Are You Open To Change?  Guest Blog by Sarah Fallaw, PhD.
Are You Open To Change? Guest Blog by Sarah Fallaw, PhD.

If you’ve spent any amount of time contemplating how you might improve the condition of your health, career, finances, family, spirituality, or other important element of your life, you may inevitably reach the conclusion that a change of some kind is required. Many readers of our blog and books share a common conundrum: they acknowledge a change is necessary (either for themselves or for their client), but they also instinctively know that actually making the needed change is going to be tough. Why?

One of the hurdles to making any significant change is being open or receptive to something new. We often refer to this as openness to change, and it’s related to many different personal characteristics. First, it’s related to the personality characteristic from the Big Five known as “Openness to Experience.” In a nutshell, this personality characteristic is associated with those of us who enjoy new sights, sounds, and, well, experiences. It is related to creativity and having a desire to learn different ways of approaching a problem or chore we have at home. It is also related to our values: do we value what’s new and different, or what’s tried and true? Think about how you might feel about being an early adopter of technology, and how you would value experiencing something that’s new and unique. Finally, it’s also related to our past experiences and behaviors: even if we are naturally more open to change, but grew up in an environment that rigidly adhered to tradition and routine while avoiding disruption, we might be less inclined to be open. In other words, our experiences can set limits on our natural personality.

While Openness to Experience is often thought of as positive, there are of course downsides to any characteristic we might possess (see two of those weaknesses in the investing world here). An individual that is high on openness may have a hard time sticking to necessary routines; he or she may be less than predictable to friends and loved ones; and he or she might also have a difficult time choosing a path and staying on it. If you’ve ever worked for a boss that is high on Openness to Experience, it can be a frustrating situation: you might get a request at 5:00 pm for a report due the next morning, work all night, and turn it in by 9:00 am sharp . . . only to learn that your boss has decided (overnight!) to abandon the idea and move on to something else.

Let’s put the idea in a financial context: imagine you and your spouse agree that a budget is a great (and necessary) idea. You both work together to create it, identify goals that sticking to the budget will allow you to reach, shake hands, and go on about your week or month. If one of the spouses is more open to change, open to experience, that spouse might be more inclined to veer away from the budget because he or she sees exciting exceptions or new ways of shopping or new ways of budgeting along the way. Yes, that openness helped create the budget in the first place (being open to having a budget and reaching goals), but the same personality characteristic can also lead someone to be “creative” with regards to money.

The upshot here: being open to making a financial change is important, but so too is having the ability to make that change last. It’s great that you want to try some new method of sticking to a spending plan, but can you implement that change long enough to see an outcome? And long enough that it will become a habit? That’s the tough road that many of us who are open to experience face: we want to make the change because we love change. But then we might get tired of our new path and head towards something else before the new (now old) plan had a chance to be effective. Knowing these characteristics and predispositions before we begin can prepare us for the inevitable future situation when we are inclined to wander off our plan.

An openness to change will likely only be fruitful if you can take steps to ensure that positive change will be lasting. If you’re curious about your own readiness for financial changes, click here to contact us.  We have an assessment for you to take and get a report that helps you understand both your openness to making a change as well as your ability to make that change stick.

 

 

 

 

 

This guest blog was re-purposed with permission by Sarah Fallaw.  Her original blog can be found by clicking here.

 

References & Resources

Cheng, M. (2018, October 4). How Openness Personality Affects Financial Planning And Investment Decision Making. Forbes Online. Retrieved April 17, 2019.

Duckworth, A., & Weir, D. (2011). Personality and response to the financial crisis. Michigan Retirement Research Center Research Paper No. WP260.

McCrae, R. R. (1987). Creativity, divergent thinking, and openness to experience. Journal of personality and social psychology52(6), 1258.

McCrae, R. R., & Costa, P. T. (1987). Validation of the five-factor model of personality across instruments and observers. Journal of personality and social psychology52(1), 81.

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Why Being Honest With Yourself Is Important In Finances.
Why Being Honest With Yourself Is Important In Finances.

Healthy finances have a lot less to do with numbers than most people think or are willing to admit. We all know that you have to spend less than you make in order to save, yet we are generally terrible at it. Why is this so? Because we are not honest with ourselves.

In order to consistently spend less than you make to then save more, we have to discover what is really in control. Are our impulses in control or are we in control. To some degree there will always be a little bit of both. The goal is to not be perfect but to be more in control than not.

So where do we start to find the areas of being out of control? Well, it starts with a willingness to look inside yourself to find things that are not aligned with who you want to be. Your daily financial transactions are a window into who/what is in control. To help you to discover areas of weakness, we have partnered with a firm that creates Financial Behavioral Assessments to help you to find weak areas to begin strengthening. Clients have access to full fledge assessments but we also provide free versions for everyone else.  

If you are willing and open to be honest with yourself, I encourage you to click the link below and take some of the assessments.

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Are you really investing?
Are you really investing?

Investing means so many different things to different people. One person will call something investing and another could call it gambling. Outside of the financial world it means, “to put money, effort, time, etc. into something in order to improve it or get an advantage”. Some key words in this definition is effort and time.

If we are honest with ourselves, effort and time is not something that we like.  We want things to happen quickly with as little effort as possible. The irony is that we all know quick and easy usually is not very good.  For some reason we do not care and continue to pursue quick and easy.

When it comes to investing, quick and easy is certainly not your friend.  There are tons of research to support this and I will provide some links at the end to reference. When it comes to investing, time and effort go hand in hand.

Warren Buffett has a famous quote on time.  It goes, “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes”.  He even proved his point when betting a hedge fund that he would beat them by investing in an S&P 500 index fund over a 10 year span. Buffett crushed them. If you are not familiar with what hedge funds are, they basically buy and sell regularly. This is a gross simplification of a complex strategy, but it is the opposite of what Warren Buffett generally does.

Now on to effort. Keeping the theme of Buffett, it takes patience and discipline. He has strict guidelines before investing in a company.  If it does not meet his criteria then he is fine with waiting or passing it by. Now ask yourself, how often do you say no to something you want? For most of us, the answer is rarely. It takes a lot of effort to calm our thoughts down enough to put things in perspective. Often times we rationalize, or rationaLIE, to ourselves so that we make it ok to do something.  

The point of this is to not say that Buffett is superior to everyone else with picking stocks.  The opposite is true.  Warren Buffett understands that he can not predict the future and is often times incorrect. When it comes to investing he uses discipline and time to his advantage.

Basically, if you are constantly changing based on current news and trends then you might be gambling more than investing.

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