Have you ever felt guilty for spending more money than you intended to? Saving & budgeting can work in your favor, yet you procrastinate on this task? The emotion you feel here is what is called money behavior.
In Morgan Housel’s book, The Psychology of Money, emotion is stated as a crucial factor when dealing with money. The emotions we experience based on having money, not having money, and using money are different. The ability to control these emotions can sometimes be challenging, and this can lead to irrational decisions.
Financial advisors work like a mediator between your money & emotions. They are like a psychologist when it comes to managing our money behavior. Although, you can always do it on your own if you have the right knowledge and time to manage money!
Do you need a financial advisor?
There are several factors that influence your answer, including how complicated your finances are, how comfortable you are in managing investments, and where you stand on your wealth journey. Advisors aim to close the gap between where you are currently and where you want to be in the future, financially! You might have a bucket list of financial goals from child education to buying a house to retirement planning. A financial advisor lays a roadmap for you to reach your goals hesitantly. Let’s see how!
Earning good but not able to save or build assets?
Morgan Housel considers this behavior as the money behavior of guilt. This happens when you purchase things that are not aligned with your wants or needs and end up not saving that money. Lack of money management is the problem here.
A financial advisor helps you overcome this situation by understanding your current financial situation, and your spending habits and guides you toward the right path. They prepare you for any uncertainties in the future by helping you create an emergency fund. They get you on the track of financial discipline by starting a SIP (Systematic Investment Planning).
SIP is a great move for people who are not able to save money. With proper goal planning, a SIP is linked with your financial goal, so you know you are on a journey to accomplish your dream goal! Initially, you might get tempted to spend the amount you are now saving via investment, but as they saw, “Discipline is key to success”. Thus, financial disciple is the key to financial success!
Are you a procrastinator when it comes to investments?
When it comes to investment, there are many different types of procrastinators. Some are waiting for the optimal time to invest, some are still looking for the perfect investment product, whereas some are just scared that they might lose their hard-earned money. A financial advisor acts as your rescuer here. Let’s see how!
Firstly, many prospective investors wish to start with investments however, they stop, considering the market fluctuations. They believe that when the market will rise they will invest that time, in order to generate better returns. Many investors have the tendency to save to pull out their investments when the prices are falling & invest when the prices are rising.
Secondly, every investment comes with a certain level of risk. A search for the perfect investment opportunity – namely one that provides high returns with no risk – is a fruitless endeavor.
A financial advisor plans & spends time developing a strategy that provides a high probability of achieving your financial objectives. This is done by clearly defining your financial goals and risk profile, along with an outlining of overall asset allocation and a sensible plan to get you there. They prepare you for future downturns in the market or sudden uncertainties.
They review your goals and portfolio and adjust if and as needed, whether to rebalance your portfolio, revisit your risk tolerance, or take advantage of potential investment or tax opportunities. By staying focused on your progress toward financial goals, you can avoid emotional decision-making during turbulent times.
Often it is believed that market fluctuations is investors’ worst enemy, however, the truth is far from reality. Emotions are the investor’s biggest enemy. A financial advisor saves you from making expensive & emotional decisions. During the highs & lows, financial advisors will your key to be patient & not losing hope.