How Humility Keeps You From Making Big Mistakes

Remember that kid in your high-school geometry class who raised his hand and asked the question everyone knew the answer to?

Remember how the class laughed and thought he was so dumb?

It turns out that kid wasn’t dumb.

That kid was humble.

More humble than most of us.

And being humble, when it comes to money, is incredibly smart.

That kid may very well have been Warren E. Buffett who, at the age of 86, still spends 80 per cent of his workday reading and thinking.

Why does he do this?

To learn things he doesn’t already know. 

You would think that Mr Buffett — one of the most successful investors in the history of investing — would know everything he needs to know by now.

But if there’s that much stuff that Warren Buffett still doesn’t know, chances are we could also stand to learn a thing or two.

It starts with being humble enough to raise our hands when we don’t understand something.

Not long ago, my wife and I met with a lawyer to get some basic estate planning done.

As he rolled through the plan, we just sat there nodding along, pretending that we understood everything he said.

We signed a few papers, shook hands and walked out of the building.

When we got back to the car, we turned to each other and said in unison, “Did you understand that?” Neither of us had a clue what we had just done.

The mistake of failing to admit we didn’t understand cost us valuable time in circling back and asking the obvious questions we should have asked in the first place.

The thing is, we both felt like we should have understood the process.

My wife has a degree in finance.

I’ve written a few books on the subject.

As silly as it sounds, we were both too embarrassed (and proud) to ask the “dumb” questions.

While humility is a virtue in all parts of life, when it comes to making smart decisions with money, it serves as a vital layer of protection.

When it comes to our money, there are no dumb questions.

So if we want to keep our money, consider this a lesson we can’t afford to learn.

I’m not telling you to start reading hundreds of pages a day, like Mr Buffett (although if you have the time, go for it!).

But I am telling you if there’s something in your portfolio you don’t understand, say something now.

Having the humility to admit there’s something you don’t know is the smartest thing you can do.

Editors note: This article was originally published a number of years ago and has been republished for the benefit of our many new readers.

About Carl Richards Carl Richards is a Certified Financial Planner and a columnist for the New York Times, Morningstar magazine and Yahoo Finance. He is author of 2 books, The Behavior Gap & The One-Page Financial Plan. Carl lives with his family in Park City, Utah. You can find his work and sign up for his newsletter (which has an international audience) at www.behaviorgap.com/