Shut out the noise to make better financial decisions
From friendly advice to Instagram posts, we take in many influences when making up our mind on money matters. Whether it’s the new car you’re thinking of buying or picking an appropriate super fund for your retirement savings, making choices about what to do with your money can feel overwhelming. Between social media advertising and well-meaning friends, we end up being exposed to so many options that making the right choice can seem impossible. So, it helps to talk to a professional about making financial choices which are guided by your own personal needs and goals. This is something Stu Varidel, Principal Financial Adviser at Heart Financial Advisers experiences in conversations with clients about important financial decisions.
According to Stu, there are three key influences that can impact your money choices and affect your financial decision making. Read on to learn more about each of these and discover what you can do to filter out the noise and focus on what’s important.
1. The influence of friends and family
Being swayed by what peers and family would do in our shoes can often be an issue when it comes to money choices. “Group thinking can definitely play a part in suggesting lifestyle goals that you might not come up with on your own,” says Stu.
While your family may have more insight into your needs and values than your peers, their words of wisdom may not be the right ones to guide you towards your goals. “Be mindful of advice from family and friends too, because what worked well for them, may not work well for you,” says Stu. “My Uncle loves property and if you talk to him about money, he will probably say term deposits and property are the safest way to invest – because that is what has worked well for him. If you speak to my Step-Dad, he will probably say, farms and John Deere tractors are where your money should go – because that is how he built his wealth and green tractors are his toys!”
2. Beware the influence of social media
Stu is also very aware of the impact social media can have on his younger clients and their expectations of what a wealthy lifestyle looks like. “What we don’t see behind the fancy cars and travel destinations posted on social media is whether these people are financially fit,” says Stu. “They may not actually own the assets, or if they do, they might be drowning in debt. Or they don’t show us the blood, sweat and tears they endured to achieve the wealth and lifestyle they are enjoying right now.”
In fact, in Stu’s experience, the people who feel the most secure in their financial situation are the ones who don’t feel the need to put their good fortune on display by posting photos of their latest luxury purchase. “What most people don’t realise is that some of my wealthiest clients don’t look wealthy, until you look at their balance sheets,” says Stu. “They are comfortable in themselves and who they are — they are able to manage their stress and emotions and don’t feel the need to show off their wealth to others via social media.”
3. The influence of online forums and ‘experts’
Another trend that’s becoming more common, thanks to the rise of social media, is people turning to online forums and groups for advice on their finances. “I see some Facebook groups and sometimes people post questions about money and investing” says Stu. “Unfortunately, the people who respond are giving financial advice without knowing it and they’re not qualified to do so. The other day someone asked which superannuation fund to go with and the majority of people responded with Hostplus, because of the Barefoot Investor. They, nor the Barefoot Investor, know anything about that person’s situation, retirement goals, their investment risk appetite, insurance, superannuation balances, age and which superannuation funds they already have.”
4. Take emotion out of your decision
So, what can you do to manage all the different types of information and opinions that can come your way when contemplating a big purchase or exploring financial products and services? Stu suggests you keep emotion out of the whole process by reminding yourself of your fundamental goals and plans for the future. “Most of the time we buy with emotion first, and then try to justify the purchase with logic,” says Stu “It can be hard to think with your head and not your heart but by doing so, you can start making mindful, smart financial decisions.”
Stu knows well how hard it can be to disrupt emotional triggers and stick to your goals instead. “When my wife and I were looking for a new car, I was using my professional image as an excuse to ‘go all out’ and buy our dream car,” he says. “Car shopping and test-driving cars can really get the heart pumping and we were really close to purchasing one! And don’t get me started with the social media car advertisements popping up on my news feed! But then Amanda and I had an honest discussion about our financial plans, needs and wants. As a financial adviser, when I’m advising a client it’s easy for me to keep the emotion out of financial decisions. So I said to myself, we are working on reducing and eliminating our home mortgage, so if I was advising a client, what would I recommend? The answer was to not spend so much money on a car!”
5. Seek professional advice and make a plan
Being a financial professional himself, Stu has the advantage of acting as his own adviser on money choices. If you’re finding yourself confused by your options or feeling that cues from social media or family are clouding your judgement, it can really help to have a professional to help you explore your reasons and motives for your financial decisions. They can also help you develop a plan that you can keep in mind as you navigate money choices, large and small.
“If you have clear financial goals, which are motivating and purposeful, you’ll find it easier to make smart financial choices and become financially well organised,” says Stu. “In my initial appointments with clients, we spend time discussing goals before we talk about financial strategies. Writing these goals down can help you make them your priority and it helps you make the connection between your own financial strategy and what you really want to achieve.”
Stu Varidel and Your Choice Financial Planning Pty Ltd trading as Heart Financial Advisers are authorised representatives of Sentry Financial Services Pty Ltd AFSL 286786.
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