Podcast Episode 249: Dangerous Mindsets for Financial Planning

Today’s Wisdom:

When it comes to managing your money, it’s important to take a level-headed approach and avoid emotional outcomes, but that’s always easier said than done. Let’s look at the mindsets you need to avoid when it comes to financial planning because these can derail your future if you let them.

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What You’ll Learn:

Being in control emotionally is often as critical to financial success as anything else you do. So many bad decisions come from reacting to a negative event rather than following an established plan.

On this episode of Money Wisdom, Eric Hogarth, partner and CFP®, joins the podcast to tell us why certain mindsets could be destructive in financial planning if you’re not careful. You’ll find these mindsets in all parts of life but when they manifest within your money, there could be problems.

Let’s begin with complacency. We’ve all been guilty of this at times, but estate planning is a common area where we see this happen in our profession. People either don’t want to discuss their mortality or just feel like it’s not a priority because they’re healthy and happy. Eric is a firm believer that everyone should have a will. There’s so much to gain from sitting down and getting guidance from a professional about this. You want to make sure that everything you want to happen with the assets that you’ve worked so hard for actually happens.

The next mindset you want to avoid is overconfidence, which is one that commonly creeps in when the market is going strong. It’s easy to get caught up in the easy gains and take on more risk than you need. But thinking you can ride the wave and keep increasing your portfolio’s value often leads to an unexpected outcome.

Also, keep in mind that market gains are all relative to your time horizon. The last thing a retiree wants to do is become overconfident and expose their money to unnecessary risks when they don’t have the time to overcome big losses.

What about fear? This mindset is pretty prevalent when it comes to money for many reasons, but we often think about the saying, ‘Ignorance is bliss.’ Many people would rather not know and because it relieves you of any worry, but not knowing where you stand for retirement can lead to a lot of fear. For the most part, this can all change with proper planning. A lot of people who are concerned that they’re not in a good enough position for retirement are actually in a much better place than they thought they were.

The last mindset we discuss is cynicism, which can often be found when it comes to working with a financial professional. There are so many great people in this industry that want to build relationships with their clients and be there when they need help. It’s not about picking the hot stock or finding the secret sauce to investing, and that’s what some people might think of when they hear about financial advisors.

If any of these mindsets have crept into your life when it comes to money, the best step to take is to get help from a financial professional. Our Money Map review is complimentary and can get those conversations started.

[0:19] – Mailbag question on rollovers

[3:33] – Dangerous mindsets – Complacency

[4:39] – Overconfidence

[5:58] – Fear

[7:01] – Cynicism

[8:25] – How to get help

Thanks for listening to this episode. We’ll be back again next week for another show.


Final Thoughts:

“Fees are an easy subject to focus on but you’ve got to make sure, regardless of what you’re paying, you’re getting good value for it because someone’s making money somewhere along the road and you need to make sure number one is still you.”

– Eric Hogarth

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