If there’s one personality trait I wish I didn’t have, it’s a tendency towards perfectionism. OK, it comes with a few upsides. Perfectionists have high standards for a start, and this desire for excellence can serve as a powerful motivator. We generally work hard and are usually well-organised; and we’re always looking for ways to improve. But perfectionism is also a very hard taskmaster. The intense pressure to perform can lead to exhaustion, and even burnout. It can put a strain on relationships. It can make us anxious and stressed, and some perfectionists never feel satisfied. The ultimate irony, sadly, is that constantly striving for the best means we often end up failing miserably, and this is definitely the case with investing and personal finance.
Four ways perfectionism trips us up
Here are some of the ways that perfectionism can harm our financial and emotional wellbeing.
We procrastinate
A common problem for perfectionists is decision paralysis. We want everything to be perfect, so the fear of making an imperfect decision means we delay in getting on and doing what we know we need to do, or avoiding them altogether. For example, we might ever get round to making a will, or we put off investing more for the future or starting to invest in the first place.
We set unrealistic goals
Another danger is that we aim too high, or try to do too much too soon. Our intentions may be perfectly good, but the strategy sets us up to fail. For instance, we might decide to reduce our spending, but then set ourselves a budget that is unrealistic, and so we abandon it as soon as we overspend.
We beat ourselves up
This one used to be a real problem for me. I would spend money on something and then regret it; and instead of trying to enjoy whatever it was I’d bought, I would only feel guilty. The same applied to investment decisions that didn’t come off; I would berate myself for the choice I’d made and think about how much better things would be if I had chosen differently.
We focus on trivialities
Another trait of perfectionists is that we tend to focus too much on the finer detail rather than the bigger picture. For example, we might obsess with small savings here and there — on groceries, for example — instead of looking at our biggest outgoings, such as spending on our cars and homes. Perfectionists are also prone to agonise over their investments, such as when to buy or sell.
Four things you can do about it
What, then, can you do to stop your perfectionist streak having a negative influence on your finances?
Cut yourself some slack
This might seem an obvious thing to say, but try to be a little more gentle on yourself when it comes to money and investing. Everyone makes financial mistakes, and no one’s finances are perfectly optimised. Even the professionals get things badly wrong, so stop being so self-critical, and see your mistakes as learning experiences.
Prioritise the most important things
The rules of financial wellbeing are actually very simple. For example, live within your means, have at least six months of outgoings in cash, invest as much as you reasonably can, and don’t let your emotions sabotage your strategy. Prioritise the basics and you won’t go too far wrong.
Focus on the process, not the outcome
For perfectionists, it’s usually the outcome that’s all-important. But investment outcomes, especially in the short term, can be very unpredictable, and the prices of different financial assets move up and down for reasons we have no control over. Focus instead on what you can control, such as investing regularly, diversifying broadly, and paying attention to fees and charges.
Seek the help of a friend or financial adviser
It’s crucial, especially when making important financial decisions, that we speak to somebody else before we act. Ideally, this should be a financial adviser, or at least a trusted friend. Whoever it is you choose, make sure that it’s someone who isn’t afraid to challenge you or give the opposite point of view. You’re not looking for someone to rubber-stamp a decision you’ve already made; you’re looking for help ensuring you make the right decision.
Play your own game
Of course, all of this might seem easy in theory, but it can be hard to do in practice. Why? Well, it’s partly down to social conditioning and the way we compare ourselves to others. We want to be seen to be making good decisions. Another problem is that the investing industry and the financial media encourage us to focus on optimal decision-making. “There's an investing quip that it's better to be approximately right than precisely wrong,” Morgan Housel writes in his latest book, Same As Ever. “But where does the intellectual effort go in the investment industry? Towards the pursuit of precisions — decimal-point exactness that deludes people into thinking they're not leaving opportunity on the table, when more often they are leaving no room for error for their analysis to be wrong.” The key, says Housel, is to keep things simple. Instead of trying to forecast the future in minute detail as financial professionals are often asked to do, play your own game. Focus on the bigger picture, which, for long-term investors, is pretty encouraging. As Housel puts it, “the odds that the economy will become more productive and more valuable are pretty good.” Precisely which countries or sectors of the economy, let alone which individual stocks, will outperform over different periods of time, nobody knows. So why waste any more time and effort on it?
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