Nobody wants to be the last one on the block to get the memo; we all have fear of missing out (FOMO).
Making good financial choices and avoiding mistakes requires that you to find the proper balance between awareness of possible opportunities and attentiveness to your long-term financial planning goals.
Financial progress comes from not doing the wrong thing at the wrong time.
WHY YOU SHOULD AVOID COMPARISONS
Many investors naively follow others who have far different goals than themselves. Different games have different aims. Mistakes can occur when you endlessly compare your specific situation to others.
Clients often fret that their investments don’t match up precisely to broad external benchmarks like the S&P 500. The benchmarks important to others probably aren’t the same benchmarks that are important to you. Your internal benchmarks are all that matter.
Some investors continually search for the most lucrative opportunities, and the outsized returns they promise, because they don’t think they have “enough.” The formulation of your “enough” is simple – it’s the amount needed to pay your lifestyle expenses for the rest of your life. Without the ability to comprehend your “enough”, it’s easy to push to the point of disappointment. You want to avoid doing the wrong thing at the wrong time.
Human emotions can easily pull you into the web of social comparison and the endless quest for “more.” No matter what you have, someone always has “more.”
A friend recently exclaimed that she bought some Bitcoin because “everyone knows” it’s the next big thing. I’m not aware of her specific financial planning goals, but she had a smile on her face while describing the investment. That was a clue that the investment was emotional, not rational. FOMO was in charge.
HOW TO STAY FOCUSED ON YOUR GAME
Long-term investors should be careful to distinguish the game they are playing versus others. You need to clearly identify the game you are playing and what you’re trying to accomplish. Your neighbors, friends, and family likely have different objectives than you.
It’s sometimes difficult to comprehend that other people might view the world differently than you do. There’s a big difference, however, between how you respond to the financial entertainment in the media and achieving your particular long-term financial planning goals.
The catch is, long-term is much harder than folks imagine. Making good long-term money decisions requires a lot more than patience; you have to withstand a steady stream of distractions and temptations along the way.
The best way to avoid financial mistakes is to make yourself immune to FOMO – which is based entirely on comparing yourself to others. Instead, focus on where you began and where you are now. Start there. Ready for a real conversation?