’s the Dr. Phil of finances.  If you need help getting real with your finances, Dr. Klontz has your remedy.  In case you haven’t made the connection between your behavior and your financial status, read below where I’ll translate Dr. Klontz’s recommendations for conducting client meetings into self-evaluative introspection and actions.   If you understand your motives and harness that energy, you will be better empowered to make smarter financial decisions.

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Mid-Year Financial Checklist

financial checklist

Usually I wait until December 31st or January 1st to assess my financial condition.

I ask myself the following  questions:

  • How much have I saved?
  • Is my money in the right accounts?
  • Is my retirement account percentage enough?
  • Do I have a balance in my Flexible Spending Account?
  • Have I contributed enough to my IRAs (deductible or non-deductible)?
  • Have I donated as much as I wanted to?

With the blur of the holidays fuzzing out my faculties, I decided that halfway through the year is probably a better time to check my financial diagnostics.  By December I don’t remember anything and I don’t have time to fix anything to fall within the calendar year.

This weekend’s activities involved conquering a mountain of laundry and getting to my fiscal monitoring.  Here’s a list of things I took care of and recommend:

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Your Health Is Your Most Valuable Asset

health

 

THIS POST MAY CONTAIN AFFILIATE LINKS.  SEE MY FULL DISCLOSURE FOR DETAILS.

Because I feel that every aspect of life overlaps with financial success, I feel strongly about a topic that most people don’t consider related.  In fact, most take it for granted and neglect it when it needs everyday attention.  Here we go: Everyone must take charge of their health.  OK, I can feel the collective groan.  You mean I have to eat chunks of tofu?  Um, no, but it would help to put down the donuts.

Here’s the downside of not managing your health.  Feeling like a slug all the time might be a hint.  Having minor, chronic discomfort is another clue, whether it be from digestion, skin problems, allergies, or constantly getting a cold.

Here’s my day when I don’t eat right, exercise, or sleep well: cranky, no focus, foggy-headed, lethargic.  I can’t read anything beyond a third-grade level and I don’t want anyone near me.  After a few days, it’s like I’ve chosen Door #1 to the dark vortex that brings on depression.  Eventually, everyone will run from me but I don’t care because all I want to do is lay down.

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