How to talk yourself out of financial security

Was reading a story about a medical doctor who is also a weightlifter and strength coach.

He has been suffering some elbow pain and so decided to go to a sports medicine doc who was recommended to him by some of his colleagues.

He went in wanting an x-ray to confirm a stress fracture.

Anyway, the sports medicine doc asked the strength training doc what he did for exercise.

The doc answered that he lifted weights.

When asked how much, he said “eh, a few hundred pounds” which he knew would not be received very well by the sports medicine doc and… it wasn’t.

The sports medicine doc told the weightlifting doc to stop lifting and that lifting anything over 200 lbs is dangerous.

Now… had the weightlifting doc come in with ankle or knee pain from running, the sports medicine doc might have said to stay off it for a couple weeks and then go back to running.

Because bias.

The x-ray showed nothing serious and so the Weightlifting doc went home and proceeded to squat over 500lbs.

Too funny.

It reminds me of the shenanigans in the financial industry.

Investment advisors will often tell you to never buy whole life insurance because it’s expensive, has a low return, etc.

And yet when their investment recommendations don’t produce the intended results… silence.

To be fair, the same thing happens with insurance agents who say investments are evil and when their life insurance or annuity designs don’t pan out… silence.

Of course, when things DO work out… vindication.

The combination of:

  1. A professional credential,
  2. Confirmation bias and,
  3. Ignorance of studies done on savings rates, human psychology, and sequence of market returns

… is a very dangerous thing.

Look, this is not about whether you should or should not invest or buy insurance.

It’s about what makes the most sense given the evidence available.

And the evidence shows most people have a hard time being disciplined savers… which is why the forced premiums of whole life insurance make so much sense.

It’s not a rich-poor thing, either.

John Wanamaker, who was one of the wealthiest men in America, bought whole life insurance because it helped him get his head around saving money and made the process psychologically easy.

On the other hand, at some point, you will have enough money to be financially secure and can afford to take risks with your money… maybe a lot of risk.

Warren Buffett is a living example of what’s possible by owning part of a life insurance company AND making investments.

Or the tech billionaire who recently bought a $201 million life insurance policy and also clearly invests in businesses outside of insurance.

More:

Time and time again people have come to me convinced they are investment wizards (or have hired an investment wizard) when the facts of their situation say otherwise.

Other times, though much less often, people have come to me underestimating their risk capacity and thus cheat themselves out of investment gains.

The common thread in both situations is negative self-talk.

The Tel-Lie-Vision tells you “it’s hard for people to save money these days” and so guess what?

You find yourself unable to save much money, if anything at all.

At the same time you know you need money for the future.

What do you do?

Either give up or… become convinced you or your financial advisor is a great investor and can make up for low savings with high returns.

Neither scenario turns out very well for most people.

On the other hand, some financial gooroo tells you whole life is the payday lender of the middle class.

So… what do you start thinking?

… that whole life is not a great place to build a savings.

Meanwhile, the evidence says otherwise.

The solution is… simple.

Delete negative self-talk from your brain.

Don’t get me wrong. I’m not asking you to be a pollyanna.

But be realistic and non-cynical.

OK, enough yammering.

Hop on my email list if you want more tips and advice that I never share on the blog.

David Lewis

This post brought to you by //The Rogue Agent//. David has been a life insurance agent, and worked with some of the oldest and most respected mutual life insurance companies in the U.S., since 2004. Learn more about him and his business, here.

This post brought to you by //The Rogue Agent//. David has been a life insurance agent, and worked with some of the oldest and most respected mutual life insurance companies in the U.S., since 2004. Learn more about him and his business, here.