What are your core beliefs?
Have you ever questioned your thoughts or beliefs? Have you ever challenged your core assumptions? How do you know that they are right? I think that many of us don’t stop to question ourselves often enough, and we can take a lot for granted simply because we don’t have the time to challenge everything. I think that doing so can be beneficial, though, and can open yourself up to new ways of thinking.
One way to strengthen your own beliefs and validate them is to relentlessly challenge them from all sides. Imagine that you were the devil’s advocate, and that you had to defend him. Hard to do, since he’s evil incarnate, right? Well, that is an assumption which we need to challenge to see if it really holds up to scrutiny. Maybe upon closer examination we’ll simply reconfirm and re-validate our belief that the devil is well, the devil, or maybe we’ll learn something new in the process that we didn’t know before.
One thing that I’ve enjoyed about being part of a group such as the Yakezie and being part of the personal finance blogosphere is that there is a multitude of thoughts, beliefs, and opinions out there across the entire range of the spectrum. Many of these beliefs are not necessarily objectively right or wrong, but they are subjectively “right” in the eyes of the writer. Are you vehemently anti-debt? Or do you believe that debt can have its places and uses? Both opinions are valid within their own sphere of reasoning.
I’ll give an example:
CREDIT CARDS
Position: You should not carry a balance on your credit cards. Carrying a balance leads to interest-rate charges, which are a bad idea, financially-speaking. If you can’t afford it in cash or if you can’t pay off your balance before it’s due, then don’t buy it!
How could we challenge this, to see if this holds up to scrutiny? First, we could look for the hidden assumptions, and then, we could look at what supports that assumption and what goes against it:
Assumption #1: Paying interest is bad.
FOR: Many credit cards have interest rates in the range of 18% and up. You will be much better off financially if you pay off your balance before interest is charged, even if you have to forgo your purchases for a bit of time.
AGAINST: If you have an extremely high time preference, in that you MUST have your item this instant, then paying some interest may be an acceptable trade-off.
Here’s a more difficult example:
PUBLICLY-FUNDED EDUCATION
Position: Publicly-funded education is necessary and fundamental. We must impose a tax on all property owners in order to contribute toward the cause, so that the public education system itself is affordable to everyone. Otherwise, the poor will stay illiterate and ignorant, and only the rich will be able to afford to have any real education at all.
Assumption #1: Collecting taxes based on property-tax valuations is the fairest and best way of funding a public education system.
FOR: Everyone, whether renter or owner, whether on a low-wage income or making a six-figure salary, all have equal access to the system. Payment is based on property values, which scales with the price of property and usually the means to pay.
AGAINST: Property taxes don’t necessarily scale with the means to pay if housing assessments are overvalued. This system also means that rich areas will naturally have far more resources to throw against education than will a poor area, so the whole premise of “fairness” in the sense of equal access to equal quality is false. If anything, schools in poor areas are simply breeding grounds for continuing poverty.
Since public education is a monopoly, it isn’t enough for a poorer family to simply scrape up more money. Instead, they have to move into a richer area, a much more difficult proposition.
Assumption #2: The indirect funding of resources via property taxes and central planning of resources will give the best incentives to teachers and schools to offer a high-quality education to their customers: the parents and their children.
FOR: By placing the money in the trust of politicians, we expect that the money will be spent in accordance to voter preferences, and that the rich will not have the ability to “game” the system and that even the poor will have equal access to a high quality education, even if they lose their income or do not make a lot of money.
With access to teachers through parent-teacher meetings, we can ensure that education is disconnected from the price and the ability to pay, and becomes only about the quality of education that is delivered to the student.
AGAINST: Central bureaucrats spend money in line with their own preferences and not the preferences of the customers; indeed, the entire flaw behind central planning is that it is impossible to gather all the knowledge necessary through a central allocation system. Whether or not the costs are direct or indirect, costs must be paid out of real resources. Money is not just a bunch of numbers but represents people’s real savings and earned income.
As these bureaucrats are spending other people’s money, they have much less of an incentive to use this money wisely, and costs rise stratospherically as a result. From this waste of resources, everyone loses out. We all know about the “rubber rooms” and other bad outcomes of this system. As public education is a captive monopoly, it is difficult for customers to “vote” against the system with their dollar, as they can easily do with other goods and services.
Thinking critically
We should keep looking for more assumptions and challenge them as well, and we can also challenge the results of our challenges, until we are satisfied.
First seen on The Daily Capitalist; thanks for sharing!
So, reader, have you challenged any of your beliefs recently? Try doing this with some of your core assumptions and beliefs, and see if you learn anything new as a result. If you do, why not write a post about it and let me know? You can also share in the comments below!
I know a guy at work..smart guy but he lives on credit. I think he’s around 60 and whenever he refinances his house, he gets another 30 year mortgage and takes the equity out. In fact, he likes the idea of reverse mortgages. To me, it would stress me out to no end. To him, he likes to live for the now and plans on dropping dead someday with a ton of debt. He wants the banks to have paid for some of his lifestyle without ever having to pay it back. Seriously..his retirement plan is to have as much debt as possible.
But you know what? It’s refreshing to hear that person’s opinion on money sometimes. Money itself holds no value whatsoever to this guy and there is something to be said about that. As much as I feel enslaved by debt or comforted by my emergency fund, he is free from the emotional attachment of it.
Great article. I’ll have to think about it some more. It would make for a good series..the opposites of PF edition.
Hi Sandy,
I haven’t heard of that strategy before, but it’s pretty interesting. Instead of paying the banks a mortgage, have them finance your lifestyle and leave them with the debt. Of course, he might want to watch out for those extending lifespans. I don’t know if I would base my strategy around dropping dead, myself. 😉
I know someone that has a similar philosophy regarding food, though. The guy is only in his early 30s and is already diabetic, but he doesn’t care. He will eat pizzas, fries, drink 2L of coke every day, whatever he can get his hands on as long as it’s not green, because that’s what he likes and that’s what makes him happy. He doesn’t believe in eating vegetables. If he dies eating food he’ll be happy, seriously…
Socrates always said that you never truly know your own argument until you can argue for the other side, as well. This truism is just as accurate now as it was then.
I have heard that said, but I didn’t know it came from Socrates. I think it’s a good philosophy to follow; even if you have a particular stance, your position will be that much more solid if you understand the other position’s argument well enough to argue it yourself.
I actually enjoy playing devil’s advocate with my own thoughts, or have others close to me challenge my views on some things. Not excessively of course. However, it’s good to look at things from different angles and be open to different ways of viewing things.
An example is my past-held view that one shouldn’t take on debt, except for a home and likely a vehicle. While I had taken on a 3-year loan to buy a my previous car new, I paid cash to buy my most recent car used. It was a few years ago, and I felt uneasy taking the plunge, as I felt that I didn’t want a used car at this stage of life and I didn’t like dropping that much cash at once. I felt kind of “dirty” afterward, like I compromised my standards and was being cheap.
Now, a few years later, I think back to the time of borrowing for a car, and I don’t want to do that again. And new vs used…well, I still like new cars, but it’s not necssarily worth paying more for as I have now realized. It’s best to live within one’s means, focus on needs vs wants, and avoid debt. Makes me wonder how I didn’t think of that before.
I’m now challenging the idea of borrowing for a home. Most people (me included) can’t go buy a nice home with cash, but maybe it’s best to lump mortgage debt into the same category as consumer debt. It’s DEBT after all! This flies in the face of my long-held beliefs, but in challenging those beliefs through discussions/debates with others, I’ve refined my thoughts.
That’s what it boils down to: being open minded and willing to consider alternative ways of doing things, in order to get the best outcome for yourself. Critical thinking skills, and willingness to use to them, are key to making this happen.
It’s important to challenge those beliefs, and in today’s day and age dumping cash like that does feel a little strange. Although I am still tied up in the rat race, I am starting to question this credit-driven lifestyle. I wonder how much more affordable homes could be were it not for all of the easy credit bidding prices up, especially up here in the Great White North. Great thoughts, Squirrelers.
The invitation of questioning one’s belief is not an easy pill to swallow. Many people find an emotional comfort zone in their beliefs and seek to justify their belief at all cost in order to keep the fuzzy warm feelings ongoing.
I won’t blame those who will turn a deaf ear to your call Kevin!
The ego tends to suffer the most when beliefs are questioned. We just need to ensure that the ego’s needs are balanced with our others, so that our personal long-run progression is not hurt by an inner child that is not happy. 😉
Great call to action, Kevin.
My friends make fun of me because my husband and I are always coming up with ‘wacky’ new challenges. I always tell them it’s to challenge all the myths our there that say things like, ‘it’s so expensive to have children’ or ‘you must make such-and-such amount of money to be happy’. HA! We ‘poop’ on that!
We didn’t buy groceries one month, I’m not buying any clothing for one year (I love clothes!), and we cut all of our expensed in half- it started as a six month challenge but it’s been over a year and we are still doing it.
I’m glad you’re doing what you love and enjoying it! Some people have a deluded sense of self importance, and think that just because it’s true for them that they must make $X amount to be happy, it must be true for everyone else. That’s how they feel justified in their beliefs, even though there is probably something tugging at them from the inside telling them that maybe it isn’t true, after all.
Interesting post… thoughful. I am constantly challenging a notion of frugality. Frugality as a way of life, metality and as a concept in general bothers me… Maybe I should write a post about it…
I guess for me personally I don’t understand the coupon phenomenon. I know you can oftentimes save money with it, but this is what I ask myself:
* Do we really need to buy something just because it’s on sale?
* Do we really need to go to several different stores just to save a couple of bucks?
* Should I deprive myself of the things I enjoy simply because they’re NOT on sale?
There’s got to be a balance. Sometimes sales can kick ass though, like when we were able to pick up many bottles of olive oil as it was something like a buy 1 get 2 free. That stuff is usually pretty expensive!
I have been rethinking some thoughts lately of paying off my mortgage early vs. investing more in dividend paying mutual funds or another investment vehicle. (Besides gold. :)) I was previously of the mindset of ‘get rid of all debt immediately’. However, I also like the though of having a possible stream of income in the form of dividends (or something else) one day. My mortgage will be paid off in less than 7 years anyway, so it isn’t like I will be carrying debt forever.
I don’t think I consciously challenged my own beliefs, it just kind of happened as I have been doing more reading and thinking more about our future.
I alternate a little bit between “pay off the mortgage double speed” and “hey, rates are so low anyways, why not just invest the difference”? We kept a 25 year amortization, so it will be very easy for us to alter our payments on the fly. Our mortgage term will allow us to prepay up to 100% additional toward the principal per month, so that’s good.
I guess it’s just important to remain flexible and to allow yourself that room; reserve the right to change your mind!
Thought provoking post. Critical thinking is absolutely essential. I think that the only way to find the truth in any matter is through a thorough examination.
Agreed, Mark! A learning mind is an open and examining mind.
“Central bureaucrats spend money in line with their own preferences and not the preferences of the customers”.
You’re right Kevin, bureaucrats don’t have customers, they have a captive market. But really, we all have our own preference for government largesse. Seniors of differing political stripes think Social Security and Medicare are swell. Conservatives and Democrats alike are keen on military bases and defense contractors in their districts. Me, I quite liked the municipal green waste site. As an avid gardener, I was very pleased with this service. The green waste site allowed city residents to dump yard waste at no charge, and they would also load you up your truck with a load of nice garden mulch for the return trip. And, if you were so inclined, all the free cut-it-yourself firewood you could cut. Well, seems that as long as a particular government service is the one that you personally like or benefit from, then a sacred cow it shall be.
However, this “free” service doesn’t really stand up to serious analysis: it is paid out of property and sales taxes, it is subject to free riders from other nearby towns (as the waste site operators don’t check residence), and it does compete unfairly with other for-profit mulch operations in the area. TANSTAAFL. There ain’t no such thing as a free lunch.
Hey Andrew,
I think you might be the only one that responded to my actual examples! 😉
You are quite right in that each voter has their own preference for government largesse. Problem is that democracy is a winner-take-all environment, so only some voters will be happy (and probably not). So in the end, everyone is probably happy with something, but nobody will ever be happy with everything. Many of the costs are dispersed while the benefits are localized making it very hard to eliminate even damaging subsidies and benefits, whether for the individual or for businesses. Hey, I benefited from subsidized education, myself, but it doesn’t mean I appreciate paying more tax than housing and transportation combined in order to make it back… 😉
I really liked your thoughts, here. Great comment.
Kevin, I must admit I usually do not challenge my core beliefs. PFStock challenged me in a recent post about short term interest rates. He advised that even with the early withdrawal penalty factored in, in the current interest rate environment, it’s sometimes better to get a 5 year CD (with a higher interest rate) and forfeit a few months interest if you need the money earlier. In contrast, my belief: NEVER PAY A PENALTY. And I was wrong. I think this is a great approach to take once in a while!
The problem with absolutes is that there is usually some condition under which they break down. As long as we are willing to realize that, then we can be much more flexible and open to change. Thanks for the comment, Barb.
Interesting post. I think most people are just set in their ways and will stick to their beliefs no matter how well you can argue against them. I think it is a sign of intelligence and maturity when we can challenge our preconceived notions and actually reconsider our point of view. Of course that often means we have to admit we were wrong, which some people will just never do.
Probably more maturity than anything else! Even the smartest scientists have been known to act like infants at times. 🙂 Admitting you were wrong can be difficult even for the I.Q.s of 200 amongst us…
No one really wants to admit the beliefs they hold are not true. The barrier to dropping a flawed belief for a better one often depends upon how many other “contingent” beliefs we’ve stacked on top of the former. Thus, the barrier to implementing change in one’s life is often contingent on what the change will cost rather than the merits of its relationship to truth. What we sometimes neglect to consider, as we weigh the cost of trading a flawed belief for a better one, is the cost of clinging to a belief devoid of truth.
Great comment, guys. Even the choice of beliefs has an opportunity cost associated with it. Being willing to learn and grow also means that you gain additional tools to analyze the world, and this will help you avoid getting stuck in a set of rigid beliefs.
Great video.
When it comes to investing, I follow guidelines rather than hard rules because hard rules are usually too black and white for me. I’ve noticed that some other investors I’ve talked to follow very specific rules that they never break.
I like flexibility so that each specific opportunity can be critically thought through rather than applying the same solution to the current puzzle as one that was applied to a previous puzzle.
I have had the same thoughts when I see investors overly rely on technical indicators and things like Elliott Wave Analysis without considering the fundamentals of why the price may be moving in that direction and where the company may be in the future.
I do not currently do much active investing, but I can see the value in being flexible and looking at each specific situation rather than just applying a rigid rule set to all decisions.
Okay, this post inspired my post today, Don’t Contribute to your 401K plan. I don’t know why it didn’t ping back to this article, but FYI. With your permission, I may do one or two more. I like squirrelers idea of paying your house with cash as a topic since it’s something my mom did but most think it’s impossible.
No need for my permission! Please go ahead; your 401K post was great and I look forward to reading more of your thoughts.
P.S. The pingback is there now. 🙂