How far do you agree with the following statement?
Your retirement will be successful only to the extent that you can remove emotion from your financial planning.
This is an open-ended discussion starter that can be approached from a variety of directions: I could see well-rationed advisers supporting either side. For this post, I’m not going to specifically agree or disagree with, but rather use it as a jumping-off point for rethinking the role psychology and personality play in your retirement planning. Some advisors and retirement planners call this behavioral finance, and in a nutshell, it asks us, rather than doing our best to minimize personality and emotion in our financial decision making, to ask what we can learn, and in fact gain from taking note of our personalities and emotions during the decision making process. Let’s take a look at two psychological points that have to do with decision making.
A Little Goes a Long Way
Imagine how it feels if you’ve got your annual meeting with your financial adviser coming up. If you’re like most, you’re stressed because you want your savings to be on track, you’re anxious because you want to make sure that you don’t forget to ask all the important questions that have come up during the year. And at the end of the meeting, you want to be sure that you can retain all the information you covered in the meeting. It’s psychology: manageable chunks of information over time will always be easier to retain than a big symposium once a year. This is exactly why the Miramontes Method includes consistent communication. It’s useful to remember when you’re doing your own research on retirement savings—don’t get down on yourself for not being able to stick with protracted financial planning work on your own: aim for manageable chunks of work over time.
How You See Yourself (Now and in the Future) Matters
Expecting someone to make good decisions about their retirement is predicated on a lot of assumptions. First there’s the assumption that the person is sufficiently informed. Just as importantly, though, is the assumption that the individual has a cogent idea of what they want out of retirement. This in turn implies that the individual is self-aware, that he or she knows who they are now and who they will be in retirement.
In this same vein, it is a useful goal to think more about what it is, exactly, that you’re buying with all your savings. Viewed as one big purchase, your retirement will easily be one of the biggest purchases of your life. Taking the effort to “test drive” your retirement by elaborating on your needs, wants, and goals, will pay off immensely in the decision making part of your retirement planning. The more you work to know yourself and the retirement you’re planning, for, the more these “concrete” goals will help to refine your plan.
Are you in Irvine or the surrounding areas? Put your trust in a retirement planner who works to know you. Contact Miramontes Capital today.