Investing money can make people understandably anxious. Money is a hugely psychological subject and the temptation to try and time the market is real. I’ve often heard people say:

⁉️ What if it falls in value?

⁉️ I think we’re at the top of the market now…

⁉️ I might wait till the market falls, then I’ll be happy to invest…

As Yogi Berra, Mark Twain or Niels Bohr may or may not have said, “it’s tough to make predictions, especially about the future”.

Markets do indeed fall every now and again. We were given a stark reminder of this in February 2020 as the coronavirus pandemic took hold. But given enough time, markets have always recovered.

This issue was stifling some young clients a few years ago.

We met in October each year and neither the husband nor wife wanted to set up direct debits to fund their investments each month. Two Octobers in a row we got to the following February, they would eventually agree to invest half their allowances by tax year end as a lump sum, convinced that the market would fall a few months later… then they’d be happy to invest the rest.

When and how to invest was not only making them both anxious but it also used valuable time and mental energy trying to decide what to do. Time and energy that could be better spent on their own family and running their own business.

Reducing the strain on their mental bandwidth became a real focus for me and I made this the sole agenda point for our next October meeting.

Early on I asked Q1: on a scale of 1 – 10, 10 being highest, how do you rate your relationship with money?

A: Three and a half.

I drank some more of my tea, hoping they’d fill the void of silence. Thankfully they did.

Money stressed them out. They didn’t know how much they spent and therefore didn’t know how much they could afford to invest. Every month seemed to include exceptional, once a year, expensive, big-ticket items. They were also convinced I could time the markets for them. I had a few slides to hand to answer that but honestly had to point out that if little old me could time markets, we’d be meeting on my private Caribbean island 🏝️, not suburban Edgbaston! Time in the market is more important than timing the market. These investments would be held for 40-50 years and wouldn’t need to be drawn on for at least 20 years, so yes, there is a risk they could fall in value in the short-term, but in the long-term this would make negligible difference.

Q2: If we could increase 3.5 to a 6 or 7, what would be different? What would need to change?

And it all came back to spending. 7 out of 10 would make them feel super confident. Spending is awareness. And awareness is confidence.

I showed them our new app and how adding bank accounts via Open Banking would analyse their spending that they could browse on their phones. We agreed to set up direct debits for half their investment allowances and see how they got on, safe in the knowledge they could be cancelled at any time without a problem.

I bet them a round of drinks 🍷🍺 that they wouldn’t even notice the direct debits going out each month. The important mindset change here was for them to:

PAY YOURSELF FIRST – invest first and then spend what is left.

DO NOT spend first and then invest what is left. 

The following February came around, the Christmas credit card bill wasn’t nearly as shocking as they thought it might have been and we agreed to increase the direct debits by a few hundred pounds each, newly confident in the affordability.

Cue the next planning meeting in October and the weight had been visibly lifted from their shoulders. 12 months of being able to analyse spending in the app had produced such awareness that their confidence was tangible. They knew maximising their ISA and pension allowances for them and their children was affordable, and the direct debits were maximised accordingly.

No more stress, investments made on autopilot each month, confidence coursing through their veins.

It didn’t matter how many times I told them the investments were affordable, they had to realise this for themselves!

🙏 Spending = Awareness = Confidence 🙏