Peter Drucker said, “Decision makers need organized information for feedback, figures and reports. But unless they get feedback from direct exposure to reality … they condemn themselves to a sterile dogmatism.”
In short, they act based on a vision or dream that is unachievable because they lack the information to make the right decisions. You need hard numbers to make good decisions, and it can be deadly to act based on what one wishes to be true instead of real world conditions.
How Assuming It Will Be Fine If You Wait Costs You
Procrastination or laziness can lead to assuming that the real world is following the trends one projected months or years ago. Then you end up driving based on an old paper map, trying to take routes that are no longer available. Continually putting off checking your retirement plan investments and not rebalancing it or selling an investment that is losing money will undermine your retirement plan.
Continually assuming you’ll contribute more later when you don’t put money back now hurts you financially. You not only lose out on compounding interest of money invested now instead of in a decade, but you risk being able to afford investing the much larger amounts necessary in ten years to catch up to what you’d have if you invested 5% or 10% to retirement now.
For example, if you can’t contribute 7% now, how can you be so sure you can afford to put 17% back for retirement in ten years?
How Assuming Tomorrow Will Be Like Today Can Backfire
Acting as if desires are valid assumptions is a driving factor in incorrect financial decisions. The 2008 financial collapse was due in part to financial products whose models assumed real estate could never go down in value on average.
Assuming you can sell your home and invest the difference doesn’t work if the housing market in your area is on a long term decline; ask anyone who still lives in Detroit or another Rust Belt city. Assuming you can work until you are 67 ignores the fact that many people take Social Security at 62 due to health problems that prevent them from working longer.
How Ignoring Someone’s Track Record Costs You
Making decisions on what you wish to be true can result in investing time and talent in failing projects and declining product lines instead of studying the world as it is and spotting investment opportunities.
In personal finance, bailing out a family member’s business or overspending yet again means you can’t save for unexpected personal expenses or save for your own retirement. Throwing good money after the bad prevents you from doing something better with it.
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Money Management reference:
- Pat Robertson
- Publisher: Charisma House
- Hardcover: 96 pages
- Jack Canfield, Kent Healy
- Publisher: HCI Teens
- Edition no. 31608 (04/15/2008)
- Napoleon Hill
- Kathartika
- Kindle Edition
Last update on 2020-03-20 / Affiliate links / Images from Amazon Product Advertising API
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