The Experience Loop

By Geoff Schaefer

Geoff is a Wealth Advisor with Intergy Private Wealth. He writes for The Steadfast Fiduciary to help people live with an abundant heart, open mind, and boundless generosity.

March 8, 2024

“Your personal experiences with money make up maybe 0.00000001% of what’s happened in the world, but maybe 80% of how you think the world works.”
-Morgan Housel

If you have young children, you likely understand the importance of routines.  Kids thrive on routines and parents’ sanity is often saved by routines. One example for us is bedtime. The kids will take a bath, they’ll put on pajamas, and brush their teeth.  Then we’ll read a couple books, say a prayer together, and then talk for a few minutes.  Most of the time that goes smoothly, and we’ll say goodnight and lights out.  From the time our kids were infants, we’ve had some semblance of this routine to the point where a bath for them triggers a near Pavlovian response that it is time to slow down and get ready for bed.  As they grow older and we have more late nights, more trips, and they experience more they will know that showers are for whenever you are dirty no matter the time of day, not just a nighttime ritual.  For now though, their experience has shaped their view to bath equals bed and their future experiences will no doubt change that. This extends far beyond bedtime and into how we instill our family values into them, how they process their experiences and make sense of new information they learn. All of this is viewed through the lens of prior experience.

Now I know all of us reading through this can easily distinguish bedtime from bathtime, but consider your view on giving, spending, saving, and investing.  How do you decide to use debt or give money to family?  Are you judgmental of other’s financial decisions because it wasn’t what you would do?

-Maybe you read a thread on Twitter on how Bitcoin is going “to the moon”.

            Odds are the person saying that has positive experiences buying cryptocurrencies.

-Perhaps you share a post from a religious financial podcast host.

            There is a decent chance you  experienced the freedom paying off a large amount of consumer debt can bring.

-Maybe you’ve read a book that highlights how real estate is the best way to build wealth tax efficiently?

            The author likely did well in real estate and perhaps was fortunate enough to experience a low interest rate policy.

-Someone tells you not to give money to a friend, family or charity that may need it?

            Maybe they have never experienced need and have been genuinely blessed by the generosity of another.

The point in those examples is to highlight financial beliefs that you may encounter every day.  None of these are inherently wrong or right. The suitability of any of these suggestions could vary wildly from person to person. Financial planning is largely subjective, and the understanding of our own biases must be acknowledged.

Once we understand how our experiences shape our views on money, we can then begin planning and let our goals and values drive our decisions rather than the sum of our experiences.

Say you have a goal to run a mile a day. The first day you go out to run, you come out to a foot of snow that fell overnight. You go back inside and try again tomorrow, more snow.  The first week of this goal, all snowed in. Now, we get to start the second week.  Will you make your decision to get your running shoes on based on your experience last week (lots of snow)?  Perhaps go back to why you have this goal.  You want to love a long life. You want to be around to spend time with your grandkids and to be healthy and fit as long as possible. That is a value you can anchor to. Based on that, plan to run.  In this scenario, maybe you get some gear that allows you to run in inclement weather. Perhaps you invest in a treadmill to run indoors because the weather is that much of a factor where you live.  Rather than allowing your first couple of runs being cancelled (your experiences) to dictate your actions, you allow your values to do that. Something no doubt easier said than done.

What does this look like practically?

  1. Don’t invest before you plan.  I often hear people say, “I want to own real estate so I can have financial flexibility.”  Often what they mean is “I heard real estate can make a lot of money so I can have more time.” So, you want more time? Perhaps before deciding if real estate, or your company’s stock, or starting a business is the right choice for you, determine what you are actually wanting to accomplish first.  What is it that you truly value? Make a plan and then invest in line with it.
  2. Don’t dismiss other’s actions as foolish simply because it is not what you would do.  How many times have you heard, “Wow, she bought that? How stupid! You know how much that cost?”  Is the decision the same one you would have made?  Obviously not, that is why you are saying such things.  Does that investment or expenditure fall in line with what that person values? Perhaps! We have no idea the situation most people are in or where they came from.  A good example of this is Giannis’s shoe collection.  The Greek Freak owns over 4,000 pairs of shoes.  This seems excessive to us, but to someone who grew up sharing one pair of basketball shoes with his two brothers, perhaps it simply is an expressive way to say, I’m ok. He does not need to share his shoes anymore. In the famous words of Ted Lasso (originally quoted by Walt Whitman), “Be curious, not judgmental.”
  3. Don’t take the blanket advice of others.  General advice and anecdotes are not for you.  In some cases, they may align. In many ways, it is simply a distraction from what you are trying to accomplish.  If you value the ability to give more money away and to coach your kid’s soccer team, should you be looking to add more time commitments through a new business or investment that directly contradicts that?  If you are earning enough for that goal, why do you need more from your new LLC or real estate enterprise? What’s the point?  Your journey is yours and the steps others are taking on their journey should not be generally and casually applied to your plan.
  4. Do self-reflect.  What beliefs on investing, spending, debt, and giving do you have? Are you open to learning alternatives methods or perspectives?  I’m not suggesting you change everything you do and become so open minded your brain falls out, but perhaps there are a lot of people out there successfully achieving their financial planning in different ways.
  5. Do be open to change.  Change is the only constant in planning.  Your future self will likely have a completely different set of goals and desires than you do today.  Many of your values will remain the same, but how those manifests into physical goals will likely change.  This is, in large part, due to more experiences.  When planning, the idea that the first draft of your financial plan will not be the last is key to come to terms with. When we know change is inevitable, we are less flustered when it comes our way.

Experiences are important and our experiences every day help shape us into the person we are and who we will become.  However, we are not omniscient.  We cannot experience all this world has to offer and even fathom understanding what that means when viewed through the mind of each individual on earth.  Money is a tool that aligns capital with values.  The sooner we can all focus on the values we hold dear, the sooner we can align ours properly.  With that comes the understanding that your alignment may mean different financial decisions than that of someone else. We are shaped by our experiences, but we must be led by our values.

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