Note: This article is courtesy of Iris.xyz
By Lauren Klein
I like to say that if my clients are worried when the market does somersaults, then I’m not doing my job. And yet, I know that no matter how much I talk about prudent portfolio risk and why our focus on the long-term mitigates the impact of short-term market fluctuations, it can be a challenge to turn off that voice in your head that starts making noise when the market dips. The nagging questions can persist. How will this affect my income? Should I be making any adjustments? Will I really have enough to retire or take care of myself?
While those questions may always rear their ugly heads when the market is in the red, here are 5 tips to help you stay on top of your emotions—and on track toward financial success:
1. Admit you’re human
In fact, embrace it! Why? As humans, we are never (ever!) free of emotions. That means that the majority of our decisions—as much as 90%—are based on our reactions to events and, yes, our emotions. Which also means that a measly 10% of our decisions are based on technical realities. If you can accept your humanity and realize that emotions play a huge role in everything we do, then you just might be ready to be an investor.[related_stories]
2. Get clarity about your personal values and goals
Since emotions drive our actions, it’s important to realize that each one of us has “moneyscripts”—absolute truths that seem to have come from our mother’s milk and that dictate how we think about money. We’re taught to be generous… or thrifty… or that “charity begins at home.” We’re given rules like “tithing is required” or “the children come first” or “children should stand on their own two feet.” We’re told that our “net worth” is our “real worth.” But in the real world, these learned truths may not be so true after all.
Look carefully at your values and goals, and understand your personal truth. Throw out anything that doesn’t fit your reality. Define your personal values and goals, and then determine how much money you need to support them. Start with how much you need for the basics—food, clothing, shelter, medical—today and in the future, and then decide how you want to use the excess. What’s most important to you? Consider things like funding your grandchildren’s education, traveling, starting a business, supporting a cause, or leaving a family legacy. The options are limitless, and they’re highly individual.