“We cannot solve our problems with the same thinking we used when we created them.” Albert Einstein
Many of us live our lives with the same financial frustrations of our parents, because we have been taught to think in the same way. Having an adviser is a sure-fire way to start thinking differently and avoid giving financial frustrations, that may be generations old, a foothold.
It would be fair to assume that when making financial decisions we always act with our own economic self-interest at heart – but we don’t. There are scores of research papers trying to understand the irrational choices that we make when it comes to personal finance.
While this is baffling from an economic point of view, in terms of human psychology it makes sense. It is the triumph of emotion over logic. Let’s take losing weight as an example. Mathematically speaking it is as simple as managing calories-in versus calories-out. Emotionally, however, it can be a battle. Likewise, the economics of our finances should be ‘spend less than you earn’ – but implementing it is often a lot more frustrating.
This frustration is often due to our behaviours not producing the results that we intend. The problem is that sometimes we don’t even think about our intent when it comes to our finances. We default to behaviours that we have learned without looking critically at what we are trying to accomplish and how we are going about it. It is like if you wanted to lose weight, but you still eat sugary cereal for breakfast every morning because that’s what you are used to eating.
It is these behaviours that we haven’t really considered that hold us back. Some examples of these frustrating financial footholds are:
If you are buying things to make yourself feel good, this approach may be keeping you in debt.
If the thought of writing down your expenses and drafting a financial budget makes you squirm, you may be missing holes in your ship that are causing you to sink.
Expenses as investments
The term investment can be thrown around pretty casually. Don’t try and rationalize the purchase of gadgets, vehicles and furniture by telling yourself it’s an investment.
Each of these behaviours in and of themselves are not necessarily bad for you – but when they become a foothold for frustrating financial blindspots or habits, then overcoming may be the personal solution that you need to thrive in your wealth space.