A Study in Perception vs. Reality
A few videos and articles recently caught my attention. As we have surpassed one year of pandemic conditions Pew Research wanted to find out how people perceive themselves and if it has changed compared to data from 2019 or earlier.
Before jumping into financial aspects or socio-economic aspects they asked something that is actually a pretty good indicator of how perception and reality can be massively different.
The first question they asked people was about driving. The question was easy: “Are you an above-average or below-average driver?”
As a little fun test, you can ask that yourself right now.
Guess what people answered? Well, 90% of people asked that question said they believe they are “above-average”.
Bringing up math is never a great idea but I am pretty sure you realize that average means half of the people are above and the other half are below. The average is the number right in the middle. Therefore it’s impossible that 90% of people can all be above average.
We just think we are above average.
Part of the reason for that is the “universe of explanations” we have set aside for a topic in our brains so we can quickly jump to an answer to a simple question like that.
For driving, we know that most situations we encountered that were worth remembering were always the fault of another driver. That can only mean I am better than most other drivers. Makes sense, right?
When we go to the field of investing and wealth, closer to my domain, Pew Research also asked about that and wanted to know the answer to the question: “Why are some people rich and successful and others are not?”
71% of respondents said that those who are rich and successful and wealthy had a better start in life and fewer obstacles to overcome. Naturally, they are rich. Only about 20% of people said that the folks they in their minds think to be rich and successful reached that point due to hard work.
When you ask people to provide examples for something that is hot, often one of the answers is “hot tub or Jacuzzi”.
When you ask people when it is dark, many respond: “in the evening”.
We have these quick responses for things that would really only be answerable in the true sense if we had done some research, knew what to compare to, and what the criteria are.
We call it hot when it’s warmer than normal, dark when the sun is not out anymore. Above-average by perception. Member of the middle class — again by perception.
The reality is that 80% of millionaires are first-generation in that status and often two generations later the heirs have squandered that wealth.
Why am I bringing this aspect of life up in the first place?
I would like you to become more aware of where you are so you can determine your “Starting Point for Change”.
I want you to focus on new things and not what you have conveniently put aside in your brain to answer common questions quickly. Here is the deal:
You need the following steps to get from today to your place of wealth and success:
- Don’t go by perception or what other people say but establish actual data, evidence, and facts about the current state of your finances. Answer these questions, in detail: What are you doing with your time — all 168 hours of the week? How much time are you using to make money and how effective are you at it? How much money are you making, spending for consumption, and saving or investing? Be honest to yourself and write those figures down to establish your Starting Point of Change.
- Go to my article about writing a letter to yourself. Let your imagination fly a little and describe how your best life should look like — but please remain realistic. It’s for your best life — not someone else’s.
- With that best future life in mind, estimate how much monthly income you will need to afford that life. (as an example let’s just imagine it were $4000/month). That is your Time Freedom Point — TFP.
- Take a look at how much money you save and invest these days, how much you make, what you could lose, where you could make more by adding new income streams and commit to a certain amount in $$ you are going to put into your accumulation savings account every month going forward.
- Add your first 10% of income to that savings amount. It works. If you want to read the details, here is the link to the book.
- Start researching real estate investing and look for a mentor, like me. That way you avoid the mistakes and get faster to your goal-reaching the TFP.
- Start immediately with optimizing your income, reducing expenses, and get smart about the journey from your “Starting Point of Change” to your TFP
