Are you taking control of your own financial life or are you just waiting for your financial Prince Charming?
I just watched this TEDx talk from Dr. Daniel Crosby called, Sex, Funds, & Rock N’ Roll. In it he humorously compares our relationship with money to our love relationships.
He points out four biases that often lead us to make poor financial decisions. Decisions like:
- playing the lottery
- gambling obsessively
- investing in Facebook at the IPO (doh!)
- investing in too much company stock
- ignoring historically-reliable financial ratios
It’s an entertaining and revealing talk and I hope you’ll watch it.
One of the biases mentioned in the talk is called the “Prince Charming” bias. Meaning, we tend to think that something or someone will come along and solve our financial problems for us, even though it’s very unlikely. Here are some takeaways I had from that point.
Hope with Action is a Good Thing
It’s not bad to have hope. Wishing for your Prince Charming isn’t bad in and of itself. In fact, I think optimism benefits our lives tremendously. But this optimism should be balanced with action. It’s the waiting for Prince Charming while neglecting action that gets us in trouble.
What’s your financial Prince Charming? The lottery? An inheritance? “Making it big”? A sugar daddy? The President or future presidents?
I have a Prince Charming: this blog’s future revenue, and the potential for a multi-million dollar, life-changing sale. It’d be awesome if this blog earned enough money for a long enough time for me to make some big advances in my financial position (e.g. pay off my mortgage, fully fund a retirement and college accounts for the girls, and more), or if it sold and made me richer than I could ever have imagined.
But sitting around wishing for that doesn’t do a lot of good. In fact, I think it’s dangerous to fall into that thinking. I’ve got to take the steps each day to advance this blog’s revenue, look for ways to diversify, and generally do whatever it takes to reach my goals.
I’ve also got to spend time learning how to keep and preserve the money I’m earning. You don’t have to be an entrepreneur to have this lesson apply to you.
Prince Charming Isn’t All That Great and He’ll Probably Leave You
Dr. Crosby makes the point in his video that lottery winners (i.e. people who’ve supposedly met their financial Prince Charming) have a good chance of ending up fat, broke, and unhappy after just a few years. We see the same with trust fund babies (i.e. three generation rule) and pro athletes.
So even if you do make the sale, hit it big, or find a President who will give you everything you need, it’s not necessarily all that great. It won’t solve all your problems and it’s certainly not guaranteed to last.Another thought within this point that I’ll add is that Prince Charming has the ability to actually steal your happiness by being so darn magical and charming.
Whenever I read Cinderella to the girls (or watch any romantic comedy) I’m always struck by how quickly the two seem to fall in love. One night of dancing? He’s a Prince, sure. But c’mon Cinderella, you’re a hottie. Play a little hard to get and build some substance into the relationship.
The same can be said of your financial Prince Charming. Spend some time learning the rules to building and preserving wealth. When you finally reach financial bliss, it will be more satisfying and you’ll have a better chance of holding on to what you’ve got.
You’ll also have a better perspective by then about what can actually bring happiness and satisfaction to your life (i.e. not necessarily more money).
Image by starrynight_012