We are taught that it’s important to “get the answer” right. With finance, free yourself from that restriction!
When it comes to money, there is no place for perfection. Everything is shifting and changing constantly. You never will have 100% of the facts before you take action. History alone has that luxury.
Therefore, you must develop a framework to make educated decisions based on the limited information available. This is what I refer to as the magical power of guessing. It’s an essential habit to develop if you want to give your finances wings.
However, before you can capitalize on this principle, you have to weed your mental garden from the corrosive effects of one tiny thought. The seemingly benign phrase: “I don’t know.”
This thought plagues your everyday thinking. I have come to the conclusion that “I don’t know” is really code for: I don’t want to know or I’m afraid to know. Let me illustrate with a short story.
Sara* is invited to a birthday dinner. I asked her to guess how much it’s going to cost her. She replies, "I have no idea! We will split the check. How can I know what everyone else will order?"
In reality, you can come up with an answer that has a very high probability of being accurate in less than a minute. You only have to do two things. First, start asking questions.
Do you know the restaurant? No
Do you know what type of outfit most people will be wearing? Yes. Dressy
Is it a sit down dinner? Yes
Do most of the people drink? Yes
The second step is to start guessing. Not guessing blindly, but making an educated guess that you believe to be at least 80% + accurate.
For a fancy dinner in NYC, my guesstimate is that the main course will cost around $25. Lets assume that every person will order three $15 dollar drinks. The appetizers will cost around $15 per head. Lastly, you will also need an additional $35 to cover the tip and the birthday girl’s meal. So, the total per head will be about $120 per person.
Now let’s compare Sara’s experience to Tara.
Tara also “didn’t know” how much the party would cost, but did not try to make an educated guess. “How can you plan for these kinds of things?” She reflects, “I just go where the night takes me. I really wouldn’t want to live any other way.”
I hear this often from my clients. Translation: What’s planned isn’t fun. However, let’s see who had more fun at the birthday dinner.
Sara and Tara arrive at the party. When the waitress stopped by for the tables drinks, a slew of fancy cocktails were ordered and menus were passed out.
Sara perused the menu and thought about what dishes to select.
Tara looked over the menu, but instead of her taste buds salivating, she’s consumed by a sinking feeling. “This is going to be expensive!” Mentally, she tries to shakes it off by reminding herself, “you only live once!” So, she orders another glass of champagne to drown her increasing anxiety.
They both went to the same party, but in the end, who do you think had more fun?
If you employ the power of guessing, your financial stress levels will be dramatically reduced. To grab hold of this super power, be aware of every time you say, “I don’t know.” Ask questions, and take an educated guess that you believe will be 80% correct. The bliss will follow.
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