IMAGINE yourself on a deserted island. Alone. Afraid. Your only hope is an airplane sitting on an abandoned airstrip, filled with fuel and apparently fully operational. One problem exists, however. You are not a pilot. While you have the machinery to accomplish your objectives, you probably lack the training and temperament required to get out. So what are your choices? (1) You can pull out the flight manuals and spend your days studying how to fly the thing. (2) You can resign yourself to your marooned status and convert the plane into a nice condo. (3) Or you can get on the radio and Call for Help!
Like the desert island dweller, a major life change such as death, divorce, retirement, job loss or inheritance can leave you feeling financially marooned and understandably terrified. Here you are with assets, an insurance company or properly settlement, your life’s nest egg (much like the airplane), but you are too distracted, too numbed by change to respond to the maze of financial and legal matters at hand. You face the same choices as our desert island castaway: (1) Do it yourself. (2) Give up. (3) Call for Help!
We’ve all heard stories of newly widowed women, lottery winners and retirees who go broke within 18 months of receiving their windfalls. The ravages of guilt, emotional interference and financial inexperience can be disastrous. Everyone needs time to adjust so that emotional distortion and financial judgment can stabilize. Yet this confusing, vulnerable time is exactly when financial events demand immediate attention. Successful and Objective Management Assistance is Crucial to your well being at this point, and your first step is to get on the “Radio” and Call for Help!
If it were all just about the money, managing our finances would be much easier. But it is not so easy. More often than not, counterproductive relationships exist between money and emotions. The fact is, everything money…is emotional. Those around you need to understand what you are going though and help you sort out emotional tell-tale signs of trauma from sound money decisions. Stress, fears, deeply felt personal losses, anxiety and uncertainty will skew and sabotage good decision making.
A Robert F. Baird Private Wealth Management Research paper on behavioral finance cites some good observations and tips toward a better money management experience, especially while under stress.
1. Don’t become “anchored” in thinking what is “now,” will always be. The future will arrive and will be different. Embrace it and avoid a future unplanned for and unwelcome.
2. People want to be “right” and avoid being “wrong.” Be objective and use objective outside assistance to help eliminate the emotional factors in financial decision making.
Avoid confusing ease of availability of information with its validity. The study asks whether you would buy or not buy a car based on, 1,000 anonymous people’s high rating of it or on your sole neighbors experience of not liking it. The neighbor’s view carries more weight.
3. Hindsight is 20/20! How could you not have seen the housing bubble coming, the market crashing, etc? Real-time analysis is forward-looking and accepts that the “real” future is unknown and is unknowable. Stay focused.
4. “Found Money” is REAL money. Treat tax refunds, bonuses, gambling winnings seriously, not frivolously.
5. Our minds fear losing far more than it values winning! Fear of loss can skew appropriate risk-taking far more than seeking wins. Be cautious with aggressiveness when trying to make up for losses.
6. Our minds value positives and wants them immediately while we tend to defer negatives. If you find yourself in a hole…stop digging!
7. We are prone to overconfidence! Be realistic about what you know and don’t know. Be honest with yourself about where your skills lie.
8. We tend to expect “averages!” When a coin flip comes out “heads” 10 times in a row, we tend to think, “tails” just has to come up next. Not so! Randomness is just that…random!
9. “Follow-the herd.” There is a tendency to feel comfortable with decisions we’ve seen others make. While the investment advice of well-intentioned friends, neighbors, or relatives may seem convenient and even logical, it is non-professional and their situations are probably very different from yours.
As you obtain money education and time passes from your personal Shipwreck, you will gain a new sense of control, independence and confidence, and realize that money is your servant, not your master. You will then be better able to feel confident and “fly solo”!