Ever notice how much human beings act on impulse? Advertising companies sure do. So do car dealerships, banks, and your local gym. Every time you go to the checkout counter at a grocery store, the strategically-placed candy bars and tabloid magazines are practically crying out: “Buy me! Buy me!”… even though five minutes before, you neither needed nor wanted them.
Pay attention next time you watch TV, or go to a store, or open your mail. Entire industries are built on capturing the human impulse. Most of the time these impulses are harmless enough, but the worst of them can have serious consequences. In fact, one of the greatest dangers to our financial health is the fact that we don’t always think before we act. We don’t look before we leap. And we give up the things we want most for the things we only want right now.
Not surprisingly, our best defense against these dangerous impulses is simple common sense. Whenever I need to renew my stock of common sense, I turn to the ancients. The legendary fabler Aesop explained it best in his story, The Fox and the Goat.1
One day a fox fell into a deep well and could find no means of escape. A goat came to the same well, and seeing the fox, inquired if the water was good.
Concealing his plight under a merry guise, the fox praised the water, saying it was excellent beyond measure. He encouraged the goat to descend. The goat, thinking only of his thirst, jumped down thoughtlessly. But just as he began to drink, the fox informed him of the difficulty they were both in and suggested a scheme for their common escape.
“If,” said he, “you will place your hooves upon the wall and bend your head, I will run up your back and escape, and will help you out afterwards.” The goat readily assented, and the fox leaped upon his back. Steadying himself with the goat’s horns, he safely reached the mouth of the well and made off as fast as he could.
When the goat cursed him for breaking his promise, he turned around and said, “You foolish old fellow! If you had as many brains in your head as you have hair on your chin, you would never have gone down before you had inspected the way up, nor had exposed yourself to dangers from which you had no means of escape.”
Had the goat looked before he leaped, or thought before he acted, he would have never given up his freedom for a single drink. The same rule applies to us. Always be on the lookout against decisions that would mortgage your future for the present. Credit card companies might try to entice you with cards you don’t need, using the promises of rewards and other goodies. But a credit card is still a form of debt. Some banks offer all kinds of incentives for opening accounts with them—but you won’t find out about the restrictions or penalties until afterwards. And there are certainly financial advisors out there who will channel you towards investments that aren’t suited for you, all with the promise that it’ll guarantee your money will grow, or that you can retire early. But do these products give you more freedom, or less? Can you read the fine print, or is it at the bottom of a well?
Keep in mind, it’s not that credit cards or all investment products are bad. They just may not be right for you at this time. Remember, I promised to send you helpful material, and the most helpful advice I can give you is: LOOK BEFORE YOU LEAP.
If you’re ever tempted by the carrot at the end of a stick, or have a decision to make that might affect your finances, don’t act on impulse. Do your research. Stop and think. Take your time. Seek out professional, qualified advice. And remember: Don’t give up the things you want the most for the things you only want right now!