Why Settle For The Default Button?

Welcome to 2018.  One of our senior clients said, “if I knew I was going to live this long, I would have taken better care of myself.” I believe he was speaking about his physical well-being, as his financial well-being is in great health. Thomas Edison said if we did everything we are capable of doing we would amaze ourselves. Another wise man said to know and not do is not knowing.  

If we truly can amaze ourselves, why do we regularly hit the “default button?”  We accept most of the default settings on our mobile phones, which were set by someone else.  

We accept prepackaged portfolios in our 401(k) plans developed by someone else.  

We accept pre-loaded passwords on many of our devices, which can lead to other problems. Sometimes, we accept Goals and Dreams established by someone else.

Let’s make 2018 the year we make the “important” the “urgent.” Let’s address it with GRIT and passion, a GROWTH mindset, and set big GOALS.  We are coming off some great economic growth. Always fix the roof when it is not raining.

Let’s spend the first quarter of 2018 looking at Three Important “Craig’s Rules.”

  1. Creating our own default buttons. 
  2. Setting goals.
  3. Planning for the unexpected.

So often we just accept what life hands to us.  I believe that comes from three thoughts.

  1. Wanting to fit in
  2. Being loss averse
  3. Or just plain inertia 

I remember when we opened our first office I had a visit from the manager next door. He said it was common practice in town that the head person joined the Kiwanis Club and the second in charge join the Exchange Club.  This was considered common and established practice – if you wanted to fit in. This is the “Default Button.”  No thinking was needed. 

I can never understand why so many people select the "default option" in selecting their investment option in their 401(k).  Really – are you going to let a bureaucrat you’ve never met plan your retirement?

But default buttons can be good. They can motivate us to take action. And we need action to accomplish our goals. Maybe it is time we set our OWN default buttons – much like we do with the ringtone of our mobile phone.

I recommend the book “Nudge” by Richard Thaler – a Nobel Prize winner from The University of Chicago. He is a pioneer in the study of behavioral economics – the study of not so much what we do, but why we do it.

He says we have two systems of thinking.

1.     The Automatic System – gut reaction – You run from the barking dog

2.     The Reflective System – conscious – Maybe the dog is sweet and having a bad day.

The Automatic System says put your 401(k) money in the best performing fund last year. The Reflective System says maybe they put too much risk in that portfolio last year and will pay for it this year with loses. He says we need to establish “nudges” to push us in the correct direction of thinking for yourself, of reinforcing positive actions. Build your OWN default buttons.

There are many decisions that need to be made in life.  Sometimes they are overwhelming and the “default button” is useful. But don’t resort to it out of pure convenience. Customize your default buttons. Planning your financial future needs to be a focus.  Don’t say in your senior years, “if I knew I was going to live this long, I would have spent more time planning my financial life.”

This is not “hocus pocus.”  It is major focus.

Now we use these default buttons to help you achieve your goals. Next, we will start talking about setting goals.