Your Financial Frames Of Reference

trainAlbert Einstein was fascinated with the motion of objects and had a famous saying “all motion is relative to your frame of reference”. What exactly does that mean? Well, the way you interpret the movement of an object is based on where you are viewing it from.

So, for example, several people may observe a train passing them, but depending on their position the train may appear to be moving to their right, left or towards them.

Einstein’s Saying Applied to Your Life

This physical principle can also be applied to our lives. What you believe, think, and trust is related to where you are in your life, what your main priorities are, and what lessons you’ve learned along the way. So, basically your understanding of the world is directly linked to a point in time of your life.

Consider for example a young person who might believe they are invincible, takes silly risks and believes they’ll never get hurt. An older adult might be preoccupied with getting a higher education while newly married people are concerned with owning homes and raising families.

As we pass our forties and fifties we become concerned with our health and how we’ll fund a comfortable retirement and finally when we do retire we may be preoccupied with how long our money will last.

The Key to Learning

key to learningThe key to learning and knowledge is the ability to get people to shift from one frame of reference to another. Unfortunately this is extremely difficult. As much as I want to educate people based on what I’ve learned (often the hard way) they are usually in a different frame of reference. Put another way, if I could go back in time and give myself advice based on what I now know, I probably wouldn’t follow the advice because I wouldn’t be in the proper frame of reference.

This obviously makes it very difficult to impress on people the importance of saving for their future. It is nearly impossible to expect people to act now based on knowledge they won’t acquire until a later point in their lives. This is due to our frame of reference changing as we experience our lives. Some people are able to short cut this process and are rightfully described as wise beyond their years. They are a rare exception to the rule.

Your Lightbulb Moment

When it comes to financial planning at some point in your life you can expect to have a lightbulb moment and realize that what you’ve been doing simply isn’t working. That will be the signal that your frame of reference is shifting and it’s time to seriously commit to saving for your future.

Hopefully that lightbulb moment allows you enough time to recover and set yourself up for a comfortable retirement. Unfortunately this is the normal process of learning that most people follow and confirms the old adage: if I knew then what I know now I’d have done everything correctly.

Einstein would definitely agree.

Water BarrelThe BalanceIn my E-books (“Water Barrel” and “The Balance”) I discuss simple methods to live sensibly for today, take charge of your financial affairs, and invest safely for the long term. For more information please visit David Penna Amazon.

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