Everyone wants to exit the rat race, but no one wants to be an outsider. Yet an outsider is exactly what you’ll be once you no longer have to work. That’s a scary prospect – and why most people subconsciously sabotage their path to financial freedom before they’ve taken even the first step on it.
This sabotage usually takes the form of two feelings, which we then allow to dominate every single one of our financial decisions: fear and greed.
For example, let’s say you get a raise at your job. So far, you’ve made do with your old salary just fine, so the smart choice would be to invest the extra money. You could put it into stocks, bonds, cryptocurrencies, art, or even a simple index fund.
Assume you find an exciting opportunity with a high risk but also a high reward: A painting by your favorite artist is up for sale. You estimate there’s a 60% chance you could double your money in a year and a 40% chance you could lose it all. Can you feel it? When you read the words “lose it all,” your fear instinct kicks in – even though this was just an example.
At this point, your fear will tell you to put investing the money on hold. “Let’s wait. Let’s find something safer later.” This, in turn, gives your greed plenty of time to kick in. “You know what? Now’s a great time for a reward. Let’s buy a new car!” Before you know it, your monthly car payments eat up your raise, and you have indeed managed to lose 100% of your money – just not the way you imagined.
Fear and greed love to play ball with your financial decisions. One will scare you away when you’re about to put your money to good use, the other will lure you into wasting it. Don’t let fear and greed win. Don’t let these bastards dictate your financial fate.
Action Item: Remember a time when fear or greed prevented you from making a financially sound decision
It’s always painful to confront your mistakes, but if you can summon the strength to do it, you’ll be rewarded with valuable lessons and the motivation to stand by them. If we could learn everything from other people screwing up, we’d all be rich already!
Think back to a time when you had all the money smarts you needed but failed to act on them because fear or greed took over. Did you double down on an investment you already suspected might not survive the market’s swings? Did you save money for a reasonable goal only to waste it on a mindless purchase a few weeks later?
Feel the pain. I know it sucks. Stay in it. Learn from it. Don’t be angry at yourself. Be angry at the fear. Be angry at the greed. Let your frustration be the fuel for making a better decision next time. One mistake at a time, you’ll climb the ladder of wealth. Until, finally, you succeed.
