Is your Wallet Locked and Loaded?

Geoff Cook - CFP, CHAIP

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Have you ever heard the old saying “Ride or Die”? If you were a Brooklyn Police Officer in the 1970s, it meant that when you carried your gun, you were ready to use it (ride it out, or die trying); be willing to do anything if it involves personal risk. This same saying is reflective of our individual financial habits.

When we have our financial resources in our wallet we are telling our mind that we are locked and loaded, ready to shoot. If we see something that we like it is far too easy to pull the trigger. As humans, we make incredibly emotional decisions. This regularly involves throwing rationality in the garbage and not thinking through our purchases.

Recently, I was fortunate to listen to author and keynote speaker Chip Heath. Chip talked about a key process we can use to control decisions. A process to limit our bad decisions. The final step is to “Prepare”. Prepare to be wrong. As humans we make a lot of poor decisions, it is inevitable.

What Chip talked about was preparing for this by using our own personal “trip wires” to protect ourselves from bad decisions. This could be comparable to using “stop losses” in investing to protect ourselves from big market downturns. Chip used the example of how Van Halen when on tour would have abnormally large contracts for their shows. Buried in the middle they would have a clause that they wanted a bowl of M&M’s in the back stage. If in the bowl of M&M’s they found a brown one, they had the right to destroy the stage, equipment, and leave the show.

They knew that diligence was paramount to the success of their show so they set this “trip wire” to ensure the people they were working with read the contract.I think that we should leave the credit card (or financial resources) at home, and set a financial decision process. We should create an incubation period to make financial decisions where we force oursleves to sit on the idea for a few days. We have all “slept” on an idea, only to realize that the next day we really don’t want to do it anymore. This incubation period will allow you to look at the facts to ensure you really need the item, make comparisons to other products, and make sure the price you are paying is competitive.

Save yourself from making a financial decision you will regret later. Don’t walk out of your house with your wallet locked and loaded.

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When dealing in financial matters, you are urged to consult an advisor for legal, tax or investment advice. Every effort has been made to present information in a clear, exacting manner. However neither the publisher nor the authors can be held responsible for any losses incurred due to the actions of any individual as the result of this post or any errors or omissions contained herein.

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