Is looking for perfection killing your financial life ?
POSTED BY ON May 10, 2012 COMMENTS (80)
Do you know that looking for perfection for everything in your financial life can be one big reason why your financial life is a mess! . If you dont think so, read the story below.
The Perfect Woman
Once upon a time, an intelligent, attractive, self-sufficient woman in her late twenties decided that she wanted to settle down and find a husband. So she journeyed out into the world to search for the perfect man.
She met him in New York City at a bar in fancy hotel lobby. He was handsome and well spoken. In fact, she had a hard time keeping her eyes off of him. He intrigued her. It was the curves of his cheek bones, the confidence in his voice, and the comfort of his warm, steady hands. But after only a short time, she broke things off. “We just didn’t share the same religious views,” she said. So she continued on her journey.
She met him again in Austin a few months later. This time, he was an entrepreneur who owned a small, successful record label that assisted local musicians with booking gigs and promoting their music. And she learned, during an unforgettable night, that not only did they share the same religious views, he could also make her laugh for hours on end. “But I just wasn’t emotionally attracted to him,” she said. So she continued on her journey.
She met him again in Miami at a beachside café. He was a sports medicine doctor for the Miami Dolphins, but he easily could have been an underwear model for Calvin Klein. For a little while, she was certain that he was the one. And all of her friends loved him. “He’s the perfect catch,” they told her. “But we didn’t hang in the same social circle, and his high profile job consumed too much of his time,” she said. So she cut things off and continued on her journey.
Finally, at a corporate business conference in San Diego, she met the perfect man. He possessed every quality she had been searching for. Intelligent, handsome, spiritual, similar social circles, and a strong emotional connection – perfect. She was ready to spend the rest of her life with him. “But unfortunately, he was looking for the perfect woman,” she said.
Just like the story above, we all are looking for the “best” and the “perfect” financial products, services and financial life, which does not exist in reality. As we don’t get perfection in most of the things we are looking for till the extent we want, we don’t take any action. We keep on searching that perfect financial product which has no defect and which is better than it’s competitors and gives us the maximum benefit.
Let me share with you couple of instances which happen in real life
Imagine a guy who wants to buy a term plan. He wants a term plan which is cheapest in the premium, he wants a term plan with best customer support, he finds few options. He was going to buy it but then suddenly he read that there is something called “claim settlement ratio” and the best of premium and customer support is of no use if this “claim settlement ratio” is not high. 3 months are gone.
He again gets on net and then concludes that the company with best settlement ratio’s have high premiums and only 2 companies are with good settlement ratio and low premiums, but he has seen 2 people complaining on jagoinvestor.com about the bad customer service. He decides to wait for some other company which fits in his criteria. 2 yrs passed by .. he never took any term plan.
Now imagine a guy who wants to go for a fixed deposit for 3 yrs. He is so excited with high interest rates that he decided to put some extra money then he planned for. But then came the issue, there are smaller banks which are offering 0.25% higher interest rate than his bank and he does not want to “loose” the free interest money. After all, all the banks are same. Then some one advises him that never go for pvt banks because they are all “chor”, but PSU banks especially the big one’s which his father approves are not giving that high interest rates. While all this as going on suddenly banks have now dropped the rates back and all his plans are dropped. His money kept lying in saving banks only.
Now again imagine this guy wanting to hire a financial planner, The planner he wants to hire comes on TV , writes few articles on few websites and also educates everyone. The financial planner charges Rs 20,000, but this guy “feels” that the fees is too high for him and that planner is not giving him sample plan also and the planner is not ready to give a free consultation too! . So there are few things which didnt match his expectation and he decided to give himself some more time. And this guy had 20 lacs in saving bank account which remained there for next 3 yrs because he didnt know where to invest it for best returns.
Is looking for perfection stopping your financial life to grow?
Now coming to the real point, what I want to say is that we all are looking for perfection in our financial lives, mutual funds, term plans, financial planners, bank deposits, relationships, education, marriage etc etc. This looking for perfection is somewhere not helping us grow. Its stopping us from taking decisions which can be much much better than not taking any decision because we didnt find that perfect thing.
90% Perfection Rule
I will say that the only solution to this problem is to look for only 90% perfection in whatever you do and let 10% go. Focus on the next step, that’s taking action because 10% of it will be things you will neither be able to find out, nor it will be totally constant. So as soon as you start getting a feel that you have understood 90% of something and 10% of things are remaining, focus your mindset on taking action, choose things based on that 90% knowledge itself. While this 90% is subjective, you can choose 95% of 85% , but make sure its not 100%, because then it does not serve you.
What do you think about this?
HI Nobuddy,
Can you give the company names you were referring to?
Thank You Very Very Much Manish for giving a platform to share the comments from different peoples.
Very nice information.
Best of Luck for the future threads and your efforts to make aware of financial planing and decision making.
Thanks
Hi Manish
I have a different view. It runs like this:
• A person does not know the effects of under insurance, or ill effects of not saving
• He reads something here and there, and comes to know these things
• He talks to a few people, 10 people suggest him 10 things
• He thinks – “oh God, this is too complicated, wish there was somebody to advise me in an unbiased manner and make things simple for me”
• He doesn’t find such a person. Life moves on. Tax season comes.
• One fine day, he gets to see a very good ad that emotionally tells him how important is to keep the head held high….he is moved!
• He calls the agent. Agent is fantastic in his job. He tells the agent – “tell me where I have to sign”
• Some months later, he meets another of his friends, who says – what a useless choice you made!
• He goes home…now it’s the product vs his ego….he realizes that his friend was right!….his ego is shattered. He blames the system, the agent, the company….
• Life moves on – new responsibilities, family, work….
• And then somebody tells him…hey you haven’t got home insurance…go get one! Now, he thinks, what to do….and the circle repeats itself again
And this circle happens till he messes up beyond control and comes to realization – hey, I need help! And approaches a financial planner! I think there will be a very less percentage of population that will keep their decisions pending because of looking for perfection, most of them suffer like this…some lucky ones though get saved as they get to your blog in time:)
Abhinav
Yes wht you mentioned is the story of most of the people, but how is it related to this article ?
nice article which gives importance to taking action
Thanks for appreciation
Excellent Article… I have faced the same issues which are described in this article and This experienced teched me that Action is more important than 100% perfection.
Thanks for confirming this concept !
A man was sure he will never find the PERFECT woman, so he acted and married a not so perfect woman, now a few years later, he meets a friend who introduces him to a PERFECT woman, what should he do? Leave his first choice from whom he has 2 children Divorce her and leave the children and go and re marry the new person he has met?
Lets relate this with Financial Planning a man has been “Investing” in Insurance policies(Not so perfect Woman but marries anyhow) FD’s and Post office schemes and some random MF schemes, now comes along a FINACIAL PLANNER and tells him to SURRENDER all his “Investments ” lock stock and barrel and plan according to what he says.
Would love to get comments from Manish and other readers on this almost real life situation!
Its very simple .. see the life ahead , if its worthwhile , you can move ahead. Also in your example it involves two people , who both have emotion, giving divorce to wife means it will hurt lady and you might feel bad and she too. In which case you might not want to .
In case of financial life, you are the person , the real person , you wont care for a policy to feel bad 🙂
Excellent article… I was in fact facing the same problem in many things for long time, but not able to find the solution. Really your article has given me a solution that actually lies within me not outside. Now on wards I will satisfy with what I am having. Thanks a lot.
Good to hear that 🙂 .. concentrate on action !
Manish – Good treatment of Behavioural finance. Hope we have many people read this and take steps towards financial independence though not necessarily thru the ‘perfect’ way.
There was some article in ET few weeks ago which said the worst performing Equity scheme itself had returned more than 10% CAGR in a decade – good enough to beat the 100% FD dependent investor.
Leaving aside the perfect financial product behind (if not visible/available when we try) is the best way forward! Excellent article again.
Yea .. thanks for acknowledgement on this !
Hi Manish,
As usual this article also gives us insights on how we ignore important things in life such as Financial Planning. I have also experienced the same at some part of life. It happened with me that I was postponing to take a term plan, but finally I did it last year…
Thanks for all your thought provoking articles…
Good to hear that Deepa
Hi Manish, very nice article. I have been following your blog for 2-3 weeks now and your latest series on term insurance is very insightful as I am planning to buy one.
Hopefully I won’t fall into perfection trap and get one soon!
Sure ! .. Just do some study and choose a good one , the rest is ACTION
nice article. i too have been postponing the term plan. But not any more.
Good to hear that
Which one are you getting ?
Aegon religare. Claim settlement ration has been discussed threadbare in this forum. AR has a poor CSR. But ultimately as i understand what matters is how truthful one is at the time of filling the form and also getting the medical done as a baseline to clear any doubts which may arise in future regarding nondisclosure of illnesses. Manish please correct me if i am wrong. lot of negative comments have been posted for AR online term plan, but i find it good. any comments manish?
typo at ratio
There are tons of positive comments also , as you said all what matters is giving correct info while filling up the form .
nice article..its really worth reading and taking financial decision
Thanks Sahil
Good One.
Hi Manish,
Very true!!! Infact I have been wanting to encash the ELSS for the last 1yr+ hoping the market to catchup so that i can encash all my losses and convert them into FDs. However that perfect moment has still not arrived 🙁
Although I took a similar step with my ULIP 1 yr back I’m glad that I did. 🙂
We really are those typical optimistic Indians wishing for a little better day…
– nice article…
Thanks for your comment Varun
I am sure you are very clear now that you need to take actions on that ELSS !
Still hoping for the market to improve :p in order to cash out.
I can recollect being faced with multiple choices during work also, when people ask
“Which is the best way to load large file to database”. Possible answers are
1. use SQL Loader
2.write a Java program
3.use an external table
4.use Informatica to load or some new technology.
The best answer given was by my mentor who said if there was a single best way then there would be only “one” way to do so.
Thats great a great answer ! 🙂
I can recollect being faced with multiple choices during work also, when people ask
“Which is the best way to write an sql query”. Possible answers are
1. use SQL Loader
2.write a Java program
3.use an external table
4.use Informatica to load or some new technology.
The best answer given was by my mentor who said if there was a single best way then there would be only “one” way to do so.
Its perfectly true. In terms of finanaial planning/investment it really happened with me. who so ever the writer of the article may be, its amazingly relevant to many of the reader.Thanks for such articles
Thanks Suresh !
Tough but true.
Thanks Rajiv
Very true. My personal experience: Only when I overcomed this “Perfect Products” illusion, Only then I brought a mediclaim and opened a PPF Account. (Manish Had earlier written an article on the same concept where a guy wanted to find a perfect woman)
Good to hear that you cracked it !
Your article is True and hope let it open eyes of many 100% perfection seekers!?
Thanks Damodaran !
So true… Cost of delay is very high in these cases. Since we are not perfect we must not strive for the same in any part of life.
Best would be to start and then be diligent with what has been started. Plan and execution both are important. Once decided there shall be no delay.
Very good insightful article. Thanks Manish !
THakns Monika !
Dear Manish,
A perfect article – 85% perfect.
Even i had wasted a year for term plan in searching for perfect which i am realizing now.
Regards,
Hitesh
Thanks Hitesh
Great article!! Not only it applies to financial goals but to other aspects of our life too!
I have been postponing to buy a term plan, waiting to find the best. Also with mutual funds, the best plan change over a couple of years, then why bother so much about investing in the best fund…
you can never know, after 3 years when u want to remit (ELSS) which fund would be best 🙂
Roshan
Yea .. it not only applies to personal finance but a lot of other area’s too !
completely agree with you manish.we do not take financial risk in our life because we are afraid of failure.what would have happened if steve jobs & bill gates have not taken risk.we feel that we are too smart & we will not fail and from here starts series of failure which we fail to acknowledge & go on failing & failing.calculated risk should always be taken irrespective of the fear of failing.as always your post is very informative & it forces us to think.you are inculcating in our mind to think & this is your great work.
yea .. very true ..thanks for putting your views !
Hi !
Very Nice One & I also Agree with comments of Safal Niveshak,
Hereby I have one question :
I have apply for Home loan upto 14.0 Lacs. to IOB at Hijewadi, Pune.
I have submit all IOB rquired documents along with aggrement documents of My Flat on 09/04/2012, they dont ask me again for any documents but Still I am waiting for saction letter & they said for the same, it may take one more month to approve.
Can you explain what are the procedures for home loans. Some banks Like HDFC etc. says within 10 days they will give the Home Loans.
Please explain…..
Take out all the documents from IOB and go to SBI. SBI is always the least
interest for home loans at any time. The processing may be trouble some for you
again. but think about intrest rate of Rs.14 lakhs. If you are getting 0.5% interest
lesser than any other bank it will put Rs.7000 in your pocket in the first year
itself. As per the past history SBI always remains the least interest offering bank
at all times. so in the entire period you will get good benefits. also no hidden charges etc
Thanks a lot,
My Flat aggrement was completed by 26th of March’12 & as per the same I need to pay balance amount within two months. I have already contact with SBI but they dont want to give the Loan because of Property is at Nanded phata, Sinhgad raod which not comes in corporation. LIC said same thing.
Presently I am staying in Hyderabad, so is there any option to go for ………
HI Shekhar,
Try ICICI Bank they are offering some fixed rate (1yr/2yr) plans as well. And I dont think they take so much time or have major concerns if it is out of the corporation limits. They certainly have some exception rules for such cases.
My advise is go to HDFC. They also offer firt two years fixed and to floating. If the floating int is high, you can reduce the interest amount(!!) by paying just 0.5% of principle. none of the banks does this including SBI. And in HDFC you can start paying EMI before the building completed. whereas in other banks, you will pay only interest and after completion of the building, you will start paying as fresh EMI..
Shekhar
Not sure on this ! .. Try asking it on our forum : http://www.jagoinvestor.com/forum
unfortunately we bother about perfection only while dealing with financial instruments . when it comes to less important things in life we let it go . we buy i phone 3 and then i phone 3s and then i phone 4 and then i phone 4s . we rather never waited for i phone 4s
Good one 🙂
True…
I can relate the term plan story you mentioned with myself.
I want to buy a term plan but not sure if I should buy online, through agent, which company etc etc.
Somebody mentioned that LIC is coming up with online term plan which would be the good option from a trusted company like LIC and online offering makes it inexpensive. The wait is still on.
Same case here..waiting for LIC to launch term plan..
but now thinking for HDFC Life..
Vipin
Dont think .. act !
Same story here ….not brought since last year…
🙁
Take action !
LIC is ‘managed by’ Agents and other officers. They don’t want cheap products to sell. So they will make all possible things to delay online Term Plan. This will reduce their commision. So, those who all want to buy term plan, do not wait further. Act immediately to buy any company,s plan. What is most important is: ‘honestly declaring everything required’. Waiting means putting your dependents in blunder-thunder. Hurry up and Act now. Later on, you may switch to LIC, if U want.
Yea .. agree !
“The Perfect Woman” needs to have a goal of marrying perfect man. When and who is not defined. Hence she keeps going here and there. Instead of what she is looking for she gets attracted by things which was never her defination. You’re right. This is what most investors do. They get fascinated sometimes by higher return, highest nav guaranttee, free insurance, tax incentives etc. Later they compare “bhala uski kamish meri khamish se safed kaise” and regret. If u have set ur goal just follow. You do not get the best always.
Yea Pankaj
You have put it very beautifully 🙂
You will always meet the perfect woman. But u should have the guts to tell her u r married.
Really good one !
You will ALWAYS get the PERFECT woman provide YOU are the PERFECT man!
Guess Pria met many such men…
Great article and reflects my condition to the T. 🙁
Hmm. Got to kiss many frogs before u meet the prince. In the meantime keep investing and divesting in the small fries.
The biggest reason people often lead an ‘average’ financial life is that they don’t start with the ‘expectation’ of failing. And when things go wrong, their ego stops them from taking corrective actions (How could I make a mistake? How can I choose a wrong insurance plan? I have already invested so much money in this stock, I can’t sell it now at a loss!).
The best idea is to always expect to fail, and thus have a good margin of safety while choosing any investment product or any course of direction in your financial life.
I have been a stock market analyst and an investor for the past eight years. And, to say the least, I have been rather frequently – and on occasion, quite spectacularly – wrong. But that is something I always expect to be.
No one really knows what is going to happen in the future. This is especially true when it comes to the stock market. So why pretend otherwise?
When you expect to be wrong, it makes it that much easier to both plan ahead and manage risk.
What I have observed is lot of people are stuck with endowment and moneyback life insurance policies. After meeting a good financial planner they realise they shouldn’t have bought these policies. At they same time they are not able to take a decision to make these policies paid up or surrender them. The get stuck with them and keep repenting also. So going forward they become all the more cautious in their other investment decisions and need everything perfect. They get held back in their financial life because of that.
Hi Gopal,
In connection to your feelings, I would like to add that, every product has it’s intrinsic value. Yes, sticking with only one product or a catagory is toxic for future planning.
The thing which we as the person lack is, awareness about financial planning.
I always support an idea to remove some of the unnessary subjects from school and add financial awareness at class XI onwards. It must be the compulsary subject and must be taught in all the classes from XI onwards.
I know, students may not take it seriously even at that moment too as they do not understand the money, but, we teach them commerce also at this stage and they understand and do their graduation etc.
Yes, as we are talking about the sex education at this stage to make them aware, financial awareness and knowledge on a gradual basis will certainly help the upcoming generation with a better understanding to manage their finance and, that will certainly lead to prosperity as, decisions will be informed.
with regards, Anurodh
I would like to correct you a little bit.
Do not expect to fail. Rather find out what is the worst thing to happen in any given situation. Be prepared for it. When you are prepared for the worst, then if somthing bad happens you feel “it is good that the worst didn’t happen”. This is so because you were prepared from the worst to happen.
I did exactly what is said in the article. But luckily good senses prevailed over me. It is my habit to do a lot of study before buying anything …may it be a cell phone or a life policy or a Mutual fund or a Fixed deposit. I did a lot of research for the best term plan. I downloded balance sheets of last 3 years from IRDA site to figure out the company giving best ‘Claim settlement ratio’. Unfortunately the company charging least premium had a worst ‘Claim settlement ratio’ of 48.5% and the company charging highest premium for Term plans …. don’t have to guess much…. was having the best ‘Claim settlement ratio’ of 97%. The per policy amount of the best premium company is also highest thereby signalling that the company has a high ratio of ‘Term Insurance’. This gives an impression that the way these companies are selling ‘Term plans’, the main intension is to collect maximum premium from the current net savy generation.( All these ‘Cheap’ term plans are sold on the net. The same plans when sold through their agents are twice as costly and in such cases medical exam is a must. Thus the ‘Online selling of Term Plans’ is a trap in which the net savy youngsters are falling prey. In comparison I preferred the trusted company having a high ‘Claim Settlement ratio’ and got my son insured with tem after a medical Exam. It is of Interest to note that the maximum term offered in the plan is 30 years by all private Insurance Companies and the targeted age group is 21 to 35 who will lose the cover when it is most needed. The revised estimate of life expectancy as given by MMIC is 62 to 65 years. As such a small percent of claims are expected by these insurance companies as per the acturial analysis. Further, I am afraid many of these companies would wind up in near future mainly due to inablity to withstand competition or the foreign partners would withdraw after being tired of indulging in the wrong practices followed by their Indian counterparts ( As has happened in case of an american Life insurer recently).
In such an eventuality, You would end up paying the premiums without any virtual cover for your life.
Who says that online term insurance company don’t conduct Medical test.. It solely depends on your SA.. Does your insurance company(with 97% CSR) do medical tests for 10 lacs SA..& what if in near future, this company comes up with a online insurance plan..should we loose trust in it?
Obviously we shouldn’t go for a 48% CSR insurance plan…but if an insurance plan is having near about 85% CSR, I think there is no harm to go for that(provided we have given all correct data). Also, in IRDA sheets, we should look at how much time the company has taken to settle the claims.
HI Nobuddy,
Can you give the company names you were referring to?
The companies are ‘Aegon Religare’ and LIC of India… now u have a guess who is who. The IRDA annual reports are available on IRDA website and you can download the latest one i.e. of 2011-12. The relevant table is Table 42 or 44 i believe which gives claim settlement ratios.
Thats a very interesting way of looking at it 🙂