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Don’t Let Emotions Drive Your Finances

Jan 12, 2021

2020 brought a pandemic that upended the lives of countless people across the world. Along with it came financial challenges for many, whether in the shape of job loss or a business closing its doors, economic uncertainty in the market or, for many nearing retirement age, wondering if they should or even could retire early. For many of the latter, early retirement was an unexpected and involuntary punch to the gut.

Personal finances are inherently emotional. Money is what puts food on the table, a roof over your family’s head and puts your children through college. It allows you to pursue your passions and lift up others in need. A lifetime of investing and saving what you’ve earned frees you to relax in your later chapters of life. Most of us can’t separate our emotions from our financial security—not completely. And that’s
when life is somewhat normal. Introduce a virus that can pull the rug out from under us, and it’s no wonder many individuals have found themselves on a financial emotional rollercoaster for the last year.

But one of the biggest mistakes one can make when managing their personal finances is to make emotional decisions. Our biases and fears have the potential to create opportunities for poor decision making when those emotions interfere with our ability to make value-based decisions. Retirement can be nerve-racking regardless of a retiree’s finances. It’s one of life’s most emotionally impactful milestones. But those facing retirement before they planned on it have a slew of things to consider, and worry, about.

So, how are you supposed to separate your feelings from your finances, if they go hand in hand? You don’t. But in order to make the best decisions regarding your money and investments, you find someone to help you who is knowledgeable and neutral. A financial advisor experienced in retirement planning can help you make difficult decisions and answer complicated questions.

A good retirement advisor is one who takes the time to get to know you, your lifestyle and your goals—and your fears regarding your finances. Use them as a sounding board. Discuss your concerns and listen to their opinions. An experienced retirement planner has helped many individuals navigate the waters of abrupt change and unique situations. Your financial advisor will work with you to create an investment strategy tailored to your needs, and help you re-evaluate your strategy as your stage of life or lifestyle changes.

It’s worth noting that the market will always be volatile. Headlines will instigate and politics will appear to affect stock values. It’s difficult not to worry when we see it dip. The instinct of many is to pull out when stocks are low and buy when everyone else is, a critical misstep in personal financial management. Our advice is to ignore the headlines, however dramatic, and continue to follow your investment strategy. If your portfolio is currently providing cash flow in retirement it becomes increasingly important to turn a blind eye to the media (in regards to financial decisions) and trust your plan. And always reach out to your financial planner before making substantial shifts in your asset allocation.

If you’re facing retirement, or are unsure whether or not to retire early, our financial advisors can help you make informed decisions and create a custom plan. And, hopefully, provide a feeling of relief. Call us at (505) 884-0451. We look forward to meeting you.