Personal Finance Truth #3
This is the final post in our Three Truths of Personal Finance series. These are simple concepts. They are immutable and fundamental. Ignore them at your own risk because eventually they will prevail.
Remember the scene from “A Few Good Men” and how Colonel Jessup (Jack Nicholson) responded to Lt. Daniel Kathee (Tom Cruize) when Kathee demanded the truth? Colonel Jessup shouted, “You can’t handle the truth!”
… and Colonel Jessup was right.
TRUTH #3 - You Can't See the Truth
Nobody can handle the truth, nor can anybody completely see the truth of any situation for what it is. Of the Three Truths we've covered in this series, this is probably the toughest one for people to accept ...
"You can never see the world around you as it really is. You can only see it as it appears to you through your own emotions and previous experiences."
The reason for this is simple - everything going on around you is being filtered by your emotional brain. This Limbic System processes all the data from your senses (sight, sound, taste, etc.), seeks patterns in the data and compares them to past experiences. The data is then either discarded, filed away for future reference or sent off to the neocortex (the rational brain) for further processing.
Because most people operate their lives in auto-pilot, the rational brain for these folks only works with the data after it has been processed by the Limbic system. As such, the emotional brain becomes the primary filter - a lens - distorting everything you experience. This is especially true when it comes to your money. Your past experiences (good and bad) with money, your wants today and your wishes for the future are all laced with emotional baggage.
All too often, your financial choices are viewed, judged and made through this "Limbic Lens."
The "Limbic Lens" at Work
This “Limbic Lens” is why most investors buy high and sell low (the opposite of what you’re supposed to do). It also explains why we’re always buying shiny, cool stuff we don’t need in order for it to lose it’s luster, gather dust, take up space in the closet and eventually wind up in a garage sale or the trash heap.
The Truth? You can’t handle the truth! You can’t even SEE the truth when it’s slapping you in the face (which is usually what is happening to most people in personal finance). Then along come politicians and financial salespeople who use that lens against you to sell you stuff you don't need and can't afford.
Change Your Limbic Lens
There are ways to “regrind” the Limbic Lens.
I'll get into those fixes in a future blog. For now, understand that while you will never see the complete financial truth, you can help yourself to see each situation more clearly with less influence from past experiences and emotional hijacking.
In the end, it can be quite easy to make much better choices with your money.
You just need to know a few tricks.
John
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