I once worked with someone whose favorite activity was checking out open houses on the weekends. Every Monday, she’d announce how much she loved one of the properties. By Friday, she’d tell me some minor details about the house that bothered her. “What if it’ll turn into a big problem down the road,” she’d say.

Over two decades later, she still lives in the same rental place.

Have you ever been trapped in the endless what-ifs when trying to make a sound financial decision?

What if I take the risk and lose everything?

What if I lose all my hard-earned money on stocks?

What if I never find a better position than the boring job I have right now?

The what-ifs are everywhere, tightening the hold around your neck, reminding you life is hard already; don’t mess it up even more.

The Psychology of Money is one of the best books I’ve read on how to get out of the what-if trap. It shows you new ways to look at risks, odds, and the return on investment.

The author, Morgan Housel, has such a talent for putting complex concepts about money into simple words, that I bought this book as a Christmas gift for my son.

A few years back, we put our son’s savings into a custodial account for him to learn stock investment. My son was always nervous about making buying decisions, worrying he might lose everything he’d ever saved up.

After finishing this book, my son purchased his first stock without relying on his parents’ input. Here are a few valuable things he learned from the book:

1. You can be wrong half of the time and still make a fortune.

There was this world-class art dealer who owned a massive collection of famous artists’ paintings. His success wasn’t because of skill or luck.

The dealer had bought vast quantities of art, not knowing which one would be valuable in the future. It’s like buying index funds rather than purchasing each individual stock.

Perhaps 99% of the dealer’s collections turned out to be of little value, but it doesn’t matter if the other 1% turned out to be the work of someone like Picasso.  

2. All you have to do is to sit tight.

“The S&P 500 increased 119-fold in the 50 years ending 2018. All you had to do was sit back and let your money compound. But of course, successful investing looks easy when you’re not the one doing it.”

In reality, it’s incredibly unnerving to maintain a long-term outlook during a stock market crash, such as in spring 2020 when the pandemic started. “Endurance is key.”

3. The change factor in long-term financial planning.

If your teenager wants to be a doctor, you think the plan is set. You save up for the day. Barely one semester in, he or she finds law school boring and wants to be a chef. What do you do?

Most of our goals and desires change over time. Only one in four college grads has a job related to their major, according to research. No one can predict the future. Even if you’re certain you want that one thing, in twenty years, you might think differently.

The saddest thing in life isn’t working hard toward something and fails. It’s working hard toward something and succeeds, only to find out you don’t even want it.

The author recommends two things when making long-term decisions:

A. Leave room for changes. Set up checkpoints at intervals to revise your decisions “to avoid future regret.”

“Regrets are especially painful when you abandon a previous plan and feel like you have to run in the other direction twice as fast to make up for lost time.”

B. “Accept the reality of change and move on as soon as possible. Don’t make (your) future self prisoners to (your) past, different self.”

These rules not only apply to money, but life in general. Most people spend too much time on things that don’t matter, until one day they look back and wonder, when they deviated from the path they’d set out to take.

As I mentioned in my book, The Art of Good Enough, “you don’t need the entire map drawn out before taking the first step. When you drive at night, you can only see as far as your headlights allow. As the road extends before you, you find your way to the destination”.

No one can foresee the future. You won’t know what the right action is until you try it out first. The important thing is to course correct when you fail and keep you going if you get it right.

This post is originally published here.

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