It’s true. Hardly anyone talks about this. The news reports numbers and charts and guesses, but they never tell you this. You might have even guessed this.
Are you ready?
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Financial Success is 80% psychological, and 20% strategy.
Whew, that is a load off my chest. Honestly it’s been weighing me down for what feels like a long time. Maybe three days.
Here at Plan & Act we make sure everyone understands this from the beginning. It sets us both up for success.
But let’s not get ahead of ourselves. You might have some questions – even doubts.
How does psychology affect financial success?
Mike Tyson had a great quote about his experience in the boxing ring: “Everybody has a plan until they get punched in the mouth.”
We hear similar advice from various people: “No plan survives contact with the enemy,” (von Moltke) “Man makes plans, and God laughs,” (Chabon) and “The best laid schemes o’ mice an’ men/Gang aft a-gley.” (Burns).
We see this play out in finance all the time. Often, an investor will choose an extremely aggressive portfolio, but when we enter a bear market they’ll try to flee. Their plans – their strategy – didn’t survive.
Even the best strategy isn’t worth a hill of beans if it goes out the window at the first sign of trouble. A plan is only as good as its execution.
And if you have a promising financial plan, but you abandon it when push comes to shove, you will find yourself missing benchmarks, and eventually abandoning the plan altogether.
Psychology and mastering our state is the answer to keep us on track in times of trouble.
All right, so psychology is important. But 80%?!
We’ve already identified that strategy without psychology is worthless.
Psychology without strategy will often carry people pretty far on its own!
You might know some people who live really happy, enjoyable lives. People who, despite never seeming to have enough money, never really complain about it.
I personally have known many people like this. They had what little they needed, and were perfectly content.
Except you and I know that without a plan in place, they would also face a difficult retirement, or they wouldn’t be able to buy the house they wanted. Or life would hit them with multiple challenges at once, as it often does, and they would face a lot of problems in adapting to the new situation.
Still, in a certain way, they were close to financial success. The little money they had made them happier than many with a much larger income.
An important part of Financial Success is enjoyment of life. If you have money, but you’re not enjoying life, then you have not experienced success.
As Tony Robbins says, “Achievement without fulfillment is the ultimate failure.”
No strategy can help you feel happy. You have to start with your mindset. With psychology.
How can I put this into action?
There are many ways to strengthen your mindset and your psychology, but it’s often difficult to do it alone. A financial coach can help you strengthen your state and mindset, which will guide you through difficult times.
If finances are causing you stress or confusion, it might be time to speak to a financial advisor for some clarity.
Click here to sign up for a free Bronze Account, and a licensed financial advisor will reach out!