by James Wilson
The road to Hell is paved with good intentions. So goes the familiar proverb, thought to have originated with Saint Bernard of Clairvaux, a 12th Century French monk. The primary meaning is aimed at our generally positive intentions that often are left undone. It is easy to get stuck.
Most of us plan to save more, spend less but lots of distractions and obstacles get in our way.
Time is our biggest asset when we are young and this remains true until our earnings capacity peaks. For many individuals, this occurs somewhere between ages 50-60. After that, time becomes less of an asset because our capacity to save declines along with income. We sometimes use this visual of The Law of Diminishing Returns to illustrate how time and wealth can work for you…and against you.
As an advisor, the hard part at times is trying to provide the right combination of appropriate advice and advice that will likely be acted upon. I can attest that we sometimes “scratch our heads” trying to find just the right way to help clients break the stranglehold of inertia. Doing nothing might be a good approach for staying with your long term investment plan in the face of market volatility, but inaction on agreed upon steps toward your goals is harmful. I can’t count the number of times we have met with clients to go over their action items from their previous meeting and find nada, zero, nothing has been done.
Since by definition all of our clients are adults, we can’t actually force anyone to do anything. I think some individuals just like being able to say that they have a financial advisor even though they do very little of what the advisor recommends. That makes no sense. One of our cardiologist clients relayed a story many years ago that seems apropos. He said a new patient came in weighing around 400 pounds. The cardiologist said the man professed to be very motivated and interested in improving his health. Armed with that, the cardiologist prescribed a regimen of exercise, diet and cessation of smoking as good first steps. The patient left the office in full agreement with his plan for good health. The cardiologist glanced out his office window a couple minutes later and saw his new patient lighting up a cigarette and pulling a Big Mac out of a bag in his car. As our cardiologist client said, a total waste of time on everyone’s behalf.
To get unstuck, you have to first come to grips with exactly where you are today. Your beliefs, behavior and actions up until now have combined to produce the exact results that you have achieved thus far. If you are unhappy with these results, some of the inputs will have to change.
My experience, from advising successful individuals over the past three decades is to make the initial steps very small and achievable. Early success breeds later success. It usually is a mistake to think that you can immediately stop doing the wrong things and start doing the right things. It is much better to ease into the water instead of diving off the high dive without any preparation.
Some researchers believe that one of the main issues with motivation for saving is that we don’t “recognize” our future selves. That is, when we think about ourselves 10 or 20 years in the future, the aims, ambitions and dreams of that person appear different from who we are today. I think there is some validity to this hypothesis but it doesn’t explain everything.
There are also generational factors that come into play. The back end of the baby boomer generation and the front end of Generation X overlap in the 50-60 age range. These cohorts perceive their futures very differently. For the main, baby boomers, (and I am one), are approaching the transition phase of their lives (what we call the “Wind Up” phase), poorly prepared financially and emotionally. Hopefully, those on the older side of Gen X are witnessing this and that alone may provide motivation to change behavior.
Professor Dan Ariely at Duke University says “We can do almost everything with money, so that makes it difficult to think about”. This is so true, the vast array of choices relating to money can paralyze us. To break this stranglehold, we have to change the way we think about money so that we associate money with flexibility and freedom. The first step is mental, the next step is physical. Stop planning for the future and instead start doing.
To learn more about James Wilson, view his Paladin Registry research report.
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