Several months ago, I was having a conversation with a friend regarding the decisions that people make about their finances. My friend asked what I thought was the cause for people continuing to make bad financial decisions. My response was that sometimes we do things that sabotage our success and don’t realize it. Most of the time the decisions that we make are based on our past and we continue to sabotage our success with those bad decisions from our past.
There is a story about these monkeys that were housed in this facility, hanging from the ceiling was a bunch of bananas and there was a pole from the ground that led to the bananas. Naturally, the monkeys wanted the bananas, so every time one of the monkeys tried to climb the pole to get the bananas a water hose would turn on and wash the climbing monkey down. This happened every time a monkey tried to climb the pole. Soon whenever a monkey would try to climb the pole the other monkeys would grab him to keep him from climbing so that the hose wouldn’t wash him down.
Every so often, some of the monkeys were replaced with new monkeys. Of course, the new monkey wanted to climb the pole to get the bananas and the older monkeys would grab him to keep the new monkey from being washed down. Soon all of the original monkeys were replaced with new monkeys, in other words none of the original monkeys that actually witnessed the hose washing a monkey off the poll were left in the facility. The only thing these monkeys knew was that whenever a monkey tried to climb the pole they had to stop him. None of the monkeys really knows why, they just had to stop them.
I told this story to make the point that sometimes we do things because that is what we have always done and we don’t even know why. For instance during a seminar I will often ask the question “Who has a $250 or $500 deductible on their car insurance” and several people will raise their hand. I will then ask them “why not have $1,000 deductable” the response varies but for most people they say that I don’t want to have to pay $1,000 if I am in an accident. Some will even say because I don’t have $1,000.
This is what I mean when I say your habits are sabotaging your financial success. I recently had a conversation with my insurance agent about my policy and policies in general. The way it works is the more risk you are willing to absorb the less you pay. In other words the higher your deductible the less you pay in monthly premiums. My agent and I played with the numbers and we determined that by having a higher deductible on our auto policy my wife and I were saving over $342 per year. Over a ten-year period that comes to over $3,420. Imagine how your life would be different if you had an extra $3,000 that you had saved over the years.
Insurance companies spend thousands of dollars in actuary calculations to determine the probability of you getting in an accident to determine your monthly premium. Therefore, my question is why not take advantage of their work, pay less money monthly, and save the difference. By keeping a lower deductible on your insurance policies you are saying, “Because I refuse to save $1,000 and raise my deductible I would rather continue to over pay for my insurance” I know that may seem a little over the top but it is reality and the truth.
Now that you have read this article it’s time to do an inventory of your financial habits to see if you are sabotaging your financial success with the habits that you have created over the years.
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