When you’re busy managing your wealth, you may face several challenges along the way. Some of these are practical, such as navigating complex rules. Others, however, are less obvious.
Many of the financial decisions you make are shaped by your psychology. Your emotions and biases can affect how you think about your wealth.
One of these barriers is known as “financial imposter syndrome”.
Research reported by IFA Magazine suggests that more than 3 million UK adults experience this psychological phenomenon. If you are one of these people, you may find that it affects how you save, invest, and plan for the future.
With that in mind, continue reading to discover how financial imposter syndrome affects your decisions and what you can do to build greater confidence.
If you feel your success isn’t deserved, you might be experiencing financial imposter syndrome
Financial imposter syndrome is essentially a mindset in which you doubt your own financial capabilities, even when evidence suggests you’re more than capable.
For instance, you may feel that you don’t understand money, investing, or financial planning as a whole.
You might worry that you’ve only been “lucky” so far, or that others are more knowledgeable than you. As a result, you may feel you don’t deserve your well-earned financial position or become anxious about making decisions.
The IFA Magazine research noted above highlights how people experiencing financial imposter syndrome often explain their financial success:
- 19% said it was due to external factors, such as luck.
- 13% claimed they relied heavily on others.
- 9% believed they were faking their financial knowledge.
Regardless of your income or accumulated wealth, these feelings can persist. In fact, even those who are financially comfortable may feel out of their depth when faced with significant investment decisions or making choices about their long-term wealth.
You may struggle to make decisions if you’re suffering from financial imposter syndrome
Financial imposter syndrome can influence your decisions over time, often in subtle ways.
One common effect is “decision paralysis”. If you constantly worry about making the wrong choice, you may delay financial decisions altogether.
Take retirement planning, for example. You may delay increasing your pension contributions because you feel unsure about whether you’re doing the right thing or worry that you’ve misunderstood the rules.
This delay can be costly, with MoneyWeek reporting that postponing pension contributions by just five years could leave you as much as £40,000 worse off by the time you stop working.
Financial imposter syndrome can also affect how you hold your wealth. If you refuse to shop around for savings accounts, you may end up leaving your wealth sitting in an account with a low interest rate.
If that rate is lower than the rate of inflation, rising prices might erode your wealth’s real-term value over time.
Investing can feel particularly uncomfortable if you doubt your abilities. You might worry that you can’t deal emotionally with market volatility or that everyone else knows something you don’t.
This might mean you act overly cautiously and choose low-risk assets that may not deliver the returns you need to achieve your long-term goals.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
You can take steps today to improve your confidence and beat financial imposter syndrome
Thankfully, there are several ways you can build your confidence and overcome financial imposter syndrome. Read on to learn about five practical steps to take.
1. Gain a clear picture of your financial situation
Uncertainty often fuels anxiety; when you don’t have a clear overview of your finances, it’s easy to assume the worst.
As such, it’s worth taking stock of your income, spending, savings, and pensions. Doing so can help you gain clarity and allow you to base your decisions on facts, rather than emotion.
You may even discover that you’re in a stronger financial position than you initially thought.
2. Set achievable goals
Vague future goals can feel overwhelming, while smaller, well-defined ones are easier to work towards.
Rather than focusing on large objectives such as “being good with money”, you may benefit from setting more practical targets.
These could include “increasing my pension contributions gradually” or “building an emergency fund”.
Achieving these smaller goals could help you feel more confident about other aspects of your financial plan.
3. Simplify information when possible
Financial information can feel intimidating, especially when you’re faced with technical jargon.
You don’t need to understand every detail to make wise decisions, as simply focusing on what matters most to your situation could allow you to make choices without feeling overwhelmed.
Breaking this information down into more manageable pieces could make it easier to deal with.
4. Accept that everyone makes mistakes
It’s vital to remember that very few people get every single financial decision right. Markets can fluctuate, and goals change, meaning even the most experienced investor can make an error.
Accepting this can reduce the fear of getting things wrong, potentially allowing you to make more informed decisions and review them over time.
5. Seek professional financial advice
Working with a financial planner is one of the best ways to gain reassurance about your plans.
Indeed, they can help you separate fact from feeling, which can be invaluable if you feel held back by financial imposter syndrome.
With their support, you may feel more confident managing your finances and making informed long-term decisions.
Get in touch
We could help you build confidence when managing your wealth and overcome debilitating financial imposter syndrome.
To find out more, please contact us by email at info@investmentsense.co.uk or call 0115 933 8433.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
