Three Mindsets That Could Derail Your Financial Goals

Time to read: 6 Minutes

Your financial mindset drives your actions, which means it has an unquestionable impact on your financial success.

Your mindset informs the way you approach financial planning, navigate setbacks and opportunities, and handle unexpected circumstances.

The right mindsets lead to behaviors and habits that will likely help you achieve positive financial outcomes. The wrong mindsets, on the other hand, can lead to behaviors that have the potential to derail your financial goals or slow your timelines.

Keep reading to learn more about three mindsets that can negatively impact your finances and why having a goal-based financial plan can help you overcome them.

 “My Finances Will Never Recover from This.”

For many people, jumping to the worst-case scenario whenever any financial set-back occurs is an instinct that’s hard to ignore.

It’s understandable. When you have clearly outlined goals and time horizons and have created a detailed financial plan, it’s incredibly frustrating and scary to feel like there are so many factors outside of your control.

Events like market volatility, unexpected medical expenses, a loss of income or slowed income progression, or another financial emergency, start to feel catastrophic.

Instead of calmly determining next steps or if any adjustments to their financial plans are necessary, those with this mindset are prone to panicking. They start making snap financial decisions based, not on logic or strategic advice, but fear. This makes it much more difficult to recover from the setback.

In the case of market volatility, investors with this mindset often sell stocks while they’re at their lowest. They don’t consider that this will likely impede their ability to bounce back when the markets rise again (as they have historically) and will result in them losing more money in the long run.

In the case of a large, unexpected expense, they may believe that getting back on track will be impossible. This could result in a complete deviation from their plans, giving up on goals they no longer feel are a possibility, or spending recklessly.

 “I Don’t Want to Miss Out.”

The fear of missing out can be detrimental to finances in a variety of ways.

The first is a prevalent cause of debt in high-income earners: spending impulsively to keep up with the lifestyles of their peers.

They see their friends taking luxury vacations, note their neighbor purchasing a classic sports car, or see a family member upgrading their home. Suddenly they want to do the same, even if it wasn’t something they were initially saving for or planning to do. They make a hasty decision without considering the impact it will have on their ability to achieve their goals in the targeted time horizons.

This mindset can also cause people to invest too heavily in financial trends. When a new stock or investment is dominating headlines and everybody seems to be buying it, they worry that, if they don’t act quickly, they’ll miss the opportunity to buy the stock at a low price, especially if it seems to be growing quickly. Of course, there’s no guarantee that the growth trend will continue, or that the investment will result in positive returns in the long run.

“I’ll Be More Intentional About Planning When I Have More Money.”

Many people believe that if there isn’t a huge surplus of cash to save or invest each month, there isn’t any value in creating and following a strategic, intentional financial plan. They see the value of goal-based financial planning, but don’t see the point in starting to save or invest when they’ll only be able to allocate small amount of money each month.

The fact of the matter is, creating and following a strategic plan is more important than the amount of money being invested and saved. Investments compound over time, which means that even small, regular contributions tend to accumulate quickly.

Laying the foundations for good financial habits early also makes it easier to be intentional about saving and working towards goals as income increases.

A Financial Plan Will Help to Keep You on Track.

Having a comprehensive, goal-based financial plan is often the key to overcoming a detrimental mindset.

When you have a financial plan that is specifically designed with your goals and their time horizons in mind, you:

• Become more confident in your ability to overcome temporary setbacks, making you less prone to emotional decision making
• Realize the impact that impulsive financial decisions may have on your long-term goals
• Understand why starting to invest and save early, regardless of the amount, will allow you to accumulate wealth more efficiently

At The Tranel Financial Group, we know that a comprehensive, goal-based financial plan helps to create mindsets that drive financial success. To learn more about creating a strategic financial plan specific to your goals and lifestyle, contact us today!