Wealth is health
So how does emotional resilience relate to financial planning?
In the previous part of this three-part series of posts, we talked about the basic needs which form the foundation of the pyramid of Maslow’s hierarchy of needs.
Financial planning plays a key role in securing these basic needs. When they are met and we feel financially secure and in control, we (and the dinosaur parts of our brain) are happy and this often has a profoundly positive impact on our mental health. That’s why wealth is health.
Unfortunately, with many people suffering from lost income, increased expenditure and forced confinement due to Covid-19 our financial security and emotional resilience has been shaken. This has triggered our dinosaurs, who, because they feel threatened, tend to make snap decisions without considering all the consequences. Logic – provided by the owl part of our brains – goes out the window and this can lead to some questionable financial decisions being made.
Andy Chong, a KL-based Infinity financial consultant, highlighted three common ways this has played out during the pandemic.
Dinosaur-led financial decisions… and how an owl could have done better!
- Panic-selling stocks
Stock markets became highly volatile when the pandemic hit, triggering panic selling of shares. According to Fidelity, nearly a third of clients aged 64 and above sold all of their stocks between February and May 2020 and failed to re-enter the markets in time for the subsequent rally when stimulus measures were introduced from June onwards. The owl response would have been to stay invested, keeping focussed on the long-term investment horizon.
- Following the herd
The meteoric rise of glove stocks in Malaysia attracted attention and, as ever in a crisis, the price of gold, perceived as a safe haven, rose (around 25%). Investors influenced by the herd mentality piled into both. But following the crowd is a dinosaur response, motivated by FOMO and greed, and a questionable investment decision. Wiser owls don’t follow the crowd but instead invest in a well-researched portfolio, focus on consistent long-term returns and limit exposure to risk.
- Negative thinking
Covid-19 has led to mass unemployment and lots of redundancies. According to the International Labour Association over 400 million full-time job losses have been incurred this year. For many of us, this has, understandably, led to questioning if we will be next on the chopping block. The negative emotions triggered by this insecurity can impact our morale and productivity and make this a self-fulfilling prophecy. Rather than giving into this dinosaur-thinking, our owls should focus on controlling what we can, proving our worth and upskilling or getting a side gig as a back-up policy.
If Covid-19 has prompted concerns about your financial security, don’t let dinosaur-thinking influence your decisions. Here at Infinity we know how difficult it can be to quieten your dinosaur and listen to your owl but you don’t have to do it alone. Now might be the time to consult a financial adviser. A professional will look at your situation with an objective eye and help you to engage your owl and make sensible decisions based on your current circumstances.
If you don’t already have a trustworthy and qualified professional in your corner, feel free to contact Infinity for a free initial consultation at email@example.com..
You’ll also find Andy Chong’s top tips for managing your finances during the Covid-19 crisis very useful.
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