At the most basic level, financial responsibility is living within your means. It’s spending less than you make. But if you’re reading this, it means you’ve graduated to investing and are really building up your financial future.
And that’s the key here: your financial future.
Sure, that future will likely involve relationships and family, jobs, houses, maybe even friends. Yet none of that changes the fact that when it comes to your future, you must be comfortable with answering to yourself.
You’d think that for many smart investors, this is obvious. However, people tend to see responsibility (or the lack of it) in others. And we’ve all seen it before.
Here’s an example: someone is leading a project at work when it starts to run behind schedule. It must have been Jerry’s fault; he was the project manager. But it’s not. It’s the leader’s. They were in charge.
When it comes to investments, it’s the same idea. Some blame the portfolio they saw on YouTube or the traders skewing the market and become frustrated, jealous, aimless.
We all know investing comes with a risk. There are going to be highs and lows. But when we dodge responsibility, we experience higher levels of stress. Suddenly, we may not be in the right head space to make the investing decisions that align with our goals.
The good news is this can all be changed with a mindset shift. But before we tell you how we shift our mindset, let’s look at the patterns that cause some people to dodge responsibility and self-sabotage.
The 5 signs of dodging responsibility
1. Placing blame on circumstances or people.
This deflection is the most common. When a specific stock breaks someone’s heart, do they blame the brands for preying on their innocence? Or the brand leaders for overpromising in the relationship?
“Unlike some executives who try to pass the blame to an underling,” reports CNBC on Warren Buffet’s greatest mistakes, “Buffett owns his errors and assumes full responsibility when he fails to deliver to shareholders.”
If someone’s happiness depends on someone or something performing, then they’re playing the blame game.
2. Transferring anger.
Also called displacement, this is when someone lays into someone else, like a partner or coworker, instead of directly dealing with their own negative feelings.
For example: If someone is frustrated that they never invested in a food delivery stock, they may take it out on their food delivery driver.
3. Following the crowd.
We’ve all seen the day trader trends not turn out well, right? People go on social media and they start blaming each other for suggesting a certain stock.
Trusting the masses is a tempting way to shift responsibility after things go sideways. But it’s not necessary to do what the crowd does if your strategy says otherwise.
Panic-buying and panic-selling stocks is another classic example of this avoidance.
Someone who regularly and vocally decries the failure of others to do the right thing are often themselves struggling to do so.
This is where everyone can focus on their own portfolios just a little bit more…
5. Signs of denial or suppression.
Pretending everything is fine is another common way people dodge the difficult work of taking full responsibility.
For example, when someone’s investing strategy consistently underperforms, but they blame the companies instead of their research.
We all dodge responsibility
None of us are immune to the habits above. When you think about it, the same principles can be applied to our health and happiness. That means the same pitfalls that catch us in those areas of life, catch us in investing too.
If you recognize yourself in one of the above pitfalls, remember: many smart investors face the same challenges. The key is to focus on mindset and remember that we all have room to grow.
8 ways we can shift our mindset
This is where the room to grow part comes in. We identified eight steps that can help investors stop self-sabotage and take control:
1. Envision a (reasonably) wealthy, healthy future.
It’s hard to achieve what you don’t aim for. At the same time, it’s hard to achieve a goal that’s too big.
Odds are we can’t all be like Warren Buffet, but that doesn’t mean we can’t have retirement savings goals too.
2. Recognize where true happiness comes from.
Many investors equate more wealth with more happiness. The truth is, they’re not always tied to each other. Separating the two can help remove some of the emotions around investing.
“When you expect happiness to come from ‘the system,’ you have less reason to take the steps that would trigger it,” writes Loretta Graziano Breuning, Ph.D., a professor emerita of management at California State University East Bay.
3. Focus on growth.
Even the highest performing, most diversified portfolios have down days. Instead of getting upset about it, we like to take some time to write down our takeaways. How are we feeling? What have we learned? What did we want to do in the moment?
It helps us identify patterns we may want to change.
4. Understand personal history and tendencies.
Our diverse backgrounds condition us to think about money and personal finance differently.
Think history, upbringing, strengths, weaknesses, and other major influences that can impact an investing strategy.
Like a medical history, we like to list which events or generational/cultural inclinations exist in our makeup as decision-makers.
Now, we can refer to this list before making any future investing decisions.
Diversifying investments can help some investors scatter risk, while diversifying income can help some investors contribute extra money to their accounts. There are many ways to diversify your income or portfolio, but be sure you learn about over-diversification, too.
And if the concept of diversification feels familiar, it is! It’s applicable to physical, mental, relationship, and community health.
6. Set up systems.
This just in: motivation comes and goes. Although we love a good goal, James Clear recommends setting up systems for improvement in his book, Atomic Habits:
“When scientists analyze people who appear to have tremendous self-control, it turns out those individuals aren’t all that different from those who are struggling. Instead, “disciplined” people are better at structuring their lives in a way that does not require heroic willpower and self-control. In other words, they spend less time in tempting situations.”
7. Automate the hardest tasks.
Some steps are painful now, but extremely beneficial later.
Exercising, apologizing after arguments, practicing a language, studying for a degree, and investing are all examples.
Unfortunately, most of those things cannot be automated. Try to spot the one that can. (Hint: It’s not Portuguese verb conjugation.)
8. Remove emotions from decision-making.
We try to put thought into our behavior before acting.
“Humans can withstand almost inconceivable stress—and you can too,” writes Jocko Willink in Discipline Equals Freedom: Field Manual. “So that is your first step: Gain perspective. And to do that you must do something critical in many situations: Detach. Whatever problems or stress you are experiencing, detach from them. Stress is generally caused by what you can’t control.”
Keeping up with our new mindset
No wonder conventional experts haven’t published the ultimate guide on investing. Sure, there are smaller ones out there but that’s because it’s a different map for every investor.
Ultimately, that’s why we like to think about our mindset so much. It helps us focus on long-term investing and pushes us to get smarter.
Another thing that helps? Staying connected with communities of those who take full responsibility too.