Today Madoff was sentenced to the maximum term of 150 years and his investor victims got their chance to have their say. The stories are tragic. One of the investors Burt Ross, a former mayor of Fort Lee New Jersey, reported to the press outside of court that his loss of money was tragic, but his greatest tragedy was his loss of trust. He went on to draw an analogy between Dante and "The Divine Comdey" theme and the sentence and future. The depths of hell, according to Dante, plagues those who have betrayed trust.
The loss of trust is far more painful than the loss of money, according to Ross and Dante. Ross says that he and other victims he has met share a loss of trust that is pervasive in affecting love and relationships which depend on trust to flourish. So, yes, they have lost money, but they have lost much more.
It occured to me that what Ross didn't say is that he has lost trust in himself--trust that he knows what is right for him. What barometer will he and other victims use to trust again? How will they protect themselves and make themselves feel safe?
Unfortunately, I have known and know many other people who have been dramatically plagued by this loss of self-confidence and inability to trust again. They now manage their own money or they hire managers who have no incentive or conflict of interest in managing their money.
To trust again--themselves and others--they have to acknowledge and forgive their own liabilities and contributions for their financial and emotional loss. Reasons may have included excessive greed, unreasonableness and lack of personal responsibility in doing adequate research. The important lesson is to recognize how powerful these personal dynamics are in motivating us to make inappropriate, and often times, dangerous decisions.
There is no magic here. There is no crystal ball which will enable a wizard to do the impossible; i.e. guarantee big or regular returns. If we fall for that promise, we have bought into a fantasy and self-deceptive ploy. When we give up our involvement, our sense of reasonablenness; we give up ourselves. We then become victims of others and of our own human emotions. Fear and greed are well-known culprits in playing havoc with sound money management.
I believe wholeheartedly in following the "3-R Rule" which has helped me and many others I have counseled and met. The 3 R's: Reasonable, Rewarding and Realistic are trust-worthy and reliable guide-posts for making sound and suitable decisions.
Monday, June 29, 2009
Monday, June 15, 2009
Greatest Fear Turns to Pleasant Surprise
Have you ever had the following experience: your greatest fear turned out to be one of the best things that ever happened to you? Had you not been forced to play out the scenario, you would not have had the opportunity of being so pleasantly surprised.
Unfortunately, this happens all too often. We don’t experiment with something new because we fear the outcome which is a great unknown to us. We’re going through that scenario today with the prospect of making significant changes in our medical system.
The potential change pushes our fear buttons and sets off powerful emotional charges. Our health is so very personal and we want to be in control of our medical care. We want to choose what is best and not deliver that right to our government.
I understand all of the reticence and fear which makes sense when you know what you know, but don’t know what you don’t know. Most people hear nothing but negative facts about other medical systems around the world. They are led to believe that the U.S. medical system is superior and the only one that delivers professional, unlimited and personal care.
It was just four years ago that I had the same reactions. As we were moving to France for a few years I made my husband promise to bring me home to the U.S. if I needed serious medical intervention. I had no trust in any other country’s medical care as I had only heard the fear mongering about socialized medicine of the last decade in the American media.
That mind-set led me to being closed and prejudiced in my thinking of what might be possible. I am happy to say that I was pleasantly surprised and humbled by my medical care while living in France. In fact, I wish I could do something to bring that same level of care and experience to the U.S at the same cost to me here as there. The humanity and sense of individual care that I feared would be lacking outside the U.S. turned out to be very much present--everything that the U.S. has lost in recent years.
I was treated with humanity, expertise and great individual care. From mammograms to dental check-ups, I had fabulous care and experiences for a fraction of the equivalent cost here in the USA. My personal experience led me to conducting qualitative research among an ex-pat community to see if others shared in my positive sentiments. Unanimously, I found others singing the praises of their medical care. There were no long waits for procedures; they had a thorough and lengthy doctor visit covering all of their concerns; they were given whatever tests and services they requested without question.
We hear of all kinds of catastrophes in the press about other countries where people are victimized by lack of choice and an inferior delivery system. Some of those cases may indeed be valid, but I cannot say that I or dozens of people I surveyed had the same experience. Most said, in retrospect, that they were glad they happened to be in France when they found out that they had cancer or that they had a heart attack.
I realize I am comparing the consistently number one medical system in the world, the French system, to that of the US which is consistently ranked in the teen’s but I make the case nonetheless. I have often heard politicians ask consumers if they would like to give up what they have in the U.S. and risk having the inferior system such as the English, French or Canadian system. So the next time a fear-mongering politician asks me if I want to risk having a medical system like that in England or Canada, I’ll gladly respond affirmatively for the French System. Yes, please. I’d be happy to receive the highest level of healthcare at a fraction of the cost I now pay with the current health care system here at home in the USA!
Unfortunately, this happens all too often. We don’t experiment with something new because we fear the outcome which is a great unknown to us. We’re going through that scenario today with the prospect of making significant changes in our medical system.
The potential change pushes our fear buttons and sets off powerful emotional charges. Our health is so very personal and we want to be in control of our medical care. We want to choose what is best and not deliver that right to our government.
I understand all of the reticence and fear which makes sense when you know what you know, but don’t know what you don’t know. Most people hear nothing but negative facts about other medical systems around the world. They are led to believe that the U.S. medical system is superior and the only one that delivers professional, unlimited and personal care.
It was just four years ago that I had the same reactions. As we were moving to France for a few years I made my husband promise to bring me home to the U.S. if I needed serious medical intervention. I had no trust in any other country’s medical care as I had only heard the fear mongering about socialized medicine of the last decade in the American media.
That mind-set led me to being closed and prejudiced in my thinking of what might be possible. I am happy to say that I was pleasantly surprised and humbled by my medical care while living in France. In fact, I wish I could do something to bring that same level of care and experience to the U.S at the same cost to me here as there. The humanity and sense of individual care that I feared would be lacking outside the U.S. turned out to be very much present--everything that the U.S. has lost in recent years.
I was treated with humanity, expertise and great individual care. From mammograms to dental check-ups, I had fabulous care and experiences for a fraction of the equivalent cost here in the USA. My personal experience led me to conducting qualitative research among an ex-pat community to see if others shared in my positive sentiments. Unanimously, I found others singing the praises of their medical care. There were no long waits for procedures; they had a thorough and lengthy doctor visit covering all of their concerns; they were given whatever tests and services they requested without question.
We hear of all kinds of catastrophes in the press about other countries where people are victimized by lack of choice and an inferior delivery system. Some of those cases may indeed be valid, but I cannot say that I or dozens of people I surveyed had the same experience. Most said, in retrospect, that they were glad they happened to be in France when they found out that they had cancer or that they had a heart attack.
I realize I am comparing the consistently number one medical system in the world, the French system, to that of the US which is consistently ranked in the teen’s but I make the case nonetheless. I have often heard politicians ask consumers if they would like to give up what they have in the U.S. and risk having the inferior system such as the English, French or Canadian system. So the next time a fear-mongering politician asks me if I want to risk having a medical system like that in England or Canada, I’ll gladly respond affirmatively for the French System. Yes, please. I’d be happy to receive the highest level of healthcare at a fraction of the cost I now pay with the current health care system here at home in the USA!
Monday, June 01, 2009
Using Empathy As An Asset
I just read David Brook's column, "In Defense of Empathy" and found it very insightful and germane to so many of life's critical decisions. His basic premise is that empathy is not only potentially helpful in making suitable decisions but an absolute necessity. His hypothesis is that people without emotional empathy cannot make sensible decisions because they don't know how much anything is really worth.
For David Brooks, it's whether Sonia Sotomayor is able to understand and manage her own emotions in the decision-making process that will predict whether she will be a prudent and judicious member of the Supreme Court. It will be her ability to empathize the specific context of each case while valuing gradual change, small steps and modest self-restraint.
It's both my experience and belief that empathy is a critical component in effectively dealing with life's decisions if we want to produce satisfactory and personally relevant consequences. This is true in most contexts--not just the judicial system. For example in my work dealing with the psychology of prudent money management, I've discovered that those individuals who understand how to effectively manage their emotions make more appropriate and satisfactory decisions. They not only accumulate more wealth, but they are also more satisfied in how they use their wealth.
This prudent and effective money management process is developed over time and with sufficient self-analysis, reflection and focus. The financial decisions are made within the context or framework of what's preferable, meaningful and most advantageous both in the short and long-term.
I totally agree with David Brooks that emotional empathy should be defended. "It's not whether judges rely on emotion and empathy, it's how they educate their sentiments within the discipline of manners and morals, tradition and practice." He understands that emotions can be a wise guide in some circumstances while a deceiver in others and what it takes to make it an asset.
For David Brooks, it's whether Sonia Sotomayor is able to understand and manage her own emotions in the decision-making process that will predict whether she will be a prudent and judicious member of the Supreme Court. It will be her ability to empathize the specific context of each case while valuing gradual change, small steps and modest self-restraint.
It's both my experience and belief that empathy is a critical component in effectively dealing with life's decisions if we want to produce satisfactory and personally relevant consequences. This is true in most contexts--not just the judicial system. For example in my work dealing with the psychology of prudent money management, I've discovered that those individuals who understand how to effectively manage their emotions make more appropriate and satisfactory decisions. They not only accumulate more wealth, but they are also more satisfied in how they use their wealth.
This prudent and effective money management process is developed over time and with sufficient self-analysis, reflection and focus. The financial decisions are made within the context or framework of what's preferable, meaningful and most advantageous both in the short and long-term.
I totally agree with David Brooks that emotional empathy should be defended. "It's not whether judges rely on emotion and empathy, it's how they educate their sentiments within the discipline of manners and morals, tradition and practice." He understands that emotions can be a wise guide in some circumstances while a deceiver in others and what it takes to make it an asset.
Tuesday, May 26, 2009
Wealth Inside Out
Each of us has our own definition of wealth--what it feels like, looks like. We might even be able to describe it in financial terms; i.e. how much money we have, how much we want, how much we need.
Would you be able to describe it? Would your definition include external factors and trappings such as net-worth, number of personal dwellings, ability to fulfill your dreams, have financial security? Would you describe your feelings, attitudes and beliefs about your wealth?
Whenever I've asked individuals, families and/or groups to think about their personal wealth, I've found a common reaction and initial response. Most people of all levels of financial wealth are mystified and a bit perplexed. They really have to think about it. More perplexing is how they feel about it. They often reiterate the question aloud, "How do I feel? Do I feel wealthy? Hmm. That's a very good question. I'll have to think about it."
As an example, having and taking the time to enjoy a favorite hobby; spending relaxing time with family and close friends; finally engaging in a wish-list hobby could be ways that we feel wealthy.
It's obviously a complex issue which requires some contemplation, reflection, soul searching. Yet, the financial industry of which I am familiar, defines wealth in numerical terms for the most part. It's how we've become accustomed to judging our financial advisers; i.e. how much did I make? how are they performing?
Wouldn't it be more meaningful if we could describe how we wanted our money to serve our life's activities and purposes so that we felt wealthy inside and out? For me and the many people I've known, the answer is unanimously "yes".
So let's always think about our wealth holistically and be aware of wealth not only from what it might look like from the outside but how it will serve our very core of what matters most to us in life.
I'd enjoy hearing your ideas and definitions of what "being wealthy" means to you personally.
Would you be able to describe it? Would your definition include external factors and trappings such as net-worth, number of personal dwellings, ability to fulfill your dreams, have financial security? Would you describe your feelings, attitudes and beliefs about your wealth?
Whenever I've asked individuals, families and/or groups to think about their personal wealth, I've found a common reaction and initial response. Most people of all levels of financial wealth are mystified and a bit perplexed. They really have to think about it. More perplexing is how they feel about it. They often reiterate the question aloud, "How do I feel? Do I feel wealthy? Hmm. That's a very good question. I'll have to think about it."
As an example, having and taking the time to enjoy a favorite hobby; spending relaxing time with family and close friends; finally engaging in a wish-list hobby could be ways that we feel wealthy.
It's obviously a complex issue which requires some contemplation, reflection, soul searching. Yet, the financial industry of which I am familiar, defines wealth in numerical terms for the most part. It's how we've become accustomed to judging our financial advisers; i.e. how much did I make? how are they performing?
Wouldn't it be more meaningful if we could describe how we wanted our money to serve our life's activities and purposes so that we felt wealthy inside and out? For me and the many people I've known, the answer is unanimously "yes".
So let's always think about our wealth holistically and be aware of wealth not only from what it might look like from the outside but how it will serve our very core of what matters most to us in life.
I'd enjoy hearing your ideas and definitions of what "being wealthy" means to you personally.
Wednesday, May 13, 2009
Blind Spots in Our Money Personalities
Blind Spots in Our Money Personalities
We all have blind spots in our personalities that serve as barriers to seeing what is real, reasonable and rewarding in how we view our particular circumstances. These blind spots are so much a part of our personalities that we are literally unable to perceive them and their hidden but powerful influence in creating our familiar and frustrating scenarios and consequences.
The problem with blind spots remaining unconscious is that they lead to black holes that we can’t climb out of easily. We all know people who are constantly facing the same problems, making the same mistakes and never learning from their past mistakes and misfortunes. They just can’t seem to see how they could change their financial and personal circumstances.
I have seen some very common issues and themes over the years. In studying how people attribute the causes of their financial successes and failures, it becomes obvious that the clarity of the perception of cause and effect accounts for the ultimate success. In other words, those who didn’t experience handicapping blind spots to their role in shaping their realities were far more likely to succeed. Those who were blinded by the role that their attitudes, beliefs and behaviors played in shaping their realities were continually disappointed and frustrated by their financial circumstances and distress especially in challenging financial times.
People, who could see the direct influence of their own efforts, beliefs, and behaviors as shaping the future event, were able to successfully change the outcome so that they achieved success. Success could be developing a successful financial plan, providing well for family, being happy at work, living within one’s means.
In these recessionary times, just as in the last recession of 1991 and the market downturn in late 1999/early2000, consumers have had a wake up call that prompted their desire to change their financial behavior and eliminate the stress that they were enduring.
They no longer could be blinded by their belief that the market is always a benevolent parent that will provide growth and windfall gains for them. Nor are they able to live off their credit which postpones facing the reality that they can’t afford themselves and their false lifestyles. They are no longer able to turn a blind eye to what’s real and are forced to become aware and deal with their circumstances or fall deeper into the black hole.
Unfortunately, it’s human nature to see what we want to see and hear only what we want to hear. The pain of changing has to be less than the pain of remaining the same for us to transform how we deal with life’s opportunities and events.
Blind spots don’t miraculously disappear; it takes consistent vigilance to make sure they’re not acting as barriers to achieving a more rewarding life. In time with consistent focus and efforts in making adjustments to our sabotaging beliefs and behaviors, we begin to see our role in creating consequences more accurately. If we don’t know who we are and how we create our realities, we’re blind to our abilities and opportunities.
We all have blind spots in our personalities that serve as barriers to seeing what is real, reasonable and rewarding in how we view our particular circumstances. These blind spots are so much a part of our personalities that we are literally unable to perceive them and their hidden but powerful influence in creating our familiar and frustrating scenarios and consequences.
The problem with blind spots remaining unconscious is that they lead to black holes that we can’t climb out of easily. We all know people who are constantly facing the same problems, making the same mistakes and never learning from their past mistakes and misfortunes. They just can’t seem to see how they could change their financial and personal circumstances.
I have seen some very common issues and themes over the years. In studying how people attribute the causes of their financial successes and failures, it becomes obvious that the clarity of the perception of cause and effect accounts for the ultimate success. In other words, those who didn’t experience handicapping blind spots to their role in shaping their realities were far more likely to succeed. Those who were blinded by the role that their attitudes, beliefs and behaviors played in shaping their realities were continually disappointed and frustrated by their financial circumstances and distress especially in challenging financial times.
People, who could see the direct influence of their own efforts, beliefs, and behaviors as shaping the future event, were able to successfully change the outcome so that they achieved success. Success could be developing a successful financial plan, providing well for family, being happy at work, living within one’s means.
In these recessionary times, just as in the last recession of 1991 and the market downturn in late 1999/early2000, consumers have had a wake up call that prompted their desire to change their financial behavior and eliminate the stress that they were enduring.
They no longer could be blinded by their belief that the market is always a benevolent parent that will provide growth and windfall gains for them. Nor are they able to live off their credit which postpones facing the reality that they can’t afford themselves and their false lifestyles. They are no longer able to turn a blind eye to what’s real and are forced to become aware and deal with their circumstances or fall deeper into the black hole.
Unfortunately, it’s human nature to see what we want to see and hear only what we want to hear. The pain of changing has to be less than the pain of remaining the same for us to transform how we deal with life’s opportunities and events.
Blind spots don’t miraculously disappear; it takes consistent vigilance to make sure they’re not acting as barriers to achieving a more rewarding life. In time with consistent focus and efforts in making adjustments to our sabotaging beliefs and behaviors, we begin to see our role in creating consequences more accurately. If we don’t know who we are and how we create our realities, we’re blind to our abilities and opportunities.
Thursday, May 07, 2009
Trade-Offs--How We Cope and Often Prosper
Trade-Offs--How We Cope and Often Prosper
I have been waking up lately with a gnawing feeling that something is missing--kind of an empty feeling--an emotional ache that just won't quit. I finally realized that it's spring which is not as obvious to the senses in
We have had the pleasure of living in two wonderful worlds until last fall when we decided to sell our lovely French home as it was timely and financially fortuitous. The angst of that decision was that while we gained financially, we lost a great deal emotionally.
In my work as a psychologist helping others understand their attitudes and feelings about money and what they do with money as a result, it made perfect sense to me why we were feeling as we were and how to get through it so we did the right thing financially for ourselves.
Psychologists have identified a phenomenon known as “cognitive dissonance” that helps to explain what people do and experience in making difficult choices. Your brain doesn’t like dissonance, so it does what it has to do to resolve it. In some cases, people make the decision with a lot of reflection and make peace with the choice; others impulsively take action to rid themselves of the angst of the dissonance or conflict while others may not take action at all putting it off so they don’t have to deal with it at the moment. In other words, you protect yourself from feeling any anxiety or discomfort from inconsistencies between any beliefs you have and any actions you take.
In my work, I’ve seen the powerful impact of this phenomenon in explaining why some people say one thing and do another like taking risk when they say they can’t tolerate it; live way beyond their means while they financially can’t afford to do so; spoil their children and give them a false sense of entitlement because they don’t want to discipline them. In other words, they don’t walk their talk and live the life they say they really want to live or behave in a way that reflects what they say they want and value.
These tough economic times are a great opportunity to successfully deal with cognitive dissonance and learn that the defense mechanism of rationalization can be both friend and foe. It helps us in allowing ourselves to resolve conflicts, make the tough choices which may not give us as much immediate satisfaction but will pay off in the long-run. On the other hand, it certainly can sabotage us in allowing us to deny and rationalize why we don’t have to act and face feelings of discomfort.
So it goes in life, we are confronted with a series of compromises and making difficult choices. Being aware of and resolving both the emotional and financial issues involved with the choices, helps to assure that we won’t allow our defense mechanisms to sabotage what is ultimately in our best interest. Bottom line: To thine own self be true.
Monday, May 04, 2009
What We Expect Shapes What We Do
What We Expect Shapes What We Do
The daily fluctuations in the marketplace only reinforce our feelings of uncertainty of what's real and what to expect. Is it a bull market or a bear market rally? If you listen to CNBC daily as I do, you're not alone in being perplexed as to how to answer that question.
Today the CNBC pundits had to admit that they believed there was a general feeling that things were looking rosier and more optimistic. As one of them stated "there is just something in the air that feels different". He followed his statement pondering the chicken and egg issue.
Psychologists ponder cause and effect all of the time--trying to look retrospectively about why a certain phenomenon exists. We look at events in time and try to link stimulus and response or cause and effect. We also look at trends, norms, habits and acknowledge the power of reinforcement over time for why they stick around.
What we know is that we're all driven and motivated by reward. The more we're rewarded for a particular behavior or attitude, the more likely we'll repeat it. So it makes sense that Americans are clinging to any good news and feeling like life will be a lot rosier.
Just think about how Americans have been conditioned to bounce back, to believe that economic times will be better. We have lived in these extraordinary times of prosperity and optimism--at least in terms of wealth and the ability for the average American to have a piece of the good life.
In retrospect, reality becomes a lot more clear as consumers can see that these perceptions were not based on reality but perceived subjective reality--or what they wanted to believe. So what are we to believe about what we see today to explain what's really driving the marketplace's upturn--valid reasons for being optimistic or the subjective yearning for feeling optimistic or wanting it to be true?
Why does it matter? If we look at today in perspective of a broader and longer-term view, it becomes more critical that we really understand what accounts for the expectations and how valid they are.
We can all be optimistic. As Warren Buffet said today "How can we bet against Americans? It doesn't make sense that our economy won't come back. But he put that into a longer-term perspective. He was optimistic that future generations will have even better lives than we know today.
So, we're reinforced to cling to our enthusiasm and positive perceptions for our future prosperity. That's a good thing as long as people can afford that perception. It backfires in the short-term because it is often used as a rationale to avoid making tough choices that all will be OK. However, if they use it as a rationale to defend their current unrealistic and unreasonable actions just because they're more rewarding then they are only postponing the inevitable.
I'm stunned by the multitude of people that I meet who refuse to perceive this truth as reality. They still cling to what was true before this bust. They are still holding on to real estate purchases that no longer make economic sense rationalizing that they'll double their investments. They won't give up their short-term rewards to assure their future financial well-being. Obviously, this is a short-sighted and unrealistic strategy.
On a positive note, I've also met many people who got the wake-up call and took the action to make radical changes. The ability to listen and take information and advice to heart is a key difference. Education has a lot to do with it--self-education.
The daily fluctuations in the marketplace only reinforce our feelings of uncertainty of what's real and what to expect. Is it a bull market or a bear market rally? If you listen to CNBC daily as I do, you're not alone in being perplexed as to how to answer that question.
Today the CNBC pundits had to admit that they believed there was a general feeling that things were looking rosier and more optimistic. As one of them stated "there is just something in the air that feels different". He followed his statement pondering the chicken and egg issue.
Psychologists ponder cause and effect all of the time--trying to look retrospectively about why a certain phenomenon exists. We look at events in time and try to link stimulus and response or cause and effect. We also look at trends, norms, habits and acknowledge the power of reinforcement over time for why they stick around.
What we know is that we're all driven and motivated by reward. The more we're rewarded for a particular behavior or attitude, the more likely we'll repeat it. So it makes sense that Americans are clinging to any good news and feeling like life will be a lot rosier.
Just think about how Americans have been conditioned to bounce back, to believe that economic times will be better. We have lived in these extraordinary times of prosperity and optimism--at least in terms of wealth and the ability for the average American to have a piece of the good life.
In retrospect, reality becomes a lot more clear as consumers can see that these perceptions were not based on reality but perceived subjective reality--or what they wanted to believe. So what are we to believe about what we see today to explain what's really driving the marketplace's upturn--valid reasons for being optimistic or the subjective yearning for feeling optimistic or wanting it to be true?
Why does it matter? If we look at today in perspective of a broader and longer-term view, it becomes more critical that we really understand what accounts for the expectations and how valid they are.
We can all be optimistic. As Warren Buffet said today "How can we bet against Americans? It doesn't make sense that our economy won't come back. But he put that into a longer-term perspective. He was optimistic that future generations will have even better lives than we know today.
So, we're reinforced to cling to our enthusiasm and positive perceptions for our future prosperity. That's a good thing as long as people can afford that perception. It backfires in the short-term because it is often used as a rationale to avoid making tough choices that all will be OK. However, if they use it as a rationale to defend their current unrealistic and unreasonable actions just because they're more rewarding then they are only postponing the inevitable.
I'm stunned by the multitude of people that I meet who refuse to perceive this truth as reality. They still cling to what was true before this bust. They are still holding on to real estate purchases that no longer make economic sense rationalizing that they'll double their investments. They won't give up their short-term rewards to assure their future financial well-being. Obviously, this is a short-sighted and unrealistic strategy.
On a positive note, I've also met many people who got the wake-up call and took the action to make radical changes. The ability to listen and take information and advice to heart is a key difference. Education has a lot to do with it--self-education.
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