I’ve been talking to a lot of people lately who are concerned about missing out on something. And more than any other mistake I see, this is how to make money disappear from your life. Multiple people have expressed concern about missing out on:
- Buying a home while real estate prices are still low
- Buying a home while interest rates are still low
- Investing in a vacation or income property
These all have to do with real estate, but I imagine there are things people don’t mention to me, such as:
- Buying a program from someone because you’re afraid it won’t be offered again
- Buying a thing (clothes, furniture, jewelry, car) because you’re afraid you’ll never see a deal this good again
- Buying a thing (clothes, furniture, jewelry, car) because you’re afraid you’ll never see one you like as much
- Overspending on children because you’re afraid of limiting their experience
I have a term for this: it’s called artificial resource limitation. This means that the resource isn’t actually limited, it’s just that you perceive it to be limited—that’s why the limitation is artificial. People mistakenly believe that if they don’t act on this thing immediately, the opportunity will be lost forever. And more than any other mistake I witness, this is how to make money disappear from your life.
Part of this may be true. You might lose the opportunity to buy a specific home, lock in a rate or work with someone in a specific program. But does that mean that your life is forever ruined? I’m going to say no (unless you’re thinking of working with me, then you should totally do it. Kidding.).
I always tell people about buying my first home, which I felt absolutely pressured to do because everyone was telling me, “interest rates will never be this low again!” My interest rate on my first home mortgage? It was 8 percent. Ultimately I ended up selling that place and renting for awhile when I moved across town, but when I was ready to buy a year or so later, I was told the same thing. The interest rate on that mortgage was 6.5 percent.
Yes, we might be at all-time low rates. But if one of the reasons that you’re considering home ownership right now is that you’re afraid of missing out, then don’t. Fear absolutely should not be part of your decision criteria.
Artificial resource limitation will always give you buyer’s remorse, because you will never be happy with a decision that was motivated by fear.
You can’t feel good about something you bought for your kid if you were afraid of him or her missing out. You have to go into it, excited. When I talk to parents about private school, I ask, are you interested because it’s going to build on your child’s interests, or are you afraid they won’t get into a good college otherwise?
I’m very fatalistic: maybe you aren’t supposed to buy a home now because in 2 years your income will have doubled and you’ll be looking in a whole other price range. Maybe your kid doesn’t need private school because he’s destined to be a saxophone prodigy (do they have those?). Maybe you aren’t supposed to do this program now because you’re going to get new information in 2 months that causes you to change direction. I’m always looking at not just the financial decision, but the motivation: is it fear or excitement?
So the next time you feel like buying something (or investing in something) for fear of missing out, ask yourself, do you have a case of artificial resource limitation?
And in the comments, let me know…
Do you suffer from a case of artificial resource limitation and if so,
in what area do you experience it?
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