For Mark Roberts’ Use: Our clients often want cut-and-dry answers. How much should I save for retirement? When should I retire? How can I find more room in my budget? These are all questions that clients ask. It’s easy enough to give a solid answer, but of course you don’t just want someone to tell you what to do. It’s much better to learn how to do it!

Much like your physical health, your financial health often depends upon your mindset. Rather than viewing finances as something to be fixed once they’re broken, take these measures to change the way you view money. As your basic psychology shifts, so will your behaviors. And that’s why they call this exciting new field “behavioral finance”!

Think in the long term. Most of us have a hard time imagining ourselves in the distant future, and therefore it’s hard to plan more than a few years in advance. Experts actually recommend that you look at a picture of yourself that has been modified to make you look older (or at least, just try to picture it). You must jolt your brain into realizing that the distant future will indeed come to pass, so that retirement planning will become a higher priority in your life.

Overcome immediate gratification. Even if you know that you need to plan for the future, the lure of immediate gratification is often too tempting. That’s why we blow through tax returns, instead of stashing them in our retirement accounts. Even though we often suffer regret, we still make the same mistake again a few months or years later. In the future, start planning what you will do with extra money before you ever receive any. Put an “extra money plan” into place, and your brain is less likely to flip into “spend it now” mode when the money arrives.

Use your own psychology against yourself. Humans tend to resist change, even those that can bring a perceived payoff. You can actually use that trait against yourself! Set up automatic contributions to your retirement account, so that a certain amount of money is diverted from your paycheck to your 401(k) each week. You won’t be as tempted to spend that money in the future, because it would require making a change in your contributions.

Don’t let your fears rule your decisions. Human psychology makes fear twice as motivating as the hope of a reward. This is why most of us feel very nervous when we gamble. But this fear can rule you too much, preventing you from taking some reasonable risks with your investments. Remember that unless you’re very near retirement, you still have time to make up for any losses. No one is saying you should take extreme risks with your retirement fund; just make sure you aren’t being so conservative that you’re preventing growth. Call us for an appointment, and we can review your tolerance to risk and help you decide upon an investment strategy that allows for adequate growth.