I recently shared some tips on how to overcome money worries that many of us are currently facing. You can check out my previous blog here where I focused on small steps we can take to better manage debt and how to reduce feelings of spending guilt by budgeting. Now, I’m going to focus on saving habits and investing – two other key concerns many of us have – and explore how they impact our state of mind and what we can do to alleviate the stress that comes with them.

Saving – build positive habits to reduce future stress

Saving is the main way we can get the things we want in life and helps us to achieve our goals, for example, getting on the property ladder or a once in a lifetime holiday. Yet, it is easy to feel overwhelmed by the size of the goal and the amount of time and effort it takes to get there. As such, some avoid saving by preferring to live in the now, which can lead to feelings of regret down the road.

If possible, it’s important to save even small amounts regularly to support our future, even if we don’t have any particular goals on the horizon. Doing so increases our financial security which in turn reduces future sources of anxiety when life's trials and tribulations inevitably happen. Making positive changes in our life is often about making small choices regularly, the benefits of which build up over time.

While it’s good to aim high when saving, I have seen some people who are “over” saving at detriment to their daily lives, which increases the likelihood that they end up accessing their savings to make ends meet anyway – leading to more pesky guilt. Doing this will also lead to saving fatigue, where we see saving as a means to an end and as something we dislike doing, rather than as something that helps us.

When saving, have a plan which you can stick to and be patient – you will get there!

Investments – patience and perspective are everything

In theory, we know that investing requires a long term approach and that seeing fluctuations in investment values is something we must accept in order to see additional returns. Despite this, when we actually see our investments fall, we cannot help but become concerned and these feelings can be heightened for inexperienced investors, or those who are more averse to risk.

Research into behavioural finance shows that we have a greater emotional reaction to seeing a loss rather than a gain, even when they are of equal proportion. As such, some find it useful to limit how often they review the value of their investments, in order to curb any instant reactions they may have.

This highlights two important virtues, which benefit us when investing but also in everyday life, which are patience and perspective. The risks associated with investing tend to reduce, and the likelihood of higher returns increases, the more patient we are. When we do inevitably see falls in the market that naturally cause us to worry, we must take time to look at it in perspective. For example, if our investment falls by 10%, but this is following a long term gain of 50%, then we must view this fairly within the wider context and doing so helps our frame of mind.

In conclusion…

When our problems are small, we find it easy to over analyse and over emphasise them, yet when we do have an issue worth worrying about, we can find it easy to bury our heads in the sand as the problem feels too big. We cannot change our feelings and tendencies overnight and must accept that we can be prone to such reactions. Sometimes one of the best things we can do is to give ourselves a break and not put unnecessary pressure on ourselves to be perfect or have everything figured out. If you would like help figuring out your finances, then please get in touch and we would be more than happy to support you in any way we can.

Check out my previous part 1 here

Investment returns are not guaranteed, and past performance is not a guide to future returns. The value of your investment may fall as well as rise, and you may not get back your initial investment. The information here is for general information purposes only and should not be regarded as financial advice. It should not be considered a substitute for regulated advice on specific circumstances and objectives.