Aaron Cirksena is the founder and CEO of MDRN Capital.
Procrastination is common when it comes to financial planning. In fact, starting too late in life is one of the top regrets people voice when it comes to retirement planning. Even after people begin the investment planning process, they can succumb to analysis paralysis and remain stuck in an endless cycle of research and rethinking.
The tendency to procrastinate can be extremely difficult to overcome because many don’t understand what is ultimately driving it. While it may seem like a lack of time or interest are the factors that keep investors from moving forward with wealth management strategies, the real reason is more often fear. And until individual fears are addressed, investors will rarely activate plans to optimize their wealth-building potential.
This is where mindfulness comes into play and why it is becoming a core part of wealth management. Mindfulness brings the life-shaping thoughts happening in the shadows of the mind into the light.
Mindfulness allows investors to gain a deep and empowering understanding of the ways in which their personal beliefs, emotions and behavioral patterns are impacting financial activities like saving, spending and investing. For both investors and the advisors who guide them, developing a greater degree of mindfulness in the investing process is critical.
Mindfulness: Maximizing Active Engagement
Traditionally, passive accumulation has played a big role in wealth-building. Advisors would check in with investors periodically to refine goals and make minor course corrections, but most relied on compound interest and long-term investments to optimize earnings.
Today, though, active engagement has become key. Consequently, investors need to be prepared to assess advice and approve pivots regularly and rapidly. Mindfulness puts investors in a place where they can contribute effectively to informed and sober decision-making, allowing strategies to be redirected quickly when market movements require.
Procrastination, for example, often arises from the fear of making bad choices or the fear of failing to secure healthy financial returns even when the right choices are made. If investors are unaware of those fears, they can resist decision-making even when the best option seems obvious.
But fear is not the only emotion that can derail wealth management. Excitement can be just as problematic for an investor who is unaware of the impact emotion has on their behavior. Someone who is excited about a season of higher-than-average returns, for example, can become overconfident in their choices, leading to excessive risk-taking or the dismissal of expert advice.
Mindfulness can tame feelings across the entire emotional spectrum. It unmasks the emotions that discourage decision-making and points investors toward the information they need to feel confident. It also helps investors to temper the emotions that can lead to reckless investing.
Making The Shift To Mindfulness
Awareness is at the heart of mindfulness. Investors must become aware of the emotions they are feeling and the behavior those emotions inspire if they are to make sound financial decisions.
For awareness to be empowering, however, investors must move beyond their emotions to other aspects of their personal financial situation. Optimal decision-making requires mindfulness of income, expenses, assets and liabilities. When those factors are acknowledged, investors can construct strategies that effectively build on strengths and mitigate weaknesses.
Investors should also be mindful of the complexity of today’s financial markets if they want to optimize wealth-building. A variety of new asset classes have emerged in recent years, many of which require strategies that differ considerably from those applied to traditional investing.
Technology innovations have also reshaped markets, introducing algorithmic and other novel approaches to investing that open the door to new opportunities as well as new risks. Investors who aren’t mindful of the investing pitfalls they face can easily make ill-informed decisions.
Leveraging Mindfulness To Align Financial Activity And Goals
Investors must align their financial activity with their financial goals if their wealth-building strategies are to be successful. Mindfulness is a powerful tool for achieving that type of alignment.
Mindfulness empowers investors to keep their financial goals top of mind, which in turn makes it easier to appreciate how financial decisions impact their movement toward those goals. With greater mindfulness, investors gain greater clarity, control and confidence that their financial goals can be achieved.
Wealth management is a process that rarely unfolds without challenges. Markets rise and fall, shifting returns in ways that can evoke strong emotions and cause investors to lose sight of their goals as well as the practices needed to reach those goals. With mindfulness, investors can better corral their emotions, stay aligned and avoid the missteps that rob wealth-management strategies of their effectiveness.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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