Cutting emotions from your money
Money can be very emotional. You work all week for a wage, and with that money you need to pay for the bills, keep a roof over your head and have a little bit of fun while you are at it.
The thing is, money is just a tool. It doesn’t have a mind of its own, it is just there to be used and manipulated to get a certain outcome. That outcome can be as simple as buying bread and milk or as complex as funding your retirement for 30 years.
To get the best results from your money, you need to take the emotional aspect out of it. For some people this can be hard to do, which is why getting a second opinion is a wise decision.
When it comes to couples, having a third party professional who has an outside, non-emotional view on your financial situation, can ensure that you are doing the rights things at the right times.
Often I meet with people who may have an existing share portfolio. Let’s say they own BHP shares. It is not that uncommon for someone to say ‘I really like BHP, I just want to keep them’, regardless of whether it is actually a good investment for them or not. This is an emotional connection, which is not the best way to invest in anything, especially if your goal is to make money.
When it comes to your investments you should not be investing with your heart, but very much so with your head. Investing is really the idea of choosing businesses or assets (like houses etc) that will make you money over the long term. This may be via capital appreciation (it is worth more later than it is now) or via income, or both.
If you are holding an investment because you ‘like the name’, or think it ‘seems like a nice company’, or you have a property that is losing money but you ‘like that it has a pool’, then you are well and truly letting your emotions rule your financial decisions.
If you are struggling with a decision, take a step back and try and view it with a purely business like attitude. If you truly have trouble deciphering the two, then you need to see a professional Financial Adviser. Over the long term they will likely save you money on the potentially bad decisions that you could have made if you were bringing emotions into the mix.
This post is from our resident Financial Planner Cara Brett, check out her details in the About Us section.