{"id":9906,"date":"2025-02-09T13:06:45","date_gmt":"2025-02-09T13:06:45","guid":{"rendered":"https:\/\/finderica.com\/?p=9906"},"modified":"2025-02-09T13:06:45","modified_gmt":"2025-02-09T13:06:45","slug":"why-do-we-avoid-the-things-that-matter-most-greg-mckeown-and-an-essentialist-approach-to-personal-finance","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=9906","title":{"rendered":"Why Do We Avoid The Things That Matter Most? Greg McKeown And An \u201cEssentialist\u201d Approach To Personal Finance"},"content":{"rendered":"\n
\n

Tim Ferriss recently talked to Greg McKeown, offering \u201cTactics and Strategies for a 2025 Reboot<\/a>,\u201d and the Essentialsim<\/em><\/a> author had a showstopper of a quote that caused me to \u201cWait, what?\u201d and rewind:<\/p>\n

\u201cWhat I have learned is this strange law of inverse prioritization,\u201d McKeown said, \u201cwhich is, I literally believe now that the most important thing in our lives at any given time is the least likely thing to get done, which is really strange.\u201d<\/p>\n

<\/p>\n

Why don’t we do the most important things?<\/p>\n

<\/fbs-accordion>getty<\/small><\/figcaption><\/figure>\n

Inverse prioritization<\/em>, you say?<\/p>\n

Is this the answer to the question, \u201cWhy do we avoid the things that matter most?\u201d<\/p>\n

Maybe. Let\u2019s explore and consider this phenomenon\u2019s impact on our ability to move ourselves forward financially and personally.<\/p>\n

Inverse Prioritization<\/h2>\n

McKeown\u2019s short answer is that inverse prioritization happens because of the emotional weight of our most important tasks. We may tie our very identity to the most important tasks; therefore the emotional cost of failing at something so meaningful outweighs the discomfort of simply avoiding it.<\/p>\n

<\/fbs-ad><\/p>\n

Here, we are using procrastination as a protective mechanism, and because the stakes are so high in the most important tasks, perfectionism will slow us down, and performance anxiety will stop us in our tracks.<\/p>\n

Few of us would disagree that money management is one of our most important tasks in life. It\u2019s not that there is any inherent value to our currency\u2014at least since we left the gold standard in the 1970s\u2014but because just about everything in life requires money, effectively managing it is paramount.<\/p>\n

But with money matters, it\u2019s not the importance alone that slows us down. There are additional barriers, thanks to an overabundance of information, the proliferation of misinformation, and the financial industry\u2019s unfortunate preference for profit over your personal well-being.<\/p>\n

So, let\u2019s look at four of the most important money tasks through the lens of our mental model that helps us better apply purpose to our personal finances. Although there\u2019s no right or wrong way to prioritize these four fundamental human-felt needs, we\u2019ll start with the one that gets the most attention:<\/p>\n

Grow<\/h2>\n

The preponderance of attention shown to the various pillars of financial planning lands in the Grow bucket disproportionately. Perhaps this is because the daily market tickers provide such a tempting reminder of the opportunity to win\u2014or lose\u2014big, creating a greed-and-fear flywheel that grabs all the headlines, even though choosing the perfect investments is not the most important task in ensuring that you sufficiently grow your assets.<\/p>\n

The investments<\/em> you choose are important, but the most important task in the growth game is investing<\/em>\u2014sacrificing a material portion of today for tomorrow. But why is this so hard?<\/p>\n

It\u2019s because we have such a powerful present bias. Throughout human history, we have been appropriately wired for survival; therefore, we have an inherent preference for that which we can deploy or enjoy now versus the future. Our present needs are in clear focus, while our future is uncertain.<\/p>\n

Dr. Hal Hershfield, professor of marketing, behavioral decision-making, and psychology at UCLA and the author of the book, Your Future Self: How to Make Tomorrow Better Today<\/em>, puts it starkly: \u201cSaving is like a choice between spending money today or giving it to a stranger years from now.\u201d Therefore, he instructs us to seriously deliberate on our future\u2014using our imagination to conceive of what it will look and feel like\u2014to improve our financial decision-making in the present.<\/p>\n

Practically speaking, what do we do to be successful money growers? We have to invest, of course, but instead of forcing ourselves to make a series of successive decisions to cede guaranteed enjoyment today for an uncertain future, we can make a single decision by automating our savings.<\/p>\n

Typically, the easiest and most profitable place to start is your 401(k). First, do everything possible to get any match your company offers. (For example, your company may give you 50% up to 6% of your pay that you contribute.) And with many 401(k)s, you can evendecide today to increase your contribution every year through an auto-escalation election.<\/p>\n

The best part about this is that, unlike the market\u2019s uncertain performance, especially in the short term, your choice to save is completely within your control. By regularly saving, you increase the resiliency of your portfolio (because when the market goes down, you\u2019re buying more shares) and increase your confidence in every other domain of your personal finances. This positive phenomenon, known as the \u201cbehavioral spillover<\/a>\u201d will be especially important when addressing one of the most emotionally laden issues\u2014Protect.<\/p>\n

Protect<\/h2>\n

Protect may be the most challenging of the four pillars we\u2019re addressing because it involves facing the most powerful emotion in personal finance\u2014fear. Two types of fears slow us down: fear of the known<\/em> and fear of the unknown<\/em>. Fortunately, there are two antidotes to offer that help us address these impediments to financial success.<\/p>\n

The best example of our fear of the known is our very mortality. I\u2019m sorry to be the bearer of bad news, but we can all be fairly sure that our probability of dying is extremely<\/em> close to 100%. Why is it, then, that LIMRA reports that only 52% of people have life insurance\u2014and many of those who do are underinsured?<\/p>\n

Sure, a minority of folks may have enough assets to self-insure the financial risk inherent in death\u2014but if anyone is reliant on you financially, you likely need life insurance.<\/p>\n

So why don\u2019t we do it? We don\u2019t like addressing the fear of our inevitable demise.<\/p>\n

Then, we have the fear of fear itself\u2014fear of the unknown. Especially as homeowners and spouses and parents, there are so many things that can surprise us financially, from a busted appliance to a boost in utility costs to a healthcare scare. While the occurrence of these risks is unknown, the ways we can handle those risks are not. There are only four ways to manage risk, known and unknown:<\/p>\n