Real wealth doesn’t start with choosing the right broker or investment strategy. It starts in your head—with understanding your own emotions and desires that drive your financial decisions. As Dan Ariely, author of Predictable Irrationality, aptly puts it: “We all think we make rational decisions, but in reality our decisions are largely driven by emotions, short-term temptations, and unconscious cognitive traps.”
Why do emotions rule our finances?
Even with all the necessary knowledge about investments, people often cannot remain disciplined without the right emotional approach. They are constantly lured into the trap of instant desires. Dan Ariely describes an experiment where people were offered $100 today or $120 in a month. Most chose the smaller, but instant money, although logically it was more profitable to wait.
This trend is also evident in investments. People are looking for quick riches and are falling for dubious schemes like “X2 in a month”, speculative assets or constant trading. They act under the influence of emotions, not rational calculation, although they know that even professionals rarely outperform passive index strategies.
How do financial marketers exploit our emotions?
In the pursuit of quick riches, people often become easy prey for sophisticated financial marketers. Advertising campaigns promising “guaranteed profits,” “automatic trading systems,” or “unique investment opportunities” fuel our fear of missing out and our desire for easy money.
But it's worth remembering a simple rule: if something looks too good to be true, it probably is. Sound investment strategies are based on patience, balance, and a willingness to accept the natural risks of the market. Even the most experienced investors cannot guarantee results, because the market is unpredictable.
Boredom is the key to success in investing
As George Soros aptly noted: “If investing seems like an interesting activity to you, and you get pleasure from it, most likely you are not earning anything. Real investing is deadly boring.”
Indeed, disciplined investing is not about the thrill of deals or impressing your friends. It is about the slow, methodical accumulation of capital through rational, calculated decisions. It is about the willingness to forgo momentary temptations for long-term goals.
How to choose a reliable financial or investment advisor?
A real advisor doesn't promise super profits or tell you which specific stocks to invest in. His main task is to help you be disciplined, understand how the markets work, how to plan a budget, and gradually achieve your financial goals.
If an advisor promises “guaranteed returns” or pushes certain financial products without objective analysis, be wary. A good advisor always takes into account your personal goals, risk profile, and investment horizon, rather than selling one-size-fits-all solutions.
10% Sandbox Strategy: Balancing Discipline and Experimentation
To curb your natural desire to take risks without jeopardizing your core savings, use the “sandbox” strategy. Divide your portfolio into two parts:
1. 90% – a reliable core of index funds, bonds, real estate, etc. You manage it in the most disciplined and rational way possible.
2. 10% – a space for financial experiments: business ideas of friends, hot stocks, cryptocurrencies, etc. Here you can try out bold ideas, but without the risk of seriously harming your financial situation.
This approach helps to curb emotions and prevents reckless decisions with fixed capital, while maintaining the ability to find new prospects.
Personal stories: why is financial discipline so important?
Over the years as an investment advisor, I have repeatedly seen how emotions negate financial achievements:
• Clients with incomes of tens of thousands of dollars a month could not start investing because they spent everything on expensive cars, designer clothes and luxury accessories. They lived “in the lap of luxury” but did not have a sufficient financial cushion.
• Other clients spent years disciplinedly accumulating their first capital of $100,000. But when they reached $80,000–$90,000, they started trading, trying to “beat the market” – and eventually lost most of their savings. Emotions and the desire for quick profits nullified years of effort.
These stories prove how important it is to control emotions and impulses in financial decisions.
So where can you start your journey to financial freedom today?
1. Identify your long-term financial goals and write them down.
2. Analyze your spending structure and find opportunities for optimization. Create a plan for regular savings, even if it's small amounts.
3. Develop a regular investment plan according to your goals and risk level.
4. Surround yourself with people who share your financial values and inspire you by their example.
5. Invest in self-education: read, attend seminars, learn from mentors. An hour of conversation with an experienced professional is often more valuable than a highly advertised info product.
6. Practice mindfulness in financial decisions: Avoid emotional purchases and view discipline and lack of emotion as a sign of a sound long-term strategy.
Our environment has a huge impact on our financial habits. So consciously form a circle of friends who know how to save, invest and budget. Seek out like-minded people, mentors, partners who inspire you to grow and achieve your goals.
Remember: the path to financial freedom consists of small but consistent steps in the right direction. Gain knowledge, practice discipline, form useful connections - and success will definitely come. Good luck to you on this path!