Throughout our lifetimes on this beautiful planet we have developed ways of viewing and reacting to the world that determine our path in life, how hard we work, our relationships and our daily reactions and emotions.
This might sound strange, but finance is, to a great extent, psychology. The way we view the world around us, our decisions and the resulting behaviors whether we buy or sell, are happy with our interest rates or not, feel taken care of by our bank are all driven by the psychology of perception.
Let’s go on a brief journey through the psychology of financial windfalls, the psychology of investing, and the psychology of life. But first and foremost, let’s talk about the psychology of love and warm temperatures.
The mentality of dating
Picture this scenario: You meet someone in a bar while out with friends. A couple days later in the morning you text the person asking if they want to meet in the evening for a drink. You meet up and things are going really well, laughter, sparks, and the feeling that maybe this could go further. You have really hit it off and it feels amazing being with the other person.
The following Friday morning you text them again to see if they are free this weekend. By midday you still have not heard back. You are starting to wonder: were they not interested after all? You have been there before. You have enjoyed a nice conversation, but when asking them out a few days later, they declined saying that it was nice meeting you, but they are too busy or it is not the right the time for them to date.
As the hours go by, you end up checking your phone ever so frequently. You get to a point where the wait is becoming unbearable. You start contemplating whether you should better call. But you don’t want to seem desperate. But then again, maybe you should just wait a bit longer. Sometimes messages take longer to arrive, people are busy. Or maybe they did not get your message at all.
Dammit, you think. This sucks.
Suddenly a message pops up on your phone.
It’s the person telling you that they have indeed been really busy. They ran from one meeting to another and simply couldn’t find the time to reply. They would love to meet you tonight.
You had both found yourselves in the exact same scenario: a text message to meet again that evening.
But while you were in anticipation, getting increasingly nervous about the delay in reply, your love interest was preoccupied with work. Even though they really want to see you, they didn’t find the time to answer.
Even though you both looked at the same message, your realities and interpretations of the moment were very different. You were engrossed in waiting for a reply; especially as you had been there before with someone not as keen as you. The other person was concerned about getting through all the meetings. Their delay had nothing to do with you.
But thankfully realities can change. With both your love interest and you interested your expectations and interpretations of the situation may now change for the positive.
But love is not the only area of life where our perception of the world, of ourselves, and the environment around us is based on how we choose to see the world. It is indeed only us who choose to interpret the world how we see fit. Have you ever looked through the news or listened to arguments only to focus most of your attention on this one article or this one statement that confirms and conforms to what you already believe?
Or take the weather: Sunny and warm leaves some to complain about the heat. They are constantly to hot and find that being active is simply to tough on the body. Others tell you how much they love the warm summer air and all the things they can do outside. They are excited about how much life gets better with the sun rays and the heat adding an extra layer to life’s awesomeness. I am sure you can guess where I stand. I love the sun and the heat.
However, a few years ago as I was living in Las Vegas, I had friends come visit me. The first day of their holiday I still had to work. As I came from the office that evening to meet them, the first thing that I saw was the smiles on their faces: “It’s fantastic. This is absolutely wonderful. We spent all day at the pool. It must be great having these temperatures every day.”
“It surely is if you are on holiday. For us living here,” I explained, “the heat can be quite exhausting and make work really hard. This is the reason everything is air-conditioned. It would simply be too hot to be productive.”
You can even be in the same situation, experiencing the same things, not even be separated by geographical distances or anticipation as with text messages and still see things differently. Another vantage point, a deviating focus on what is important to you or how you want the world to be leaves you experiencing and being affected by the exact same stimulus very differently.
This is where our vantage point in life determines how we interpret the same situation. And this has a major effect on how we feel about our finances and go about investing.