Terrie Drake, A Quiet Fortune: It’s all about the message
A Quiet Fortune
“A person can’t really argue about your message,” a friend told me the other day. “Investing regularly for a long time is the only way most people can accumulate enough for the future. Trouble is, most people don’t do it.”
This man knows what he’s talking about, I’m sure. He’s an accountant who has seen every example of personal financial planning — or lack of planning — there is. He commented that a dream, albeit illusive, of getting rich quick exists for almost everyone. He followed up by saying it’s extremely hard for many people to stick to a plan that they would call drudgery: saving steadily and investing in something that will take years to grow to fruition.
My friend’s comment got me wondering why it’s so hard to stick to a savings plan.
Two days later I was in a store and walked past some large totes. You know the kind; they’ll carry anything you want for work, picnics, or an overnight stay. One of them had these words printed in enormous letters: EAT – SHOP – SLEEP – REPEAT.
“Well, that says a lot,” I thought. “I wonder how many people think that’s the message they should pursue: eat, shop, sleep.”
I know that’s not the complete answer to my question about why we don’t save, although it certainly is part of the problem. Sure, the lure of consumerism is one layer, and lack of financial knowledge as well as distrust of the markets are other pieces of the puzzle. But there has to be more. Why is it often so hard for us to get started on a path that is likely to assure us of having a secure future? Why don’t we put at least a little aside for the years ahead?
I found some insights into my question in a book I had read years ago. Written by Jason Zweig and published in 2007, it’s called “Your Money and Your Brain.” Zweig has a long list of credits: senior writer for Money magazine, guest columnist for Time and cnn.com, mutual funds editor for Forbes, personal finance columnist for The Wall Street Journal, etc. The man knows his stuff.
Zweig’s book introduces and discusses the field of neuroeconomics, the study of “what goes on inside your brain when you make decisions about money.” Neuroeconomics is “basically a hybrid of neuroscience, economics and psychology.” Zweig shows us why and how certain things happen to us mentally in regard to finances. I’ll quote just three facts that he explains in the book:
• A monetary loss or gain is not just a financial or psychological outcome, but a biological change that has profound physical effects on the brain and body;
• The neural activity of someone whose investments are making money is indistinguishable from that of someone who is high on cocaine or morphine; and
• Once people conclude that an investment’s returns are “predictable,” their brains respond with alarm if that apparent pattern is broken. You can find the complete list on page 6.
The point of the book is not just to analyze what happens to us emotionally when we deal with money; it’s to let us understand, then overcome, some of our resistance to making good financial decisions. For example, about 25 percent of Americans are chronic procrastinators who play tricks on themselves by thinking that doing something later, like starting an automatic savings and investing system, will be much less painful than doing it today. He likens this to our resistance to other “good for us” steps like eating more healthful foods, paying down our credit card debt, quitting smoking, etc. Knowing how procrastination changes the future can quite possibly turn our switch to a “do it today and get it out of the way” thought and action process.
The book is first-class: I recommend it. But whether you read it or not, I urge you to think about what my friend the accountant said: “Investing regularly for a long time is the only way most people can accumulate enough for the future.” Then decide to become a member of the relatively small group of people who follow through…today.
Terrie Drake is the author of the book “A Quiet Fortune” and a retired teacher and librarian. She and her husband have lived in Glenwood Springs since 1974. She is not a financial adviser; consult a competent professional for your personal financial solutions. She can be reached at email@example.com.