 OVERCOMING THE PSYCHOLOGICAL BARRIERS TO SAVING Barrier #9. Fear of risk-taking When you played Monopoly as a child, did you collect the good, safe utilities and lower-priced properties, while the other kids went for broke buying Boardwalk? The security you felt collecting regular income from your utilities probably never quite matched the thrills they experienced going for broke. The grown-up money game, Working-Investing-and-Retirement, is a lot like Monopoly, but the stakes are higher. Most people play the real-life money game too conservatively, even if they were risk-takers in juvenile games. Others are too aggressive in real life, investing in outlandish get-rich-quick schemes. Risks and reward work in tandem: the greater the risk, the greater the potential reward. It is foolish to take financial risks you can't afford, but it is also foolish to avoid risks you can afford, thus sacrificing financial gains. Assess your personal risk tolerance and follow your intuitions. By learning about investment risk and reward, and combining that knowledge with basic intuitive skills, you can become an astute investor. Barrier #10. PerfectionismSome people want to pin down every detail before making any decision about money. They spend so much time fussing with details that they miss important concepts about saving and investing that affect their financial future. Perfectionism delays financial success. Emphasize action: Don't wait until you are fully educated in finance to start saving, or you will never begin. Begin saving now, then start an investment program using mutual funds. Making financial decisions creates the possibility of mistakes, it is true. But fortunately, you don't have to be perfect, and your decisions don't all have to be right. In most financial situations, there are a wide range of right decision and only a narrow band of decisions that are decidedly wrong. You don't need to know how to pick the exact right investment, only how to avoid those that don't suit your financial needs. |