Why Your Emotions Are Often Your Worst Financial Adviser - The most expensive financial mistakes usually don't begin with numbers. They begin with feelings.
Why your biggest financial mistakes may have less to do with money and more to do with the emotions driving your decisions.
By
Dolores Kriel
Have you ever found yourself saying, "I'll wait until things settle down," "I'll start investing next year," "I'm still young; I don't need a will yet," "Nothing is going to happen to me," or "I'll just leave everything as it is for now"?
If so, you're certainly not alone. Most of us have said something similar at some point. The interesting thing is that none of these decisions are usually based on careful financial analysis, mathematics or long-term planning. Instead, they are emotional decisions that simply sound logical at the time.
In my experience as a financial adviser, I've come to appreciate one simple truth: the biggest financial mistakes are rarely caused by a lack of intelligence. More often than not, they are the result of perfectly normal human emotions influencing otherwise rational people.
Nobody Ever Says, "I Made an Emotional Decision"
In all my years as a financial adviser, I've never had a client walk into my office and say, "Dolores, I made an emotional financial decision." Instead, they say things like, "I just wanted to wait a little longer," "I thought the market was going to fall further," "Everyone I know was investing in it," or "I had a feeling it was the right thing to do." Every one of those explanations sounds perfectly reasonable, and in the moment they often feel logical. However, they all have one thing in common: the decision was driven by emotion, with logic only being used afterwards to justify it.
Fear Is an Expensive Adviser
Imagine opening your investment statement one morning and discovering that the value of your portfolio has fallen by 20%. What would your first instinct be? For many people, it is to protect what remains by selling their investments. It feels responsible, it feels sensible, and above all, it feels safe. Yet history has repeatedly shown that some of the greatest long-term investment mistakes have been made during periods of fear, when investors made permanent decisions in response to temporary market events. Markets have always experienced periods of growth and decline—that is simply the nature of investing. Fear, however, has a remarkable way of convincing us that "this time is different." More often than not, it isn't.
Then Comes Greed
Fear often tells us to sell, while greed convinces us to buy—usually at exactly the wrong time. Every few years there seems to be something that everyone suddenly wants to own, whether it's property, technology shares, cryptocurrency, artificial intelligence, gold or whatever happens to be dominating the headlines at the time. The reality is that people don't always invest because they understand the opportunity or because it suits their financial goals. More often than not, they invest because they don't want to be the only person who missed out. That feeling even has a name: FOMO, or the Fear of Missing Out. It is a powerful emotion, and it has influenced countless financial decisions over the years. Unfortunately, good financial planning has never been about following the crowd—it has always been about making decisions that are appropriate for your own objectives and circumstances.
The Decisions We Never Make
Not every emotional financial decision involves doing something. Sometimes, it's about the things we choose not to do. Writing a will, reviewing life insurance, starting to save for retirement, increasing monthly contributions or simply updating beneficiaries are all decisions that many people postpone. And honestly, it's understandable why. These conversations often force us to think about subjects that most of us would rather avoid, our own mortality, serious illness, growing older or the uncertainty of what the future may hold. Those are not easy things to confront and delaying them is a very human response. Unfortunately, life doesn't always wait until we feel emotionally ready. The decisions we postpone today are often the ones we wish we had made sooner when tomorrow arrives. Good Financial Decisions Are Usually Quite Boring One of the biggest surprises in financial planning is that successful long-term financial strategies are rarely exciting. We often associate success with finding the next big opportunity, perfectly timing the market or discovering an investment that no one else knows about. In reality, lasting financial success is usually built through consistency rather than excitement. It comes from saving regularly, reviewing your financial plan as your circumstances change, maintaining a well-diversified portfolio, avoiding emotional reactions to sensational headlines and remaining patient when markets become uncertain. None of these habits make for exciting conversation at a dinner party, and they certainly won't make tomorrow's news headlines. Yet, over many years, they are often the difference between achieving financial confidence and living with financial regret.
The truth is that good financial planning is rarely about doing extraordinary things, it is about consistently doing the ordinary things well.
So, What Does a Financial Adviser Actually Do?
One of the greatest values a financial adviser can offer extends beyond simply recommending financial products. While product information is more accessible today than ever before, understanding how that information applies to your own circumstances is often far more challenging.
An experienced adviser can provide an objective perspective, ask questions that may not otherwise have been considered, challenge assumptions, and help ensure that important decisions are not made in haste or driven purely by emotion. Good financial advice should include a balanced discussion of the potential benefits, risks, costs and consequences of the available options, enabling clients to make informed decisions with confidence.
Sometimes the greatest value of financial advice lies not only in knowing what to do, but also in recognising what may be better not to do.
The Honest Conclusion
Twenty years from now, you are unlikely to remember what the stock market did this week, what interest rates were today, or the headline that convinced everyone the world was coming to an end. What you are far more likely to remember are the financial decisions you made because of those moments. Markets recover, economies recover and money can often recover, but time is one thing that can never be replaced. Perhaps that is where a financial adviser adds the greatest value—not by predicting the future or choosing investments on your behalf, but by providing an objective perspective when emotions threaten to influence important financial decisions. Sometimes the greatest value of financial advice is simply having someone who can help prevent a good decision from being abandoned on a bad day, or a poor decision from being made on a good one.
Speak to G&D Wealth
At G&D Wealth, we believe financial advice is about more than products and performance. It's about helping people make informed, objective decisions that are appropriate for their circumstances, even when emotions threaten to take over. If you're facing an important financial decision and would value an independent, professional perspective, we'd be pleased to have that conversation.
Important Information
This article is intended for general educational and informational purposes only. It does not constitute financial, investment, tax or legal advice and does not take into account your individual financial objectives, financial circumstances or needs.
Nothing contained in this article should be interpreted as a recommendation to purchase, replace, retain or dispose of any particular financial product. Before making any financial decision, you should obtain advice appropriate to your personal circumstances and carefully consider the relevant product information and contractual documentation.
G&D Wealth (Pty) Ltd is an authorised Financial Services Provider (FSP 54762).
