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Where Are You Stepping Over Dollars To Pick Up Dimes?

August 9, 2013

Today’s tip is about getting out of the habit of avoiding losses rather than acquiring gains.

Know When to Quit

stop

Sometimes you have to cut your losses and move on. Your first loss is always the best loss.

When you’re “in the gym” and you injure yourself, it’s better to go ahead and quit for the day rather than stick it out and injure yourself further. That’s exactly what the kid did, even though it may have been unintentional.

I have a very good friend who bought a house with his girlfriend. He used about $100,000 of his own money as a down payment, but the mortgage and deed were put in her name.

Long story short, the relationship didn’t work out like he thought it would and, she walked away from not only him, but the house and her related responsibilities as well. He could have walked away as well, and since he wasn’t on the mortgage or the deed, it wouldn’t have affected him at all…except he would have lost his $100,000 down payment.

How much is $100,000 worth to you?

My friend eventually convinced his ex-girlfriend to sell the house and got his money, but that happened almost five years after she moved out. That was five years of him sticking things out with two roommates, hoping he’d have enough money to keep the lights on and spending countless houses trying to convince his ex-girlfriend, via attorneys and otherwise, that everybody would be better off if the house didn’t go into foreclosure.

Would you deal with “crazy” and “unknown” for $20,000 year?

That’s exactly what my friend did. And if you’d approached him with a job offering like this, he, like you, would probably turn it down. So why would he hang on to $100,000 that was already spent to do pretty much the same thing?

It’s called loss aversion. Simply put, people have a tendency to strongly prefer avoiding losses to acquiring gains. In fact, some studies suggest that losses are twice as powerful, psychologically, as gains.

Loss aversion means a person who loses $100 will lose more satisfaction than another person will gain satisfaction from a $100 windfall. This is why the one-of-a-kind purchase you “kind of ” like starts to look more desirable the moment somebody else shows interest.

So how do you overcome a tendency toward loss aversion? Have a clear goal before investing your time, money, and resources in something and keep focused on it.

For example, it’s pretty safe to assume the kid in the gym wants to get healthy, build muscle, and lose weight. Overall, he’ll better be able to achieve these goals by cutting short a workout in which he injures himself, so he doesn’t do more damage. If he’s clear on the goals, they’ll help him think about the long term benefits of being able to consistently be in the gym rather than going to extremes in a single visit, which may give him a “better” workout once, but affect his ability to continue the process later.

For my friend, his ultimate goal in purchasing a house with his ex-girlfriend was to create a home where the two could further their relationship. But the relationship ended. So why stick around at something that’s taking away your energy from creating that same thing elsewhere, with somebody who is a better match?

For you, as a creative entrepreneur wanting to make an impact, what are you hanging onto, out of habit or fear, that is affecting your ability to pursue your “big picture” plans?

People change and plans change. Just because something worked for you in the past, doesn’t mean it’s working for you now. Getting caught up in old habits and patterns is a sure way to keep you from fulfilling your highest and best purpose.

Action Step:

Think “big picture” and always move forward, even if it means temporarily stepping back a bit. Where are you missing out on dollars to pick up dimes?

ABOUT THIS SERIES: Every Friday, I give tips on how to build the foundation needed to have a successful business and platformSee other posts in this series here and, if you have a request for me to cover something specific, let me know via Twitter.

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