Intro – Episode 4

Trusting yourself and learning the basics

To start off, do you think that having a map to financial independence would be the ideal solution?

Compared to a puzzle it actually would be far better than trying to piece together something, if you could just have a map to take you to where you needed to go.

We’ve all used maps before. We’ve probably even used those old maps that are a few hundred pages long and you’ve to look up “G3 to E6” and compared that to the iPhone today where you’ve got a GPS – all you need to do is jump on the phone as long as you know the address, enter that in, and you can get there fairly easily

And even if you’re in a car that has blue tooth the car will talk to you and tell you where you need to go.

But unfortunately, that still runs into a few issues – the phone not have updated with the new internet location, it tells you to go down the wrong street or even a street that’s a dead end or a no right turn that you have to make… so eventually you have to pull over, stop, and figure out where you need to get to from where you are.

And that can be fairly distressing if you’re in the middle of the highway, you have no idea where the next turn is. That is a fairly bad situation to find yourself in but if you’re in a residential street you can pull over and generally the internet will come back on fairly soon and most people have been in this situation however if you’re in say, another country, and you don’t have internet and no body speaks the language either it can be much more difficult to deal with a situation like that and it’s because there are too many decisions involved.

If you’re fairly familiar with being in the city, being in your car, the only things you need to wait for is the internet to kick back in and readjust and look at the new direction that the car will tell you to go.

Then that’s not really much of a burden as far as making a decision, however in the previous example in another country, you’ll have to think about new ways of actually achieving what you need to do – and that’s figuring out where you are and where you need to be!

With more decisions comes a thing called “Decision Fatigue”, and decision fatigue actually occurs to us all the time. Every single day you’re going to need to make decisions. The more you need to make the more fatigue you’ll have.

So, think about just going to the gym. If you do 100 push ups you might not be able to do many more after that, and that’s because your muscles are fatigued. And, it can be very costly to make the wrong decision when you’re too fatigued to do anything more. So, if you’re in the gym and all of a sudden someone needs help to lift something and you’ve already exhausted yourself you might not be able to help so well.

With decision fatigue the best thing that you can do is try to hone in on what your goal is first. Because, when you have a clear idea of what financial independence really looks like, your choices are much narrower. However… now you have to choose which one is the correct one.

And unfortunately, a lot of the strategies that are online or that are taught, they generally teach [that] all financial independence can be gained by this strategy, or dream to financial independence. And it’s a bit confusing because if every single strategy will get to financial independence then there’s almost no wrong strategy. It still fails to meet a lot of individuals’ goals. So, by that logic, if every strategy meets your goals it doesn’t matter which one you choose. You’ll likely see one that’s popular amongst friends or family and pick that. Or if you don’t have any guidance in that direction, and you’re not sure still, and everything looks like it’s a good option, then you might actually not make one… and have “Decision Paralysis”.

It actually becomes tomorrows task.

So, the more information that you actually get (and the longer that goes on for) your brain’s building up many, many, many, many stockpiles of different choices, different decisions, and it can cause people to freeze and not actually ever make a decision.

There’s a pretty interesting study that was done on farmers markets where they set up stalls with 3 options compared to 20. And the ones with the 3 options basically sold out their stock every single time because it was very easy for people to go up and actually just select the one that they wanted. However, if you’ve got 20 different options it’s going to be hard to stand there and puzzle at which one’s actually the best. I’m sure everyone’s experienced a similar thing if you’ve had to go to say, the supermarket, and pick out a dip for someone. And they just asked you to get “dip”.

If you don’t know what type of dip they want it might be a bit of a risk to not call them first and ask. And say you do just make a decision. Upon searching, all of a sudden, there’s many, many, many, options and you see all the negatives about them.

And that’s what you see most in the news. Every time you google something it’s more likely to be something negative or something casting a bad light on it than anything on the positive. And that’s because fear sells.

So, it actually creates a real pain in people seeing the stories of others losing, because we emotionally resonate with one another. We see a bad story and then we feel not as much pain as that individual, but we do feel something about it as well.

And that’s just more negative feedback! So, the more you actually search and look it’s actually more of a detriment to you.

How do you trust what you read on google? Someone at the end of another computer who’s saying something. It could be the wrong strategy and it also could be just the over information out there that’s leading to decision fatigue and therefore picking some suboptimal choice.

At the fear of choosing incorrectly though why even step outside of our realms? What we’re doing right now – our lives are fine, “everything will be fine”, because why take the risk?

If you trust your friends and family you’re more likely to turn to them and obviously they’re going to try to give you the best advice because they love and care for you. However, if what they say is in the best intention (but not the best outcome) for you, you’ll still believe that it’s the correct [information] because you trust them and you believe what they’re telling you will actually help you in the long run.

So, there’s a big different between trusting something and knowing it’s the actual truth. And when I say truth I’m talking about more an objective truth. So, what’s the outcome that you’re after? To explain that think about gravity. Gravity it’s almost like a “universal truth”, and it’s actually one we have to live by every day. So, the more you believe gravity exists, the more likely you are to trust that your information about the world is accurate, and you’ll actually trust. And that gives you confidence – in knowing that if you fall from a very high building it’s not going to end well. And that trust actually comes in two parts; first is actually knowing that gravity exists and that you will hurt yourself if you fall off a high place. However, trusting that you know what to do with that information though, well that’s another separate thing.

Because for instance, say you had to make a decision around how much speed you’d need at a certain angle to ‘Evel Knievel’ over a canyon – that is a complex thing – and it involves gravity. So, you can trust that gravity exists but you might not trust yourself to apply it to a physics problem where the outcome is very, very, life-ending if you get it wrong.

So, the difference [is] between trusting yourself and making the right choices about applying that knowledge. It actually goes a long way to start building and learning the basics because a lot of it comes back to the basics, when trusting yourself is the most important thing in what you to do. You need to gain that trust. And the basics is where to start.

I know this perfectly well first hand where, the first time I invested, it was fairly nerve wracking. And anyone who’s bought shares for the very first time probably knows that little heart beat going on, the elevation, the excitement almost, of buying that share.

And I was 16 at the time, all life savings at that point (and for a 16-year-old it was quite a bit).

I was starting to look at buying shares and I bought a few – and this was 2004 so it was a pretty good time. I thought I was a genius for years and years and years and years. I kept buying more shares and up until 2007/2008 I hadn’t had any negative experiences.

And all of a sudden GFC hits… and the value goes down, quite a bit!

But that is, again, just learning how that market works. When that happened, it was fantastic – it wasn’t a time to sell, it was a time to buy. And that just comes with knowing the basics. So, trusting to learn the basics and to actually be able to achieve what you want to achieve is baby steps.

And the other truth is that it won’t be smooth sailing. With the GFC and that example, that could have been disastrous if I’d sold all my shares at that point in time and put it into cash. It would’ve been a much worse outcome. It’s about learning that there will be tough times as well. There will be financial corrections along the way and it’s about having the correct structures in place built on the basics, to survive them (and actually take advantage of them).

And everything can be really, really, amplified with fear. And fear comes from the unknown. If you don’t know the basics about a lot of finances then it’s very stressful and fearful. Shares don’t have to be scary. All it is, is an ownership in a company. And it can be scary if you’ve bought a very small company that might not be earning an income and is in a very “start-up” phase. It might have gone up in value because people think it’s going to be the next best thing. But if it doesn’t turn out to be that way it’s a very, very expensive (but valuable lesson) …and I’ve made plenty of those.

I started out investing with one rule – it was, “never invest more into one asset than I could afford to lose”.  So, with my “life savings” I put it amongst about 7 or 8 shares. But then I actually learnt the best lesson from there (where it’s my second rule now) of never investing in something out of hope. A few of those companies were solid with the banks, but I took what I thought was an educated guess as a 16-year-old (and how much do they know about the world when looking back at it).

I was investing out of hope.

Thought that these companies were the next best thing. It’s great to see them go up by 150-200% in a very short period …but eventually they went down 95-96% …all the way to zero. So, it’s those sorts of lessons in life that you do learn over time, but it’s about structuring the basics and doing it all well.

And that’s what this whole series is trying to lead into – how to teach yourself. Eventually to trust yourself. And be comfortable to make the correct choices.

Because human behaviours and actions are really the “make it or break it” moment for financial independence. ‘Responsibility’ and ‘trust in yourself’ – they’re the two biggest factors because you need to really realise that the only person who can make you financially independent …is you!

And that comes back to choices – making the choice to be financial independent – I know it sounds very cliché – but unless you actually put that first step in place and put that first investment in and start building, then who will do it for you? And it can be scary to realise that.

No-one’s going to do it for us, but ourselves. But, it also should be very liberating, as when you can be in charge and be responsible you’re 100% in control of your journey. So, believing that a politician or another person out there is going to help you succeed in your financial independence without actually taking the first step, well, they’re selling dreams.

And it comes back to what ought-to-be isn’t, so people put a big weight into what ought-to-be rather than looking at what they have to work with, and build up to what ought-to-be.

So of course, I believe in rights, say, what ought-to-be is a right for everyone. But there’s a level of tyranny that I don’t think people realise, that to have the same level of equal rights for everyone and it doesn’t lead to a better outcome for any individual. Because any individual can only better their outcome by doing the basics but if no one can than why bother?

And if there’s things that are determined as rights (or just called rights) unfortunately it’s not guaranteed that they’ll actually ever eventuate. Because I’ve checked a few countries (I haven’t been able to check them all) but the bill of rights of every single one says that the population has the right to housing. Unfortunately, Zimbabwe’s in this mix and it doesn’t mean that declaring something as a right makes it happen. So, if it’s a right for us to be financially independent then we need to do something to make that ought into an IS.

And that comes back to choices and the basics

Michael Jordan said that doing all the basic stuff is all it took for him to play the game so well. So, once he had the fundamentals, he was one of the best with the fundamentals and could build on that. So, with a map you can go a long way with following the route but you need to make the choice of, if the GPS kicks out, what do you do?

And if you just wait for a bit and then decide what the decision is, probably a good idea but if you keep driving down the road saying that “we’ll get there eventually”, you might end up on the other side of the city. So, it’s about learning to reduce fear, becoming comfortable and taking control and just not waiting…and starting!

And unfortunately, it still doesn’t do much for the long term at this point. This will help you start – but what keeps you moving forward? And it’s all about why you are going. So, in any journey why are you entering that address into the phone? If you’re going to a friend’s house to catch up (depending on how bad the journey is) you might just turn around and just come back. But if it’s going to a very important event, like a job interview or something, you would probably do whatever you can to get there.

 

So, we’ll finish off this point in the next episode.

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