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9 Steps to Help You Gain Control of Your Finances

Marcus by Goldman Sachs is excited to share this insight from our friends at Goldman Sachs Personal Financial Management.

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Few topics come with more emotional baggage than money. Whether you’re excited about earning more or fear losing what you have, money and emotions are forever intertwined.

But making financial decisions based on emotion is never a good idea. Emotional decisions may feel right at the time, but they can often work against you in the long run.

We’ve identified nine steps to help investors keep their emotions in check and make smarter investment decisions.

1. Figure out what really matters to you

Having a clear understanding of your long-term priorities can help you stay focused on future goals when making decisions. The perspective allows you to look past changing circumstances and market fluctuations.

 

2. Avoid common mistakes we see investors make

Every investment is essentially a tug-of-war between the fear of missing out and the fear of losing money. But fear is an emotion, and letting emotions cloud your judgment is a common mistake investors could make. Working with an advisor can help you step back, gain some perspective and avoid emotional decisions that may adversely affect your wealth.

3. Look at money as “fuel”

When you see money as just a resource to allow you to do things, it can help make financial decisions less emotional. That shift can give you breathing room to realize money isn’t the end goal – how money helps you live the life you want is what really matters.

4. Control what you can control

There are some things you can control and some you can’t. Interest rates, for instance, are out of your hands, so there’s no point worrying about them. But you can control your costs, tax exposure and risk. A solid plan and a diversified, flexible portfolio can help you manage the things you can control and avoid distractions from things you can’t.

5. Ignore what others invest in

It’s easy to feel left out when you hear how much your brother-in-law or next-door neighbor made on a particular stock. Smart investors ignore those stories because they know people only talk about their wins. No one ever mentions their losses.

6. Understand how your biases affect decisions

Getting past your biases and emotions can help you act in your long-term interest more consistently. A financial advisor can help you see your biases and move past them, giving you the perspective to be more financially objective, and ideally, more financially secure.

When it comes to money, people tend to have three basic priorities:

  1. Protect themselves
  2. Take care of people they love
  3. Enjoy life

You may favor (or be biased towards) one priority over another. Working with a financial advisor can help you identify your biases and build a portfolio to balance your priorities. (They can also help adjust your portfolio as your life and goals change over time.)

7. Make sure your goals and your partners’ are aligned

Whether one or both partners manage the finances, you should both agree on your priorities. Do you want to take more vacations now or leave more for the kids later? Your spouse may not support a financial plan if they had no part in creating it.

8. Reassess your priorities before the pandemic ends 

If there’s one bright spot to the Covid-19 pandemic, many people have taken this opportunity to step back and evaluate what they want life to be like when it’s over. Will you just be happy to get back to “normal” or are you taking a hard look at goals or obligations that may no longer be relevant?

9. Prepare for volatility

While no one knows what lies ahead, being prepared for market volatility is always good sense. We call it the “lifeboat drill.” How much water can your boat take on and stay afloat?

If you’re concerned about a market overcorrection, it may be a good time to discuss your plan with an advisor. 

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United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management (“GS PFM”) is a registered investment adviser and an affiliate of Goldman Sachs & Co. LLC and subsidiary of The Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management, and financial services organization.

The information contained herein is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. GS PFM does not provide legal, tax, or accounting advice. Clients should obtain their own independent legal, tax, or accounting advice based on their particular circumstances. Please contact your financial adviser with questions about your specific needs and circumstances.

Information and opinions expressed by individuals other than GS PFM employees do not necessarily reflect the view of GS PFM. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.

Marcus by Goldman Sachs is a brand of Goldman Sachs Bank USA, which is an affiliate of United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management