The other night I was sitting on my bed with my wife and 3-year-old daughter Lily. We weren’t doing anything unique, just chatting and playing before it was my daughter’s bath time.
I asked Lily if she would share her soft fleece blanket with me because my legs were cold. “NO! It’s my blanket!” she said.
Anyone with kids knows this is pretty normal. Some things they love to share but other things are just off limits. It’s times like this that I try to teach her and help her grow.
“Honey, if you share your blanket with daddy, I’ll share my pillow and bed with you. We can both keep our legs warm with the blanket, but you can also rest on the bed and pillow and we can play.”
I continued, “But if you won’t share your blanket with me, then you can’t use the bed or the pillow. You will have to sit on the hard floor and play alone.”
Well, not every lesson goes as planned – she chose to keep her blanket and sit on the floor alone. In these moments I can’t help but kind of feel like a bad parent. Of course, I want her to stay and have that father-daughter time and play on the bed. But, children need to learn. So, I let her go pout on the floor with her blanket.
We shouldn’t really over think the things that toddlers do because their brains and emotions are just beginning to develop, but if you know me at all, I got to thinking anyhow. In her little world, she was more afraid to lose a part of her blanket than to gain use of the bed, pillows, and fun.
Looking at it from an investors point of view, the potential loss was that I would take the entire blanket and leave her with nothing while the potential gain was everything else. Though the loss seemed catastrophic to her (loss of her favorite blanket), the risk of loss was pretty low because I’ve never just taken her blanket away before.
But I realized something else…
Many adults have the exact same mentality about investing
By saying it I risk insulting a lot of people, but if you really boil it down, some people have the same mentality as my toddler.
People cling to their money like my daughter clung to her blanket. Rather than invest it, they would rather bury it, put it under the bed, spend it, or stick it in a savings account.
They are so afraid of the risk of losing part or all of the blanket that they would rather give up the bed, pillows, and fun.
The blanket is synonymous with their savings while the bed, pillows, fun are like retirement and financial independence.
Some people will hold tight to their small amount of money rather than risk it. To them, losing that money would be catastrophic even though the risk of that loss is quite low.
Growing is painful
Part of teaching my daughter how to be a better person is teaching her how to share. The lessons can be painful, but it’s important. Understanding investing and managing one’s budget/debt can similarly be a painful experience, but we are all better people after learning it.
In a sense, 2 years ago I was like my daughter. I didn’t really understand the concept of financial independence at all and just like my daughter I didn’t even know that I needed to learn this lesson.
Fortunately, I’m not a person trapped by my own thinking. I was always good at making money, but I realized that’s really only half the equation. Not only do you have to earn money, but you have to reduce debts, live within your means, and have an investor’s mentality.
I used to make all kinds of crazy money mistakes. Part of growing into FI was admitting that I made those mistakes and then beginning to fix them (like giving up my awesome truck).
There isn’t just one right way…
Continue reading the ways to become financially independent here.
Written by Eric Bowlin, U.S. Army
Founder of Ideal Real Estate Investing: idealrei.com