habits

Knowing and Doing

© Can Stock Photo / yarruta

Knowing and doing are two different things. We were reminded of this recently, during a Financial Literacy Month discussion. A colleague surprised us with a contrarian opinion on financial literacy.

Conventional thinking is that the presence of so many people who fail to save for retirement and make costly mistakes is proof that more and better financial education is needed. Our colleague asked us whether the issue was one of knowing, or one of doing?

“Consider what we know about health and what we do about health,” he said. By some estimates, lack of exercise and poor eating habits lead to millions of deaths each year, not to mention deaths from tobacco use and alcohol abuse. Haven’t we all heard about these things?

Likewise, most people may have heard that investing for the future is a good idea, and spending within one’s means. But surveys show that many are ill-prepared for retirement.

Whoever first said “knowledge is power” perhaps was only partly right. Wall Street pioneer Roger Babson wrote a century ago:

“Experience has taught me that there is one chief reason why some people succeed and others fail. The difference is not one of knowing, but of doing. So far as success can be reduced to a formula, it consists of this: doing what you know you should do.”

Our view at 228 Main is that ‘knowledge in action is power.’ We will continue to promote knowledge and awareness of financial and investment concepts and ideas. But we will also work to motivate and persuade on the merits of taking worthwhile action.

Knowing. And doing. We need both in order to get where we want to go. Clients, if you would like to talk about this or anything else, please email us or call.

Don’t Stop

© Can Stock Photo / rusty426

I’ve been electrified by James Clear’s book, Atomic Habits. Examining the central message, you may be able to see why:

“Small habits don’t add up. They compound. It’s remarkable what you can build if you just don’t stop. The business you can build if you don’t stop working. The body you can build if you don’t stop training. The knowledge you can build if you don’t stop learning. The fortune you can build if you don’t stop saving. The relationships you can build if you don’t stop caring. Small habits don’t add up. They compound. Tiny changes. Remarkable results.”

This might help explain the wealth I’ve seen you build with lifetimes of work, the stellar careers and businesses so many of you have had, the warm network of relationships so many of you enjoy.

I’m heartened by this message when I think of building a sustainable enterprise to serve you more reliably, staying healthy so I can work to age 92, and meeting other, more personal challenges.

It is exciting, too, to think about bringing the message of effective habits to generations just beginning to save and invest and make career decisions.

Clients, if you would like to talk about this, or anything else, please email us or call.

Directing Positive Change

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We humans are not perfect, have you noticed? Many of us have aspects we would like to improve in order to make life better.

In his book Atomic Habits, James Clear illustrates three layers of behavior change. We may seek to change an outcome, or the process to get that outcome, or our identity. Let me explain.

The outcome is the obvious thing, what we want to end up with. I’m reminded of comedian Steve Martin’s advice on how to become a millionaire. “First, get a million dollars.” Lose weight, get a degree, or get in shape are other examples of outcomes.

The process or systems you use to get to a desired outcome are a better focus for our efforts to change. If your goal is financial independence, you might begin contributing to a retirement plan, start a Roth IRA, begin a monthly automatic deposit to a savings account, find ways to earn more money, or monitor your expenses more carefully.

It seems like a process orientation – how we get to our desired outcomes – is a better place to focus than on the outcomes. But there may be a more powerful layer to effect change.

A recent news story indicated that a large fraction of pre-retirees believe they will struggle financially in retirement. If part of one’s identity is they will end up broke, it may be difficult to make process improvements stick. “What’s the use, if I am going to end up broke anyway?”

If identity becomes “I am a person who will always be able to get along financially,” then doing the things that are necessary to make that true become easier, if not automatic. But can our identities be changed?

James Clear says that what we do affects what we believe about ourselves, our identity, just as our identity affects what we do. So taking those steps to improve our processes, combined with a thoughtful approach to what we want to become, may actually shape our identity over time.

Consider the difference between “I’m trying to quit smoking” and “I don’t smoke anymore.” The first version is from a person who still identifies as a smoker. The second version is from someone who believes that smoking is now a part of their past, not their present identity. You know which one is a more effective way to look at it.

Clients, if you would like to talk about this or anything else, please email us or call.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.