If you’ve been giving some thought to the choices and the kind of lifestyle you want in the future, then investing should probably be part of your plans. The problem is, you may not feel that it’s something that comes naturally to you. You may, for example, feel you’re lacking in the tools, or worried about not having the know-how.
If this sounds even just a little familiar, what you might need is some help in building the right attitude for successful investing. But how do you go about doing this? A healthy investing mindset is all about setting goals, developing better money habits, and defining where you want to go financially. Here we take a closer look.
Start with a saving mindset
When it comes to getting into the right way of thinking, a focus on saving is a good place to start. After all, before you can even contemplate investing, you need to make sure you have enough money squirreled away in an emergency fund. As a guide, this should be equivalent to between three and six months’ worth of essential outgoings – and should be tucked away in an easy-access account.
If you’re not already in the savings habit, set up a standing order to transfer some money into a dedicated savings account on payday. That way, you won’t miss it (and don’t have to think about doing anything). Just take care to get that amount right, as you don’t want to end up having to move money back later in the month to cover bills.
Other simple strategies to get into the savings habit include dedicating some time to going through your statements to spot areas where you might want to cut back, or opting to have a ‘no-spend’ weekend. The idea here is to shift your mindset towards forming a savings habit – the more you do it, the more likely you are to stick to it. A savings app might help, as we explain here.
Another key ‘box’ you need to check at this stage is ensuring you have paid off any expensive debt, as you don’t want this hanging around your neck as you try to grow your wealth.
Begin to build an investing mindset
This means getting a clear understanding of why you are doing it – and then committing to it – as this is key to keeping the momentum going. Focus on finding steps that will support long-term financial resilience. This means maximising potential returns on money through making good choices about the use of savings and investment options, and by being tax efficient.
This involves getting your head around investing being a ‘long-term’ thing. You may be of the view that slotting money into savings is the best way to work towards your life goals, but while this certainly has its place to cover planned expenses in the next five years, your hard-earned money is at the mercy of inflation. Holding too much cash in savings accounts is akin to watching the spending power of your money drop with every passing day.
This is where you need to get used to the idea of your money being tucked away in investments for at least five years – and ideally, more. This way, it has the chance to work that much harder for you.
Take the fear out of risk
For some individuals, a reluctance to get into the ‘investing mindset’ could be down to worries about risk. What you need to bear in mind is that while markets will go up and down, over the long term, investing has the potential to beat inflation. More broadly, the trade-off is a simple one: the more risk you take, the greater your chances of significant rewards; the less risk you take, the less you’re likely to get back. This article explains the trade-off in more detail.
In fact, there can be a risk in taking too little risk, especially if you have time on your side and a long-term investment horizon. A key thing to remember, here, is that you can choose investments which suit your risk appetite.
Diversifying your money across different sectors and countries – as well as different asset classes (such as shares and bonds) can also help level out fluctuations in price. Moreover, don’t forget that you can dip a cautious toe into the water with as little as just £10 or £20 a month to begin with.
Get help
If taking the first step feels like taking a huge plunge – or just not quite where your head is at – what might be helpful is having someone to encourage and guide you on your investment journey. This is where a financial coach could come in handy. A coach can help you give some serious thought to your financial health and well-being, help you reflect on what you are already doing – and what you could be doing better. A coach can be an accessible and lower-key alternative to a fully-blown financial adviser.
That said, there is certainly a time and a place for paying for expert financial advice, not least because a money coach cannot recommend specific products or services, or manage your pension on your behalf. Make sure you know the questions to ask a financial adviser to help you make the right decision.
Some workplaces may offer access to a money coach as part of a salary sacrifice scheme. This might well be a price worth paying, as you could find that one of these money companions is a real asset when it comes to helping you develop a plan to reach your goals and work towards building a secure financial future.
Reach out to like-minded people
If neither a coach nor a financial adviser is right for you, it’s still worth trying to avoid ‘going-it-alone.’ After all, a big part of getting into the right mindset can often be down to finding people doing the same thing as you. Linking up with like-minded individuals can help you get into the mindset of investing with confidence.
Engaging with your savings and investments (with the help of others) can mean you feel more empowered – and could be the key to boosting your financial well-being not only for the next few years, but for many years to come. Helpfully, there are now lots of investment platforms offering people the chance to connect with others who want to improve their financial knowledge and understanding, through forums and information-sharing. Our platform comparison tool will help you find the right one for you.
Photo by Ibrahim Akcengiz on Canva
