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Why is it so hard to confront reality?


Welcome to this month’s newsletter.

This month, I would like to discuss one of my observations from life that seems to prevent many people doing well financially, mainly due to our inability to confront reality.  Let me explain what I mean.

Have you noticed some of the following situations?

  • You have been doing a particular type of work for decades. You may be an accountant, a financial planner, a real estate agent or a fund manager. You are aware that you never seem to have the depth of understanding that you would like in certain areas of your profession, either because you keep avoiding those areas or every time you try to get to the bottom of those issues, other things pop up to divert your attention, and you somehow end up just not knowing it for a long time.
  • There are areas in your personal life you never have the time or courage to get to the bottom of; for example, your own finances. For some reason, you never seem able to spend the time required to check the numbers to get a real and true understanding of your income and expenses.

The interesting thing about these situations is that we instinctively seem to know what is the right thing to do. All we really need to do is to confront the reality that we’re avoiding, then things would be much better, we would get to work much more efficiently and manage our financials much better.

Then why don’t we? What has stopped us from doing what we know is best for us?

Obviously there is no one single correct answer to these questions, but I would like to throw in my two cents about one key factor that can influence these situations.

I believe most habits we have start from something small. It may be that when we don’t pay attention to a small behaviour, it can end up becoming something large and unmanageable for us one day. For example, as an accountant, there may be a taxation term or definition you didn’t really spend enough time to fully understand. So you may carry 20% confusion with you for that definition. Then when you read other taxation material which happens to include that definition, this compounds your confusion, that you then carry forward into another area of taxation. Eventually it will get to a point where it will become more comfortable for you to completely avoid that area of taxation which surrounds that original misunderstood definition of that taxation term.

Have you ever heard someone in a work conversation bluffing their way through topics to cover up what they clearly didn’t know? It would be no surprise to discover that they have accumulated a lot of misunderstood definitions from their earlier days in their profession, to the point that they don’t even know what they don’t know any more.

So what is a potential solution to this issue? Whenever you start working on a new project or start a new career, try not to let any definition (or words) go past you without you fully understanding their meanings. If you want to be a great financial planner, a great accountant, a great real estate agent, or a great fund manager, you will probably need to stop at any new term or expression you come across in your profession that you don’t fully understand and spend extra time and effort to make sure that you fully grasp its meaning before moving onto other topics. 

In other words, we shouldn’t sit on words, definitions and concepts that we don’t fully understand or misunderstand. It’s best to clarify them as soon as you run into them, otherwise you will spend the rest of your life avoiding the subjects related to those words, definitions and concepts. Grab a dictionary or search online, but do whatever you need to make sure you have fully understood the context and meaning of the term as it is being used in your profession.

For investors, we need to make sure that we don’t go past financial definitions without fully grasping their meanings, otherwise we may spend the rest of our lives running away from financial opportunities altogether?

We often miss great opportunities because we can’t see our own reality clearly enough and miscalculate the situation or opportunity itself. The best way to allow us to confront reality is to never walk away from an opportunity to defuse a confusion regardless of how small it may seem at the time, so the attitude to get to the bottom of something (or ask a few more whys than others) is the best prevention of missed opportunities.

Until next month, happy investing.

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