Second to running a small business, the most I've ever learned at work was my experience working at a boutique financial planning firm. I learned tons of ratios and formulas, got good at creating excel spreadsheets, and took multiple classes on insurance. Economists made visits to our office to give us their economic predictions and how that would impact the financial markets. So I learned how to distill and communicate that dense information into digestible pieces. I learned how to go about doing all the financially prudent things one ought to be doing; that alone is a wealth of knowledge that I'm forever grateful for stumbling into.
Another valuable takeaway was learning how to think like a financial planner. An excellent financial planner had to be able to separate the signal from the noise, read between the lines, and anticipate issues. Part of that process was learning how to think about all the ways someone's financial life could get destroyed. Being able to look at a person's financial life from that angle was a big reason why we did our job so well. We anticipated failure and talked clients through their contingency plans to prevent loss or to repair it. We managed expectations by reminding folks that life will eventually punch you in the face. We imagined that around the metaphorical corner, a piano would fall from the sky and damage our client's financial lives.
We would imagine things like the financial impact of a chronic illness, what not being able to afford a variable mortgage payment meant, how to deal with having a promising career in entertainment grind to a halt, or one of the most expensive financial disasters: divorce. I learned how to ask our clients specific questions that would help unearth potential risk factors outside of our control. We asked for details about family members, from what they did for work to how their health was, and if they could predict the likelihood that they'll have to support any of their family members financially.
If you've ever considered your worst-case financial scenarios and have been motivated to try to prevent them, you understand the power of pessimism.
The power of negativity
Positive psychology came onto the scene in the 1950s. The term "positive psychology" first appeared in *Motivation and Personality*, a book published in 1954 by the psychologist Abraham Maslow. The phrase appears in the title of a chapter and states, "The science of psychology has been far more successful on the negative than on the positive side; it has revealed to us much about man's shortcomings, his illnesses, his sins, but little about his potentialities, his virtues, his achievable aspirations, or his full psychological height. It is as if psychology had voluntarily restricted itself to only half its rightful jurisdiction, and that the darker, meaner half." Maslow was concerned with answering the question, "Why is it that we are all born with limitless potential, yet few people fulfill those possibilities?" He wanted to explore psychology that entirely focused on the dysfunctional. He wanted to look closely at those who were fully realizing their human potential.
Since Maslow's books, the popularity of positive psychology has grown into a full-blown psychological movement. It's adapted into areas of business management, the armed forces, and in mainstream popular culture. Countless studies tout the power of having a positive attitude. However, over the years, positive psychology has gotten quite diluted that this concept it's often simplified and distilled down to merely "positive thinking."
Positive thinking is a great way to feel good for most of the general population. I enjoy feeling good, and I enjoy good, posi vibes. But good, posi vibes has a time and a place, which is not all the time, everywhere. Somehow, and I guess I shouldn't be too surprised, positive thinking, like motivational Instagram posts, get overused to avoid negative thoughts and feelings. And while in the moment, positive thinking feels good, avoiding negative thoughts and feelings can have unintended consequences. It can prevent us from relieving our negative thoughts because we don't give ourselves the space to bring them to the surface and process them. With continued avoidance, there is a risk relegating that negativity into your subconscious, where it will continue to operate behind the scenes. Besides the potential of allowing our negative feelings to burrow into our subconscious, a false sense of optimism might prevent us from taking necessary actions that would help us feel a more genuine sense of ease. It might also set us up for failure because we overestimate what's possible and probable.
When it comes to money and our financial lives, this rings especially true. A typical example I see is putting off savings today because of an unwarranted optimism about one's ability to earn more money in the future. In other words, I'll save for retirement when I make more money in some nebulous, optimistic future. Instead of allowing ourselves to sit in the disappointment of not saving enough money to be financially independent, we push those feelings of fear, inadequacy, and uncertainty aside and slam down a cold glass of optimism that the future is bright. In reality, a hot, thick glass of pessimism and fear may be what you need to motivate you to come up with a plan today.
Invite negativity in
If you have issues with anxiety or PTSD and the thought of inviting negative feelings in sounds triggering and overwhelming to you, you might want to seek professional support when diving into these feels. For the vast majority of us, our fears, anxieties, and negative feelings are challenging, but we can learn how to sit with these feelings, tolerate them and then productively address them.
By learning how to invite in our negative thinking, we can develop a pragmatic and practical way to address our fears. If you already let negativity in, but it's more in control of you than you are of it, a pragmatic approach to processing these feelings might be what you can do to stop your bad vibes from always dictating how you feel. Through this process, you can honor your negativity, maybe even thank it, give it space, then put it away while you handle life.
Learning how to tolerate and create space for negativity can help us foster a calm and measured response to uncertainty. Stoics, practitioners of the philosophies of stoicism, have a practice and an exercise called premeditatio malorumโthe premeditation of the evils and troubles that might lie ahead. The idea behind this exercise is to let your negative feelings through visualization and to give them space so you can then prepare yourself for addressing them. It's like a fire drill or having a disaster manual written for a business, but way less clinical. It's a pre-mortem instead of a post-mortem. It's an analog simulation.
Practicing premeditatio malorum
This practice is brief, practical, and solutions-oriented. It will help you to accept reality, give you space to prepare for possible challenges in your life, and ultimately provide a sense of inner peace. And that's the reason why I'm personally motivated to do anything, because of the potential of inner fucking peace (because world peace starts within you, kids!).
Step 1: List your fears
Set aside time to visualize and feel some of your biggest financial fears. You can write these down in a journal or type them out on a device. Tim Ferris calls his premeditatio malorum practice fear setting, and he uses a three-page checklist.
Imagine losing your job and not being able to afford your rent. Imagine looking at your cute, 65-year-old face in the mirror and realizing that you're not even close to being financially independent. Imagine you're a few years from retirement, and your investment portfolio takes a huge hit, and you have to put off retiring. Imagine you pass away, and you leave your family who depends on you behind. Imagine your business failing.
Take one fear at a time. Let's go with the example of a business failing. Imagine your business failing. What kinds of feelings come up? Let your feelings have space, work on what it feels like to tolerate them, but don't allow yourself to overindulge. After you feel your emotions, ask yourself, "How can I reasonably deal with a situation such as this?"
Step 2: List out actions you can take to impact the outcome
What are things within your control that might prevent your worst fears from happening? In this example, there's a lot within your control. You could create an emergency fund for your business so it can handle any financial, economic, or personal shocks. Once you figure out how much money you need, you can come up with a plan for how to systematically save each week or month. You may consider learning more about your business finances. You could get a good accountant or bookkeeper to ensure you are diligent about keeping track of your monthly income and expenses, to ensure you are saving for taxes and to have a professional who can give you advice. You could learn more about your business through the eyes of your customers. You can ask to have conversations with them to find out what they are happy with and unhappy with when it comes to your product or service, so you can improve your offerings, pare them down or expand them. You can observe your competition and learn how their marketing impacts their success and assess if you could do something like that for your business.
Step 3: Fix or accept
Some things will be outside of our control, so if you can't prevent a negative outcome, what can you do to course-correct? And if you cannot course correct, then the reality of the situation might be to accept it. Practice tolerating and accepting that you have no control over some outcomes. A business could fail because the laws change or new technology destroys it. Accepting that as a real possibility is difficult, but it's rooted in reality. If it happens, the shock won't blindside you.
You don't have to just practice with major failures. You could also practice uncomfortable exchanges, like confronting an employee about how they are underperforming at work. A conversation like this could be awkward and difficult. You could read a book about difficult conversations, find an outsourced HR service to help guide you through this process. You could ask other business owners about their experience and talk to your attorney about the legal ramifications and your fears if you have to let go of an employee. You can learn about psychology so you can understand how to communicate effectively to others instead of taking the employee's underperformance personally.
The benefits
This exercise has a few benefits. You can gain a sense of inner peace. You'll have action plans to prevent adverse outcomes and contingency plans in the face of negative results. Through this exercise, you'll practice being under stress in a safe setting, which can teach you how to have a sense of peace and calm in tragic or stressful situations. Think about a basketball player making the winning shot. That player trains to be able to perform under that stress, to be calm under pressure. This practice creates the byproduct of gratitude. By imaging loss, you appreciate what you have. Have you ever been in a situation where you thought you lost your cell phone or your wallet only to find it lodged in between your car seat and the center console or may be left behind safely at a friend's house? Don't you feel elated and so so grateful?
This kind of practice fosters an ability to think about things from a different perspective. An inverted perspective can allow you to manage your failures instead of striving for success. For example, instead of focusing on earning more money, you could ask yourself, "what are all the areas that I'm losing money?" Are you not utilizing subscriptions, overpaying for services, and overlooking fees?
Inverting your thinking helps you realize what failures you're willing to accept and what failures would be hard, nearly impossible for you to accept, so know where to exact your focus and what to avoid. It challenges not just your thinking, but your beliefs. It's an excellent reasoning tool to help you make better financial decisions.