Prudent and successful investing is as much about managing attitudes and feelings about money as it is about managing the money itself. It’s all in how we use it that brings us the greatest satisfaction and success.
If we are self-aware and self-confident, we feel more of a sense of mastery. We feel we are making the best use of it because we are using it to reflect our core values and our sense of ourselves.
Daniel Goleman has written extensively about the benefits of having and using “emotional intelligence” in our life’s pursuits. In his book, “Leadership: The Power of Emotional Intelligence” he posits that the ability to identify and monitor one’s emotions is imperative to being a competent leader.
He has a short list of competencies leaders must possess including self-awareness and self-management. If you are self-aware, you have realistic self-confidence—you understand your own strengths and limitations. His point is that effective leaders understand how their personal dynamics, principally emotions, make an impact and learn to manage them so that they are used most effectively.
In my work at Financial Psychology Corp., the same principles are applied to money management. In working with the financial services industry, it became clear early on that understanding feelings and being able to manage them was a key competency in mastering wealth accumulation. Financial advisors had the greatest influence with their clients if they understood the importance of managing attitudes and feelings as well as finances—both their own and their clients.
Investing by its very nature is an emotional business and being able to understand our feelings and the impact they have on how we are using our money, enables us to make smarter choices and ultimately make the best use of our money.
I have seen too many otherwise highly intelligent investors allow their emotions to cloud their better judgment. They react impulsively and inappropriately to market swings and use their emotional money minds instead of their more rational money minds.
The skill set is the same whether you want to be a good leader or you want to be a good money manager: you have to know yourself and how to profit from reinforcing your attitudes and feelings which are assets and shoring up those that may be liabilities. We can become our greatest financial asset if we learn how to use our personality traits so that we profit from them. It all starts with knowing ourselves.
The mission of my company, Financial Psychology Corp., is to give people insight into their financial behavior so that they can make the best use of their money.
Just as leaders use their personal attributes to achieve the most powerful influence in their pursuits, investors must be able to use the same skills and competencies to have optimum influence in how their money is being managed: realistic self-awareness and self-confidence of doing the right thing.