Have you ever noticed how likely we are to share our financial success stories, yet how hesitant we become when sharing our financial failures? Furthermore, have you picked-up on how we tend to attribute our success to our own brilliance but our failure to outside circumstances beyond our control? If it goes right, we credit ourselves, but if it goes wrong, it’s not our fault.
This syndrome is so common, psychologists have given it a name—the Fundamental Attribution Error—and while we’re inherently averse to recognizing it in our own behavior, it’s the likely culprit in most dysfunction in the realm of personal finance. But while we might have this innate self-centric orientation, there is something we can do to reconcile our perception with reality. It’s a little practice called TRUTH. It often hurts, but it always helps.
Truth has been around for several millennia, but we humans have a nasty habit of running from rather than toward it. Embracing it is often humbling, but incredibly freeing. A good friend of mine, Carl Richards, has become a model for truth-telling in the financial industry. He’s a well-renowned and brilliantly creative advisor who expressed the truth of his own financial missteps to the world in a New York Times article entitled “How a Financial Pro Lost His House.” He received almost universal support for coming clean, except, interestingly, from the financial planning community, where reviews were mixed and skewed toward condemnation rather than grace. It saddened me, but it didn’t surprise me from an industry built more on perception than truth. Fortunately, Carl is undeterred in sharing his story and inviting others to the truth party, to amazing effect.
So, what truth do you need to embrace? Start small. Admit that you weren’t actually a stock maven for buying Apple in the low hundreds—you just love your iPhone (or maybe it was an iPod back then). Then, take a bigger step by acknowledging that you’re not a real estate mogul for buying your house a year before (or after) your now underwater neighbor; nor is he a financial imbecile.
Or has your fundamental attribution error suffered an inversion? Maybe you’re positioned on the less green grass, suffering from one or more of the punishments doled out by the Great Recession. You wonder, now months or years unemployed, whether you only ever had a job because you were lucky and are meant, instead, to be an employment reject. “Maybe I just don’t have anything to offer society, even my family.” You imagine your short-sale, foreclosure or bankruptcy as a lightning bolt punishment from the cloud-bound Overseer. “What did I do to deserve this?” These scripts that run through our conscious and subconscious minds are no more true, and are often a great deal more damaging than financial narcissism.
If it sounds like I may have experienced some of these errors in judgment personally, it’s because I have, and I don’t know anyone who has taken the time to engage in some honest self-analysis in this arena who has determined themselves immune, unscientifically proving the fundamental nature of this attribution error. An interesting admonishment designed to help us live closer to the truth comes from Martha Beck in The Joy Diet, where she recommends we “create and absorb at least one moment of truth each day.” Philosopher Dallas Willard suggests—“Earning is an attitude. Effort is an action.”—and seems to find worth in the latter but little benefit to the former. Would you, then, consider taking less credit for your successes and failures, instead applying that labor to the work of simply making better (financial) decisions?