Have you ever heard of cognitive dissonance? This is how Wikipedia defines it:
Cognitive dissonance is an uncomfortable feeling caused by holding two contradictory ideas simultaneously. The “ideas” or “cognitions” in question may include attitudes and beliefs, the awareness of one’s behavior, and facts. The theory of cognitive dissonance proposes that people have a motivational drive to reduce dissonance by changing their attitudes, beliefs, and behaviors, or by justifying or rationalizing their attitudes, beliefs, and behaviors.
So what exactly does this mean? This means that at points in your life you are going to feel uncomfortable about things that you do and/or believe. The reason you feel uncomfortable is because you behaviors and your beliefs aren’t lined up. They aren’t balanced. You’ll be sitting on a seesaw and won’t be flat. So what are you going to do?
Have you ever been stuck at the top of a seesaw? It happened to me when I was a little kid. I didn’t know what to do and I definitely didn’t like it. This is cognitive dissonance. You believe that gravity will pull you down. However, you realize that you’re stuck up in the air. You’re uncomfortable because your feet are off the ground. I know I don’t like that. You begin feeling nervous and it’s getting worse. So, you try to squirm or struggle a bit to see if you can get the thing moving. It shakes a little and nothing happens.
Now you have two choices. You either convince yourself that you are up there for a reason. By doing this you are actually modifying or changing your belief that gravity should be pulling you down. This would then make you feel more comfortable about being stuck up in the air on one end of a seesaw. Does this actually make your situation better? Maybe it makes you feel better about it but it doesn’t fix anything. You’re still stuck.
Your other option is to do something drastic to get down. Squirming didn’t work so we know it’s going to have to be drastic. Maybe you jump. There is a risk in jumping. You might get hurt. It’s a long way down. The difference is if you jump, if you make a drastic change, things get fixed. You’re not just figuring out how to deal with the problem, you are fixing it. You don’t have to deal with being stuck on a seesaw anymore, you’re off that seesaw.
How does this relate to personal finances you may ask? Well I’m writing this at night. The time you go in to kiss your little girl or little boy goodnight, I want you to look them in the eye and tell them the truth about your life insurance. Then tell them the truth about your disability insurance. Climb into bed with your spouse and tell them the truth. Tell them the truth about your retirement. Do you know the truth? Tell them what you know and how you feel.
It will probably go something like this:
“(your child’s name here) I just want you to know that I have no life insurance (or not enough) because I’ve convinced myself that I will live a long and happy life. I’m convinced that I will have plenty of time to make the tough decisions about dealing with something bad happening. The truth is though (remember I told you to tell the truth) that when something does happen, it will be too late. And because I’ve become comfortable with this, you will NOT be financially prepared for when something bad happens to me.”
Could you say that? Could you repeat those words? How about to your spouse about the two of you’s retirement? Then do something about it. Jump off of that seesaw. If you ask the right person they will even help you down so you don’t have to jump. I’m right here.
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