Ever notice how much human beings act on impulse? Advertising companies sure do! So do car dealerships, banks and your local gym. Every time you go to the checkout counter at a grocery store, the strategically-placed candy bars and tabloid magazines are practically crying out: “Buy me!”…even though, five minutes before, you neither needed nor wanted them.
Pay attention the next time you watch television, or go to a store, or even open your mail. Entire industries are built on capturing the human impulse. Most of the time these impulses are harmless enough, but the worst of them can have serious consequences. In fact, one of the greatest dangers to our financial health is the fact that we don’t always think before we act. We don’t look before we leap. And we give up things we want most for the things we only want right now.
Not surprisingly, our best defense against these dangerous impulses is simple common sense. Whenever I need to renew my stock of common sense, I turn to the legendary Aesop who explained common sense in his fable, The Fox and the Goat:
One day a fox fell into a deep well and could find no means of escape. A goat came to the same well, and seeing the fox, inquired if the water was good.
Concealing his plight under a merry guise, the fox praised the water, saying it was excellent beyond measure. He encouraged the goat to descend. The goat, thinking only of his thirst, jumped down thoughtlessly. But just as he began to drink, the fox informed him of the difficulty that they were both in and suggested a scheme for their escape.
“If” he said to the goat, “you will place your hooves upon the wall and bend your head, I will run up your back and escape, and will help you out afterwards.” The goat ascended and the fox leapt on his back. Steadying himself with the goat’s horns, he safely reached the mouth of the well and made off as fast as he could.
When the goat cursed him for breaking his promise, the fox turned around and said, “You are foolish. If you had as many brains in your head as you have hair on your chin, you would never have gone down before you had inspected the way up, nor have exposed yourself to dangers from which you had no means of escape.”
Had the goat looked before he leapt, or thought before he acted, he would have never given up his freedom for a single drink. The same rule applies to us. Always be on the lookout against decisions that would mortgage your future for the present. Credit card companies might try to entice you with cards you don’t need, using the promises of rewards and other perks. But a credit card is still a form of debt. Some banks offer all kinds of incentives for opening accounts with them, but you won’t find out about the restrictions or penalties until afterwards. And there are certainly financial advisors out there who will lead you to investments that are not suited for you with big promises that those investments will guarantee that your money will grow quickly so that you can retire earlier than expected. Do these products give you more freedom or less? Can you read the fine print, or is it laying at the bottom of the well?
Keep in mind, it’s not that all credit and investment products are bad. They just may not be right for you. Always check. Always look before you leap!
If you are ever tempted by the carrot at the end of the stick, or have a decision to make that might affect your finances, don’t act on impulse. Do your research. Stop and think. Take your time. And remember: Don’t give up the things that you want the most for the things that you only want right now.
If you have any questions or need some advice, I’m here to help you.