Hope Can Be Bad for Your Financial Health

January 22, 2009 by  
Filed under Money and Behavior

Is our new President making you hopeful for a better financial future?  Good for you.  But I recommend that you not make any financial decisions until that hope subsides.

I have a small sticker on my office door that welcomes visitors with the phrase “I found the cure for hope.”  It’s one of those cute sayings that’s supposed to be funny and painfully true at the same time.

My day job is the law.  In my business, decisions based on hope rather than hard truth often turn out to be very bad decisions.  Helping clients understand that can be difficult.  I probably should have a larger sign over my door that says “All ye who enter this office, please check your hope at the door.”

People who know me well (or who have read a lot of my writing) would say I am a cynic and skeptic.  Fair enough.  But I am not opposed to hope as a human emotion.  It can sustain us in difficult times.  Even I was amazed at the outpouring of hopeful giddiness at the Obama inauguration.  At the same time, I watched the stock market experience one of its biggest drops in weeks.  Apparently, most investors either were not Obama fans or decided to leave hope entirely out of their investing decisions.  I think it was the latter and that’s probably the way it should be. 

Concerns about your financial health and your money should not dictate all of your decision making.  Otherwise, you could end up being miserable for extended periods of time.  On the other hand, unless you have made an affirmative choice to remain oblivious and uncaring about the state of your money, you also need the ability to put your hope aside temporarily when thinking about your finances.  To give you some examples:

“I hope I can find some extra money in my budget to make this new car payment.”

“I hope my income goes up faster than my adjustable mortgage interest rate.”

“I hope my tax refund will be large enough to pay for this plasma TV.”

“I hope I win the lottery this week.”

All of these hopeful thoughts are indicators of a bad decision about to be made.  I’m sure you can think of many more examples in your own life.

So Mr. ToughMoneyLove will leave you with this parting message:  Enjoy the warm glow of your sunny disposition, your optimism, and your overflowing hope for a better future.  But when you are ready to make a financial decision, ditch it all for the hard truth.  That way, your vision of your money future has a better chance of becoming reality.

Image credit:  Ahmed Al-Shukaili

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2 Responses to “Hope Can Be Bad for Your Financial Health”
  1. Lou says:

    the market didn’t drop during the inauguration be/c small investors, ordinary people, were selling. Institutional investors – not “most investor” -(think gamblers & manipulators – think Madoff) were/are scared of the restrictions on greedy manipulation that are coming & they were profit-taking after a small rally.

    We’ve got a recession – not a depression. Things are ambiguous, not terrifying or hopeless. If you are a small, regularly contributing investor there’s not much reason to do anything differently. If you are an arrogant Wall St high-roller, that’s different.

    I wonder if hope is the problem, really? Perhaps the underlying issue is trust.

  2. MasterPo says:

    I agree.

    While a positive attitude helps, smiling won’t keep the Titanic from sinking.

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