You do have a choice. Yes. You read it right. By continuing to read this blog, you opted for it.
This is not an article about surrendering your free will or freedom. This is about YOU, cultivating an environment for you to succeed by limiting or eliminating your options which will ultimately lead you to achieve your goals.
I am a fan of this concept. And if you have had a coaching session with me, you know that I am an advocate of this principle.
The basic premise is similar to the story in 1519 of a captain, Hernan Cortes, who set sail to Veracruz, Mexico with his crew. Upon arrival, his men became weary and scared, with hopes of turning back home but Cortes had his men burn their ships, leaving them NO CHOICE but to press on! This POWER, allowed Cortes’ men to complete their mission because the retreat was no longer an option!
This POWER OF NO CHOICE can tremendously help us achieve whatever goals we may have specially on taking charge of our finances.
Willpower is a limited resource. I’m pretty sure that there are a lot of instances that you have been battling with yourself against a decision of getting a bite of that delicious brownie or keeping your diet regimen intact; a fight between you and your other self whether to buy that bag and latest gadget or to stick with your current budget allocation; to swipe that credit card or not for that beautiful necklace. Sooner or later, your willpower will deplete and you would give in, oftentimes, with regrets afterwards.
However, what if, you don’t have a choice? What if you didn’t go to the brownie shop, hence no opportunity for you to be tempted? What if you don’t own a credit card, what are you going to swipe your purchase with? This is the Power of No Choice – and this has helped me take charge of my finances.
How?
- Eliminating my credit cards. At the end of 2018, I decided to cut off my last credit card. By giving myself zero opportunity to use a credit card, I no longer have a choice but to only purchase items that are part of my budget. Remember, that consumer debt actually decreases your cash flow, hence, limiting you to allocate more money to your goals. You can read my credit card blog through this link.
- Working on full commission-only without any salary. I have practiced my chemical engineering profession for 8 years in the UAE. I had a decent salary but when I found my passion for educating the Filipino community about personal financial management, I moved to work as a financial advisor. This allows me to get trained and certified in the industry while teaching back what I learn. I was given two remuneration options by the company: 1) basic salary plus commission; 2) full commission only. It was a tough choice. However, I had to “burn the ship”. I chose the latter.
Most of us would just be so complacent when we are receiving our regular salary. Whether we work hard or just playing pretend, we are receiving the same salary anyway, so why bother? However, by getting salaried on full commission only, I don’t have a choice but to work hard because I have bills to pay. And the interesting thing about this as well is that “sky is the limit” for your income. Your revenue is directly proportional to your effort.
- Getting Whole of Life Insurance. The importance of life and critical illness protection is definitely adamant. Whether you get a term or whole of life insurance, that is all up to you. However, you have to get at least one. I know there are different schools of thought on this and various opinions (e.g. BTID vs VUL) but I’ll be specifically addressing insurance in the next few weeks. I just want to point out how the Power of No Choice plays in this example.
I have a unit-linked whole of life insurance; this means that I am insured all throughout my life by paying only for a specific number of years (e.g. 10 years). And after that, the investment component of the said insurance is expected to pay the cost of insurance for the rest of my life. The insurance is set up in such a way that if I miss few consecutive payments, I will no longer be insured. And if I am not able to reactivate it (“reinstate” in insurance industry term), my insurance policy will lapse and whatever I have contributed may just be gone to waste. Hence, I don’t have a choice but to make sure that I won’t miss any monthly premium payments. I am “forcing” myself to “save” in order for me to be protected in case when the inevitable happens.
- Investing in locked-in mutual funds. Same thing with insurance, you are actually “forced” to save on a monthly basis because your savings invested in mutual funds may lapse without value if you miss some payments. It is also locked-in for a number of years and if you surrender before the maturity of your investment, then you will be fined with hefty charges. This actually discourages you to stop your savings plan thereby giving you no choice but to continue saving up for your goals.
The Challenge of Voluntary Savings
If we are really good at savings, have the willpower and the discipline to do it on a regular basis, we could have already saved a lot of money in our bank accounts. If you do have, then congratulations! Sadly, this is not the case for most of us.
You can always try to save some money in a piggy bank, savings account, or any voluntary savings scheme but the challenge is, no one is “forcing” you to save up, because like I’ve said, it is voluntary. You have a choice to either put some money or skip it for now. And most likely, you would probably end up skipping for reasons like, “I need the money today since I’m traveling”, or “I will double up the amount next month”, but the sad truth is, as the months and years go by, you will still end up asking yourself, “Where did all my money go?”.
Don’t get me wrong. I do invest in voluntary savings plans like Pag-IBIG 2/MP2 (which I always highly recommend), mutual funds, and a few stocks by doing it on my own. This will definitely lessen the charges (e.g. fund management charges etc) thereby optimizing my profit. However, as I’ve said, if you just do it on your own, then you will most likely not be able to save at all because you have a choice not to. This is like just going to the gym. You can exercise by yourself and may decide to skip the gym today, or you can pay an instructor to “force” you to come to the fitness club and do your circuit training routine.
