• How we think and feel about money has a big impact on how we save, spend and invest.
  • We can’t always change who we are, but we can change financial plans to better align with our behaviors and goals.
  • Become more intentional with your financial life; re-evaluate old habits to be sure they’re consistent with your values.
  • Start slowly and simply—set small, achievable goals, and don’t try to do too much at once.

Have you ever spent money you should have saved? Sold an investment you should have kept? Or made other decisions not in your best financial interests?

You aren’t alone.

It can be difficult to envision goals far off in the future, or how small investments can compound into large amounts over time (see chart below). And so we often invest too late, too little or not at all.

Past experiences can also shape our current saving, spending and investing patterns. A millennial who watched her parents struggle through two bear markets might grow up distrusting stocks. Some people raised in poverty may compensate by overspending, while others live too far below their means.

We can’t always change our most deep-rooted behaviors, but we can understand them, manage them and build our financial plans around them. Take a step back and think about your values when it comes to money. Are your behaviors consistent with those values? Are they moving you closer to your goals? If not, even small changes can make a big difference.

For example, consider the following scenario where Client A saves $400/month for 10 years, ages 25–35, and then stops contributing. He earns 6% per year. Client B waits until age 35 to start saving and has to save for 30 years to reach the same amount that Client A has by age 65.

The Power of Compounding

The line graph shows the trajectory of two savers over a 40-year period. Although both of them arrived at the same financial figure, it takes nearly three times as long for the late saver to catch up to the one who got an early start.

  1. Be the architect of your financial life. Many of us follow old financial habits without ever thinking about whether they’re good for us. As a simple first step, roughly estimate how much of your total income is going toward spending, giving, saving and investing. Then ask yourself if that’s really how you want your money allocated, and adjust accordingly.
  2. Reframe your financial decisions. Reframing is simply the process of looking at the same situation from a different perspective—a glass half full versus half empty. For example, instead of agonizing over what you’ll do without the latest electronic gadget, you can contemplate what to do with the money saved. Or you could reframe a stock market decline as an opportunity to buy low and not as a reason for panic selling.
  3. Align your behaviors—and investments—with your goals. How would you react to a 20% investment loss? If the money was intended for retirement in 30 years, you could calmly and patiently wait for the market to recover. Now imagine how differently—and emotionally—you might react if you needed the same investment for a house down payment in three months. Just remember to stay the course.
  4. Find a trusted person to collaborate with. It could be a spouse, parent, child, financial professional—anyone with a different mindset who’s willing to challenge your views and help you stay focused through good times and bad.
  5. Start with very small, achievable goals. Instead of focusing on the total cost of a home, college or retirement, commit to paying down a credit card or putting a few extra dollars in an IRA. If you’re a reluctant saver, consider doing it automatically by contributing part of each paycheck to a company retirement plan or arranging monthly transfers from checking to savings.


Now, let’s consider another example: 

Risk versus Reward

The graphic shows two scenarios with similar odds but different financial outcomes.

Studies have shown that many times, we will choose a more certain option even if it’s less financially rewarding than another choice that has a range of outcomes.  This risk aversion has been shown to increase as the range of outcomes increase.1

  • Loss aversion. People feel the pain of losing money much more deeply than the pleasure of making it. To avoid that pain, you might invest too conservatively or sell too hastily when markets decline, robbing you of the long-term return potential needed to grow accounts and achieve life goals.
  • Risk aversion. Simply put, we don’t like uncertainty. When given a choice, we’ll often go with the known, even if the unknown might be more financially rewarding. It’s why many workers stay at familiar but unfulfilling jobs instead of changing careers or starting their own businesses.
  • Inertia. Often we cling to the status quo because trying something different can feel like a painful loss or a frightening uncertainty. Example: passing up free money in employer 401(k) matches because we don’t want to see the reduction in our paychecks.
  • Overconfidence. People who feel more financially secure than they actually are may spend too much or not save enough. Or, they may be overactive traders who believe they can time their investment decisions to “beat the market,” but end up doing just the opposite.
  • Underconfidence. Only one in 10 retirees feels comfortable spending their retirement savings, often because they lack confidence that their money will last. We call this “lifestyle risk,” the risk of not enjoying the quality of life you want, can afford and worked hard to achieve.
  • Herd mentality. Ever wonder why some people buy stocks when others are feeling euphoric or buy stuff to keep up with the Joneses? We tend to do what everyone else is doing, even when their circumstances are completely different.

Follow three simple steps to get started:

  1. Identify your top goal and put it in writing. In particular, ask yourself: What is the job I want my money to do for me?
  2. Discuss your goal with someone else, and ask them to write theirs down. Identify ways you could help each other achieve those goals.
  3. Take one small action that would move you closer to your goal.

Access our expertise. Talk with your J.P. Morgan team about creating a goals-based analysis that reflects your unique needs and behaviors.

1 Zeng, J., Wang, Y., Zeng, J. et al. Predicting the behavioural tendency of loss aversion. Sci Rep 9, 5024 (2019).