On day two of my Tiny Experiment, I struggled to access my feelings about money. My beloved cat had just died and I felt overwhelmed. Humphry had been my furry sidekick for almost eighteen years and had seen me through some bumpy times. Although he didn’t have a lot to say about money, he did enjoy two passive income streams. Perhaps he should have written a book instead?
Anyway, losing Humph reminded that traditional financial advice usually assumes we’re in the best possible position to make an important decision. But often that decision is prompted by an unpleasant life event, such as a bereavement, divorce, or redundancy. To make matters worse, those decisions can involve long-term commitments, such as a fixing a mortgage rate or buying an annuity for retirement. The security we crave in that moment becomes a trap later on.
When there’s a lot of complexity – either emotionally or financially – we need the ability to move slowly, to figure it out as we go along. Yet there’s significant pressure on us to commit to financial companies, to give them certainty in the form of regular monthly payments. Even when life is bobbing along quite nicely, the terms and conditions are so opaque that most of us don’t know what we’re agreeing to – for example, exit fees or early redemption penalties. I’ve coached many professors who are completely flummoxed by their own pension schemes.
In my book, I want to explore how we can make smaller reversible decisions, rather than getting bounced into huge commitments that don’t always work in our favour. How can we adopt a more experimental mindset with our finances? Could a series of tiny experiments be less risky than placing one big bet on a pension scheme? I’m going to find out.
This post is part of the Tiny Experiments series.