The biggest threat to your financial well-being is yourself. This fact is also true in every area of life, we tend to be our own worst enemy.
The problem is that we all have an ancient brain that is not designed to make sense or make us happy, but it is designed to protect us from pain and help us gain pleasure.
Reality is not what is important when making important financial decisions, but it is our beliefs that are in control. Beliefs are feelings of total certainty about what something means. If we can influence and control our beliefs, then we can make better decisions that are more aligned with reality.
How can we control or bypass our beliefs? We need to put in place a system of rules, checklists, and procedures to protect us from ourselves. The criteria is basically a set of questions that we can use to examine our beliefs and more objectively assess the situation. The number one ingredient that makes this process work is discipline which basically means sticking to your system in a responsible manner.
Psychology either makes you or breaks you, so it’s really important to have a working system in place designed to keep you focus on your goals.
Life is 80% Psychology, 20% Mechanics according to Tony Robbins.
Do you have flexibility to change your approach, or is your mind fixed on your beliefs? Find people who disagree with you to find out what their reasoning is. Ask yourself the question: How do I know I’m right?
As Ray Dalio says, “If you know your limitations, you can adapt and succeed. If you don’t know them, you’re going to get hurt”. This means you need to be open-minded enough and have the humility to be able to see and understand your own shortcomings so you can plan for them.
Humans have a tendency to believe that they are better than they really are. So by being honest and admitting to yourself that you are not special, you can have an advantage to seek, validate, and learn beyond what you think is right.