Have you ever thought about how much money you spend every
year because you were afraid to make a financial decision? And it’s not just
financial decisions, but all of those other decisions we make: moving, changing
service providers, switching policies or any of the other decisions we make
every day that impact our bottom line.
I know exactly how much I spent this year because I was
afraid to change life insurance carriers: $516. I’ve been meaning to change for
quite some time as I’ve watched my rate climb from $28 to $33 and then finally
to $99 per month. Partly it’s just the annoyance of it all: the paperwork, the
medical tests and the endless questions. But part of the avoidance is unfounded
fear. What if I don’t pass the medical test? What if moving away from the blue
chip company I’ve been with forever turns out to be a bad idea for my
beneficiary? What if I make the wrong decisions about the distribution of the
proceeds? What if something goes wrong and then I have no life insurance at
all?
I realize that these fears are mostly unreasonable, but in
my years of talking to others about why they don’t make movement on financial
decisions, the reasons are usually peppered with unfounded fears. And of those fears,
many are often “the unknown.”
In our Finance Boot Camps, one of my favorite questions is
“what would happen if you did nothing?” It’s always a bit of a startling
question, because who ever brought the topic to the table that session obviously
wants to do something. Asking someone what would happen if they do
nothing is a supportive slap in the face. “I’d continue to pay $516 more every
year, and probably even more as I reached 50.” That’s not much of a decision.
Move life insurance companies.
Over the past few years, I’ve seen this play out many times
over with people’s homes and underwater mortgages. Their logic is often sound:
they want to be responsible for the mortgage they signed on the dotted line
for. There’s a flip side to the logic, though: is it sound to pay tens of
thousands more than the value of something? If your mortgage is in the poor
parts of Detroit ,
the decision would be easier. But for those in better markets where values
dropped, but not by as much, what is the right thing? And how much of
decisions, or indecisions, are driven by fear of the unknown?
My most frequent advice is “do your numbers.” Writing your
numbers down, looking at what will happen in the future if you do nothing,
looking back and becoming clear about how much you paid for something that you
didn’t make a move on in the past brings clarity to your decision, and takes a
level of fear away. Once I sat down and penciled out my insurance numbers, it
was obvious that it was past time to make a move.
Do you have any financial decisions you’ve been avoiding
because there’s some fear floating around the issue?
-Stacey Powell
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