Firefighters are expert stuff-breakers. Maybe that's why when I read this aphorism by Nassim Nicholas Taleb, I was intrigued.
"To understand how something works, figure out how to break it."
—Nassim Nicholas Taleb
Through the process of breaking stuff, whether on a structure fire, extrication, forcible entry, etc., we learn a lot about how things are put together. I wasn't thinking about the quote from a firefighter's perspective, though.
I wondered how do you break your personal finances?
Those words didn't seem right, though. Personal finance is too broad. Then I thought, "How do you break someone's financial success?" And that didn't seem right either. Success is a fleeting experience that isn't easily defined.
And then the lightbulb flicked on. The seemingly right question solidified itself. How do you break a [person's, family's, household's, etc.] financial robustness and resilience?
Robustness is the quality or condition of being strong and in good condition. Resilience is the capacity to recover quickly from difficulties.
So what will keep someone from being in good financial condition and able to recover quickly from difficulties? Well, here are my thoughts.
You Live Beyond Your Means
If you make $50,000 per year and your lifestyle costs you $55,000, you are living beyond your means. Finding financial robustness and resilience is always just out of reach.
Sadly, the shortcoming is often financed using credit cards. In the first year or two, you are using a spade shovel to dig that hole your in. But as the compound interest gains momentum, the excavator shows up
If anything happens to your income (e.g., salary cut, loss of a job, disability, etc.) bankruptcy—or brokenness—is sure to follow.
You Don't Insure Your Risks
In insurance, risk is the possibility of loss. If you risk more than you can afford to lose, financial ruin—or brokenness—becomes more probable.
If you are a 35-year-old male, you have about a 2% chance of dying within the next 10 years (that's for regular dudes—not firefighters). And according to Low Load Insurance Services, "A 30-year-old is 4 times as likely to become disabled than to die before age 65." Though the probabilities seem low, they certainly aren't zero.
And if the odds of 1 in 300 million get you excited (we all know the lottery playing firefighters), then these odds should make you go change your drawers.
Risks are everywhere, and many of them are uninsurable. But the low frequency and high severity risks need to be insured against. If you don't protect against these types of risks, you leave you and your family in a position of fragility.
You Never Delay Gratification
Delayed gratification is essential to building wealth and reaching financial freedom. If setting aside 15% (or more) of your income for retirement isn't prioritized because of your need to accumulate more stuff, then you will remain on the work hamster wheel until you physically or mentally cannot.
And then a life of brokenness it is.
Or, you can bargain with the future. As Jordan B. Peterson says in his book 12 Rules for Life, "When engaging in sacrifice something better might be attained in the future by giving up something of value in the present."
Some minor amount of sacrifice (going to work every day) is always necessary. But, without giving up more of what you value today (money) so you can gain well-being in the future, then you run the risk of becoming a broken individual. This lesson is as old as Cain and Abel.
Remember, social security is a safety net, not a retirement plan.
You Cast Blame
Blaming others for your situation leads to financial weakness. Yes, some of you are dealt a weak hand, but you don't have to play it. Life, like poker, is a multi-round game. Through education, discipline, and hard work, you can stack the deck to be in your favor.
But, if the government or your employer or [insert any other ridiculous excuse] is keeping you from succeeding, you won't create a robust and resilient financial foundation.
It is your responsibility to take ownership of your circumstances and learn from them. Once you open your eyes, the truth may be that your situation is no one's fault but your own.
And then you have a choice. Do you stay weak and fragile? Or do you become robust and resilient?
You Provide Less Value Than What You Are Paid For
If you go to work every day and only provide value up to your wage, then you are on the chopping block in tough times. Even if you hang around, promotions are unlikely. There will always be someone who is providing value beyond their salary, and that person will rise the ranks.
Naval Ravikant says, "If you think and act like an owner, it's only a matter of time until you become an owner." You have to train yourself to think and operate this way. If you do, you will gain leverage, gain influence, promote rapidly, and create a robust and resilient skill set that is marketable.
Otherwise, you remain stagnant.
Failure Freezes You
No one likes to fail, but you can't avoid challenges. You gain strength by lifting heavy weight. This applies to your career, your knowledge, your family, etc. You have to take on additional responsibility and face possible failure.
If the thought of failure keeps you from moving forward, your ability to earn more money and provide more value will atrophy. Failure is rarely fatal. Take challenges on willingly to gain financial robustness and resilience
The best part is that if the challenge is too much and you do fail, you still learn from it. Now you can re-group and re-engage.
Charlie Munger says, "many problems can't be solved forward." Through inversion, you can avoid stupidity and end up better off than most.
“All I want to know is where I’m going to die, so I’ll never go there.”
Taleb's aphorism works in the same manner. Thinking backward may significantly improve your understanding of whatever problems you are facing. Take some time to consider the issue from another perspective. You might be surprised by your insights.
And, if you'd like a fiduciary financial partner, guide, and educator to help you consider these issues; I am here to serve.
Your Friendly Firefightin' Financial Planner
Forward Focus Financial Planning wants to help you communicate and clarify your financial goals so that you can create a plan and take action. Take the first step and schedule a free planning call today. You only get one chance at living a great life. Define your goals, create a plan, take action, and be confident.
Disclaimer: All written content on this site is for information purposes only. Opinions expressed herein are solely those of Forward Focus Financial Planning, LLC, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.