In many phases of life, our attitudes and mindsets can have a big impact on where we go and what we do. The mental side of life is as or more important than the physical side, and financial planning is no different. Having the right mindset not only helps you make the correct decisions, but it also prevents you from making mistakes.
Let’s look at the five dangerous mindsets that can quickly sink your retirement if you’re not careful to guard against these, sometimes, natural instincts.
The first one might seem innocent enough on the surface, but a lack of action on your financial plan is usually not a good thing. That mindset of complacency is one that can creep into saving for retirement when the end goal is still a long way off, but planning requires a proactive approach. You should be reviewing and evaluating your portfolio and your plan on a consistent basis. Life and the legislation that shapes retirement is always changing so you want to ensure that your plan stays on track.
The second dangerous mindset we see is overconfidence. ‘Pride cometh before the fall’ applies very accurately to money. A bull market can make your investments feel invincible, but that’s usually the time when things head in the other direction. Overconfidence and greed could probably be considered cousins, and they both can be your downfall if you aren’t careful.
Third on the list of dangerous mindsets is fear. We’ve all been in the position where we’ve watched the value of our account drop along with the market, and worry started setting in. We are driven to action out of fear, but emotional decision-making rarely works out in our favor financially. Proper planning can help you overcome that feeling of fear.
The fourth mindset you need to be aware of is cynicism. It’s true that not every investment will fit your needs and help you move closer to your goals, but it’s best to approach every option with an open mind. What didn’t work for a friend, family member, or tv analyst might be perfect for what your portfolio needs. Every investment is a tool in the toolbox and we want to make sure we have them all at our disposal.
The final mindset we need to discuss is despair. That feeling when all hope is lost can be a helpless one, and that can easily happen with retirement if you haven’t done any planning. We don’t ever want someone to feel like they’ll never be able to reach their goals, which is why we will always encourage you to start your plan no matter the age. You might be surprised to find out that you’re actually in better shape than you ever thought, and that can be an empowering feeling.
So those are the five dangerous mindsets that can sink your retirement. Regardless of the mindset you currently find yourself with, know that you have the ability to change things through planning. Understanding the steps you need to take to move closer towards financial freedom will put you in the right frame of mind to be successful.