It’s one of those “deep-thought” days when I switch myself into a philosophical mode. Sometimes, this results in some extreme contemplation about the things I have been generally doing in my life. This time it was all about financial contemplation. The choice of the title is obviously inspired by the book “Zen and The Art of Motorcycle Maintenance” by Robert Pirsig.
Before I start my rant, let me give you a very brief summary of what is the concept of Zen. It essentially means going back to the basic fundamentals, starting from zero, and building your way up (Robert Pirsig’s Zen, not the original Zen). This much knowledge is sufficient for the purpose of this article. If you want to read more about this concept click here and here.
Your financial life is a big machine with a lot of odds and ends thrown into it. To maintain this beast, you require some kind of financial prudence. Now, if there is a problem with this machine, the *Zen* way is to start looking at some fundamental issues. To do that, you have to take it apart and try to put it back together. In doing so, you will realize the significance of each component. This is exactly what I will attempt to do in the following.
I have listed some potential fundamental roadblocks that defeat financial prudence. Along each factor, there is a short line of description that sort of adds financial relevance (it’s deep…you could apply this to many other issues in life). Please note that these are from my personal experiences. I will encourage readers to find some peaceful time and do this exercise for themselves at least once.
- Greed: This is foremost cause of most financial troubles. We want more, and we just don’t want to stop. Our greed not only puts us in the holes but also makes other people’s life miserable.
- Lack of self-control: Sometimes we acknowledge our greed, but we just can’t stop spending any how. Credit cards don’t swipe themselves, we swipe them.
- Lack of foresight: Greed also blinds our foresight. We buy stuff, but we simply fail to estimate how much it is going to cost us in the long run. Don’t buy an elephant just because it’s being offered for zero down and no payments for 12 months.
- Underestimation of consequences: Sometimes, we have all of the above, but we grossly underestimate the financial repercussions of our decisions. You can also term this as too much optimism or lack of proper judgement.
- Ignorance: Ok, people don’t like to acknowledge this, but this is true. How many of us really know how credit card payments are calculated? Whether your card is a charge card or a credit card? Whether not paying telephone bills affect your credit score? What is the grace period on your credit cards?
- Inability to recognize a problem: Sometimes we don’t realize that we have a problem. At times we don’t recognize the *right* problem. If you earn $120K a year and still live paycheck-to-paycheck, low income is not your problem, it is something else.
- Inability to learn from previous mistakes: Ok we made that late payment once and paid for it with heavy fines and increased APR. What did we do about it? did we make changes to the way we do things to avoid making the same mistake again?
- Lack of organization: Oh ! I forgot to make the minimum payment. Oh ! forgot to mail in the rebate. Oh! I thought this due date was for the other card that I have. Oh ! I thought I had more money in my bank when I wrote that huge check for that expensive television.
- Sheer laziness/carelessness: Ah!..what’s the hurry, I will do it later.
I have seen countless people not willing to check out more than one store for some of their large purchases…the reason: “I am bored already”. Here is another one I have heard recently, “I don’t know anything about what kind of 401K plan our company offers. I have been planning to talk to HR about it, but I find it very boring to discuss this financial stuff”. What?! - Overconfidence: This is really dangerous when coupled with ignorance. Leads to situations like “I can make this mess and then I will easily bluff my way out of it”
- Circumstances: This one is tricky. There are two types of circumstances. Type 1: self-inflicted; these are due to some or all of the above reasons. Type 2: sheer bad luck; these are just out of your control: medical expenses, car trouble, job loss, failure to garner enough votes for the economic bail-out package, etc.,
Except “Type 2″ circumstances, there is a scope for improvement in all of the above. We just need to look into ourselves before point fingers for our financial mess. Once you do that, you will be an expert in the art of financial prudence, and hopefully stay out of trouble for a long time to come. This is more philosophy than practicality, but you can give it a try..it may work for some of you.
In all humility, I am guilty of some (almost all) of them at some point or other, but I am learning.
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Good points, with which I agree. I would add one more: Not having a plan. Probably not very Zen like, but I think important.
You are 100% correct. And now, to boot, the bill is passed and the market still tanks. What’s next?
I totallt agree with you. I do agree with #11 It is really tricky indeed, still need to come to terms how you’ve distinguished between the types of circumstances.
Great to read from you again.
“Your financial life is a big machine with a lot of odds and ends thrown into it.”
You got that right!
Another roadblock that I see often is apathy. I’ve met a lot of folks who could care less about managing their finances. Hmm.. maybe that would fall into the ignorance roadblock.
One of the best books by far that I have ever read. Phaedrus’s search for the understanding of Quality, and what exactly it is, was a great journey, and if applied to finances, could lead one to wonder what is a quality investment in today’s day and age…
Hey, Nice to see you back. Going through some major life changes myself and I seem to be doing quite a bit of “financial contemplation” too these days. Good list you have put together, and I have to agree, I have been guilty of bumbling against these at some point or the other. For me the biggest fundamental issue though is, “Comparing yourself with others“. This does not necessarily mean “keeping up with the Joneses” and spending a lot (even though that is definitely one negative side effect). It could also have an entirely opposite effect as well, such as wanting to make more money, wanting to hoard more money, etc. etc., just because everyone else is doing it. From a pure financial perspective that aint so bad, but when you think of the price you pay to make/hoard more money just because everyone else you know is, you’ve got to wonder about the price you pay in tems of quality of life. I thought I could rise above this whole comparison thing, but boy, in some form or the other it always makes a huge difference in my fiancial decisions (in both spending too much and wanting to make/hoard too much). It’s proving to be one of the hardest beasts to tame!!! I’ll stop my rant now…. anyway, as I said, good to see you back.
Just found you blog but got to say its exceptional.
If the majority could think as lucidly as you with regard to financial matters the economy wouldn’t be in such a mess :o)
Grant
I’m guilty, I’m sad to say, of all but #8.
I’ve never missed a payment or bounced a cheque, which in hindsight, just helped to increase my credit limits.
As an ex-philosophy major, I thought the above post was brilliant! Great work!
Cheers,
Vince
http://www.scordo.com/blog/blog - a practical living blog
#7 is really huge in my mind because moving forward and learning from mistakes is just as important as making great decisions day in day out. The ability to apply what you learn to the future will ensure not only great success but also filter into attitude, your skills, relationships, etc.
Nice post and great list….It is funny that this can happen to even the best of us….
Even though it might seem like an old post. I do appreciate reading your post from time to time. I totally agree with you on that. And now, to boot, the bill is passed and the market still tanks. What’s next?Let’s honestly ask.
Great post.. i wish will happen to me.. give a thumbs up on su!!
wow, great stuff indeed! you have nicely described whole things.
Thanks for sharing such great post, according to me overconfidence is the best point.
Ya, That’s right. I agree
Great stuff indeed. You are correct.
Great post, according to me overconfidence and lack of organization is the perfect point which all should know.
your blog is hurendred precentage correct and result oriented for the useres.
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