Tim Ferriss recently talked to Greg McKeown, offering “Tactics and Strategies for a 2025 Reboot,” and the Essentialsim author had a showstopper of a quote that caused me to “Wait, what?” and rewind:
“What I have learned is this strange law of inverse prioritization,” McKeown said, “which is, I literally believe now that the most important thing in our lives at any given time is the least likely thing to get done, which is really strange.”
Inverse prioritization, you say?
Is this the answer to the question, “Why do we avoid the things that matter most?”
Maybe. Let’s explore and consider this phenomenon’s impact on our ability to move ourselves forward financially and personally.
Inverse Prioritization
McKeown’s short answer is that inverse prioritization happens because of the emotional weight of our most important tasks. We may tie our very identity to the most important tasks; therefore the emotional cost of failing at something so meaningful outweighs the discomfort of simply avoiding it.
Here, we are using procrastination as a protective mechanism, and because the stakes are so high in the most important tasks, perfectionism will slow us down, and performance anxiety will stop us in our tracks.
Few of us would disagree that money management is one of our most important tasks in life. It’s not that there is any inherent value to our currency—at least since we left the gold standard in the 1970s—but because just about everything in life requires money, effectively managing it is paramount.
But with money matters, it’s not the importance alone that slows us down. There are additional barriers, thanks to an overabundance of information, the proliferation of misinformation, and the financial industry’s unfortunate preference for profit over your personal well-being.
So, let’s look at four of the most important money tasks through the lens of our mental model that helps us better apply purpose to our personal finances. Although there’s no right or wrong way to prioritize these four fundamental human-felt needs, we’ll start with the one that gets the most attention:
Grow
The preponderance of attention shown to the various pillars of financial planning lands in the Grow bucket disproportionately. Perhaps this is because the daily market tickers provide such a tempting reminder of the opportunity to win—or lose—big, creating a greed-and-fear flywheel that grabs all the headlines, even though choosing the perfect investments is not the most important task in ensuring that you sufficiently grow your assets.
The investments you choose are important, but the most important task in the growth game is investing—sacrificing a material portion of today for tomorrow. But why is this so hard?
It’s because we have such a powerful present bias. Throughout human history, we have been appropriately wired for survival; therefore, we have an inherent preference for that which we can deploy or enjoy now versus the future. Our present needs are in clear focus, while our future is uncertain.
Dr. Hal Hershfield, professor of marketing, behavioral decision-making, and psychology at UCLA and the author of the book, Your Future Self: How to Make Tomorrow Better Today, puts it starkly: “Saving is like a choice between spending money today or giving it to a stranger years from now.” Therefore, he instructs us to seriously deliberate on our future—using our imagination to conceive of what it will look and feel like—to improve our financial decision-making in the present.
Practically speaking, what do we do to be successful money growers? We have to invest, of course, but instead of forcing ourselves to make a series of successive decisions to cede guaranteed enjoyment today for an uncertain future, we can make a single decision by automating our savings.
Typically, the easiest and most profitable place to start is your 401(k). First, do everything possible to get any match your company offers. (For example, your company may give you 50% up to 6% of your pay that you contribute.) And with many 401(k)s, you can evendecide today to increase your contribution every year through an auto-escalation election.
The best part about this is that, unlike the market’s uncertain performance, especially in the short term, your choice to save is completely within your control. By regularly saving, you increase the resiliency of your portfolio (because when the market goes down, you’re buying more shares) and increase your confidence in every other domain of your personal finances. This positive phenomenon, known as the “behavioral spillover” will be especially important when addressing one of the most emotionally laden issues—Protect.
Protect
Protect may be the most challenging of the four pillars we’re addressing because it involves facing the most powerful emotion in personal finance—fear. Two types of fears slow us down: fear of the known and fear of the unknown. Fortunately, there are two antidotes to offer that help us address these impediments to financial success.
The best example of our fear of the known is our very mortality. I’m sorry to be the bearer of bad news, but we can all be fairly sure that our probability of dying is extremely close to 100%. Why is it, then, that LIMRA reports that only 52% of people have life insurance—and many of those who do are underinsured?
Sure, a minority of folks may have enough assets to self-insure the financial risk inherent in death—but if anyone is reliant on you financially, you likely need life insurance.
So why don’t we do it? We don’t like addressing the fear of our inevitable demise.
Then, we have the fear of fear itself—fear of the unknown. Especially as homeowners and spouses and parents, there are so many things that can surprise us financially, from a busted appliance to a boost in utility costs to a healthcare scare. While the occurrence of these risks is unknown, the ways we can handle those risks are not. There are only four ways to manage risk, known and unknown:
- Risk assumption – Take it on yourself. Self insure.
- Risk elimination – Scared of flying? Take the bus.
- Risk reduction – Drive, but wear a seatbelt.
- Risk transfer – Buy insurance.
We can’t—and shouldn’t—buy an insurance policy for every risk, but we can choose which risk management tool, or combination thereof, we use for known risks. And for the unknown, that’s what margin and an emergency savings is for.
Give
Few are philanthropists—or would even label themselves as charitable—but most have causes beyond themselves, and we are all driven by a sense of purpose. As Daniel Pink concludes in his book, Drive, “The most deeply motivated people…hitch their desires to a cause larger than themselves.”
Are you a parent paying or planning to pay for your child’s education? That’s an act of generosity. And while they might not be dripping with romanticism, the most powerful love letters any of us will ever write are our estate planning documents, especially our wills, which I argue is “The Financial Planning Recommendation Every Person Needs.”
If the hurdle for having a life insurance need is pretty low, it’s even lower for those who need a will. Are you an adult who owns, say, anything? Then you have an estate and likely need a will. If you have minor children, the stakes go through the roof because it is in your will that you dictate who the guardians of your children should be if you’re gone.
With estate planning, our general predisposition to avoid the topic of our death is compounded by the confusion and complexity of estate tax law (which differs by state), but if there is only ONE most important financial task that you take from this post, let it be this one. Please.
Live
One of the reasons people hate budgeting and avoid financial planning, as we discussed at the beginning, is that we prefer enjoying and employing our resources today, rather than waiting until tomorrow. Got it. But where financial planning fails is in only addressing the future.
The best financial plans purposefully fund our pursuit of happiness today, bringing vastly more life to our money. Let me give you a great example:
More than 50% of marriages end in divorce, right? And financial disputes are often listed as one of the chief causes of these splits. So, why not invest in your marriage? Why not fund your relational success?
One of the better rules of thumb I’ve heard for sustaining our marriages is the 2-2-2 rule, suggesting that we should have a date night at least every other week, an overnight trip with our partner every other month, and a bigger excursion every other year.
That sounds great, but if you don’t purposefully fund that intentional fun, it’s likely that your plans will either fall apart or that you and your beloved will shove off on the Love Boat, stressing out about how you’ll pay for it.
In his book, Die With Zero, Bill Perkins capably offers an ode to the adage, “You can’t take it with you.” While its wisdom could be irresponsibly applied, I would argue that funding the life you want to live—today and tomorrow—is the most important thing we can do with our money.
So, have you checked all of the four big boxes above? And if not, what’s the most important financial task you can complete this year?
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