The youth grasped the trunk and tried to pull it out. But it would not budge. “It’s impossible,” said the boy, panting with the effort. “So it is with bad habits,” said the sage. “When they are young it is easy to pull them out but when they take hold they cannot be uprooted.”
–The Wise Old Man
How often in life do we let bad habits take root? Whether its spending too much time on social media, biting your nails, or simply ignoring the new diet, it seems everyone has something they do that they wish they could change. Finances are not immune to bad habits, with many people finding it less stressful to just do what they have always done; even if that’s nothing at all.
Is it time to stop the bad habits and make a change? Perhaps it’s time to discover how changing your investment mind set and actions could improve the results you see.
Developing a sense of panic while investing is a common bad habit, however with volatile markets, it’s understandable why many make knee-jerk withdrawals early in their investment careers. Constant check-ins to see if your money has grown can also add fuel to the fire, and with technology nowadays making it so easy to keep a regular eye on finances, ‘investment panic’ is becoming an even harder habit to break.
However it’s an important one to try and uproot. Investing is so rarely a ‘get-rich-quick’ scheme; it takes patience to reap the rewards; what may be down in the markets now, could be on the up again in the next few years. Although difficult to watch yourself seemingly lose money, it can be important to try and leave your emotions at the door; otherwise the whole process could become stressful and time consuming.
Building a habit of developing a process around your investments could help remove this emotional attachment to your investments. You could start with a ‘check in plan’; establishing how often you’re going to review your portfolio and how regularly you may rebalance it. If that feels like too much work, some funds do the rebalancing for you. These funds keep the asset allocation constant through a disciplined rebalancing process so you can maintain the right level of risk.
With patience may come a lot of benefits, including the high potential for substantial gains through compound interest – interest you earn on your initial amount that is then reinvested. The interest you earn can then increase, therefore the longer you are in the market, the more time you have to watch your investment grow.
It’s often rooted in people’s minds that investing is only for the wealthy; but perhaps the real secret to a good investment is time. Taking your time, starting early and waiting it out could be much more rewarding than a three figure lump-sum investment.
With apps like i-stock, that are simple and accessible, you can easily invest from as little as £50 a month, allowing you to get into the habit of setting aside a little a month as soon as you can.
But we shouldn’t ignore how difficult it can be to actually put money away when you have bills to pay and a have a life to live. Managing the money you have day-to-day can be enough to distract you from your future goals. But really, most looking to invest would probably be hoping to retire comfortably with the money they’ve put away, and this money won’t just appear. If you want to save more, it could be wise to keep that clear goal in mind.
Framing your investments with long-term goals could help you keep on track, keep you in the habit of ‘future thinking’, and by setting up recurring automatic transfers you could find that you don’t actually have to think of the finer details at all.
If you’re thinking of selling some investments or stopping your monthly savings plan because you want to spend your money on something else, remember why you started investing.
Unfortunately , many have fallen into the habit of letting their finances control them, rather than the other way around. Denying any overspending, or ignoring financial red flags in the hope they’ll go away, is probably never going to get you the dream retirement.
Getting on top of your finances, checking your credit score or planning any outgoings ahead of schedule rather than leaving your debt for another day, could be all it takes to establish a good financial habit.
As with any bad habit, it becomes increasingly difficult to change what you have always done when it comes to your finances. But if you keep doing the same thing, isn’t the outcome just going to stay the same? Be the change in your own financial story, and by uprooting even a few bad habits now, you could find yourself on a better path for the rest of your life.