How behavioral finance can help to achieve your goals?

Clients will often know what they need to do with their money to maximize their returns, but sometimes they don't do it.
It is important to establish good money habits, even among high net worth investors, such as delaying purchases by 24 hours to reduce impulse buys, researching any new investment to test past performance or to have a property valued by an expert before purchasing it.
We often live with our mistakes for many years and would it not be better to avoid them all together.
This is the value of advice....

 

Mistakes can be minimised but never avoided completely.

Personally I believe it's the ' trying to avoid all mistakes' which paralyses many folks and prevents them from the chance of building wealth .

 

There are simple habits that give you a head start and by following them you will minimise mistakes.

 

people can learn those habits with a few library books. Whether the person actually acts is up to them. Sure a paid advisor can provide more accountability, just like a personal trainer instead of going to the gym alone.

the best (imho) would be if you had parents that are investors or businesspeople with good financial habits, and they teach the kids before bad habits form.

 

Follow the principles outlined by that great financial adviser, Charles Dickens, to his para-planer who stated.

"Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. – Wilkins Micawber"

 

+1

 

From personal experience I have found that there are some people that you can help.

They are doomed to remain poor or living pay cheque to pay cheque

What’s that saying…..You can take a horse to water but you can’t make it drink

 

I was always told "Watch the pennies & the pounds will take care of themselves" That was good advice however having good habits works. I often see people buying investments based on emotion and failing to do the research ands that's a recipe for disaster.

 

Products such as A200, VAS, STW, VGS or other plain vanilla index funds do not require any detailed research. Asset allocation may but that's the extent of it. And after that has been done adhere to the rules "Don't look. Don't touch" and keep putting funds in no matter what. Following those removes emotion. And that is where the good habits (don't buy **** you neither need nor can afford) espoused by Dickens' Money Management Pty Limited are applied.

 

Money habits are really just life habits in disguise.

 

And life habits are based on your values.

That's why If you have the wrong values from the get go...it's all over by the shouting imo.

 

As one reader said, you can lead a horse to water, but you cannot make them drink. The effort that you put in, equals the rewards that you reap!.

 

Habits can be changed and you should never confuse them with values which rarely change.

 

Imho lasting new habits come about once there is a shift in a person's values,

I.e, do they still value crying victim or do they value personal empowerment and accountability.

That's why it's usually quite difficult for most folks to make new habits last and not fizzle out. They haven't made the internal value shift. And without that, nothing usually lasts.

My 5c.

 

I don't believe that one must change one's values to change one's habits, you just need to become aware that there is a better way and adopt it.
From my experience core values rarely change as this is the very essence of our existence. You are right however habits can change and some don't last, often because we are not very dedicated to them or we lose faith in them.

 

When we tie our habits to our values we give them a meaningful purpose. Habits aren't just the processes we use to achieve our goals. They are a way of living our values. When we separate our habits from our values we develop a disconnect between what we say is important and how we actually behave.

Hence most new habits will be short lived unless we are able to tie it to a value that is so compelling to us, it sustains the new habit giving it time to establish and become second nature.


I respect your perspective but ultimately disagree.

 

Then we agree to disagree