Is the thought of planning a barrier for you when it comes to investing? Or are you guilty of overanalysing and underacting? According to Thandi Ngwane, head of strategic markets at Allan Gray, in the search for answers, it can become easy to refuse the simple ones.
“Planning anxiety is one of the main reasons why people tend to procrastinate when it comes to saving. Another reason is that when we look for answers, we don’t like what we find. We can be overwhelmed into inaction,” says Ngwane.
She adds that different personalities take different approaches when it comes to planning and investing. You may, for example, take a carefree approach, responding to financial to-dos in a more spontaneous manner. Or you may be very structured, and have a clear plan on what you need to do to reach your goal.
A study recently conducted by the Brazilian Financial and Capital Markets Association (ANBIMA), supports Ngwane’s illustration. The study asked 450 people between the ages of 18 and 70 years, across income bands, to plot their financial lives up to that point. Their responses revealed five personas that describe how different people engage with their lives and with money over time including:
1. The Builder
This type of person grows slowly and consistently, focusing on just each next step, rather than a distant goal, with no clear long-term plan. Changes in lifestyle and financial capacity are incremental.
2. The Carefree
There is no clear or direct upward trend with regards to lifestyle or finances. Instead, this type of person tends to respond to the changing directions their life takes from time to time. They see themselves as being “open to the flow of life”.
3. The Chameleon
The key feature of this persona is the ability to find solutions to any scenario they find themselves in. Financially, this type of person would somehow make things work regardless of circumstance. This persona “makes do”, as opposed to actively moving in any direction or building financial capacity.
4. The Dreamer
These are people who are led by their dreams, but do not use structured plans to reach them. Instead, their dreams serve as motivation for forward movement, and motivation for action.
5. The Planner
This type calculates their goals and has a clear, structured plan to reach them. Each step taken is part of an overall plan towards set goals. When things change, the plan needs to change too.
Most people in the study didn’t see money itself as a goal but rather as an enabler.
“We are not motivated to reach an amount, but rather we are motivated by important events and experiences. Practically, this means that rather than trying to figure out the exact amounts we need to reach specific financial goals, it may be better to simply get started and keep going,” says Ngwane.
How to get started
“A plan on its own is not enough, and it doesn’t mean anything if you don’t take action,” says Ngwane.
So what frame of mind do you need to be in to ensure you take action?
“We are more likely to take action when we have a clear intention. Intent is different from a goal. It is less specific. Rather, intent pushes you to save for an uncertain future that will have unpredictable costs,” says Ngwane. “It isn’t an exact science, but it does help you avoid the traps of overplanning and underacting.”
Planning for different personalities
Ngwane suggests that rather than procrastinating by trying to find the “right” or “best” way to reach concrete goals, you should focus on the fact that the more you invest, the more freedom of choice you have in the future.
“Research shows that only one in five people are natural planners. Instead of allowing the thought of planning to invest overwhelm you, have you thought of shifting your focus to investing, rather than putting so much emphasis on planning? Keeping it simple is often better in your path to investing,” concludes Ngwane.
Issued by Allan Gray