Imagine it’s all gone

I like to think that I am mostly an optimistic person.

I tend to believe things will work out.

Impartial scientific analysis of the world over the last 5,000 years tends to support this thesis.

I also believe that to be a good investor you have to be optimistic – you have to have an unwavering faith in the future.

However, I recently came across a technique that is, in some ways, the opposite of thinking things will work out.

It comes from the Stoics and has been around for more than 2000 years.

I figure it’s worth paying attention to anything that has been around for more than 2000 years.

The technique is called negative visualization

Negative visualization is about imagining that you have lost all the things that you value – your home, your job, your sight, your ability to walk, your husband or wife, and even your child.

It’s all gone.

It’s easy to have an immediate aversion to thinking this way.

Aren’t we supposed to think positively and therefore manifest all the things we want in life?

Doesn’t negative thinking tempt fate?

The Stoics say absolutely not – they say premeditation malorum, translated as the premeditation of evils, has huge benefits.

The Stoics used it to ward off hedonic adaptation – our tendency as humans to quickly get used to good things (and bad things) in life.

Buying a new car gives you a temporary happiness boost but after a fairly short period of time, you return to your baseline level of happiness.

Unfortunately, it leads to constant dissatisfaction and an inability to step off the treadmill.

Imagining everything you have been taken from you induces feelings of gratefulness.

William Irvine writes in his book ‘A Guide To The Good Life’: “Most of us spend our idle moments thinking about the things we want but don’t have.  We would be much better off spending this time thinking of all the things we have and reflecting on how much we would miss them if they were not ours.”

Another benefit of negative visualization is that by anticipating disaster striking, we are more prepared for it when it does.

We are psychologically toughening ourselves up.

Fingers crossed the disaster doesn’t actually happen, and we don’t need it to happen in order to have the benefits.

Many people who go through a catastrophe report feeling joyous and thankful to be alive after having the experience.

But we can’t wait for a catastrophe to strike in order to feel that way.

As William Irvine explains, negative visualization can be done repeatedly, and the beneficial effects can last indefinitely.

“Negative visualization is a wonderful way to regain our appreciation of life and with it our capacity for joy.”

Now I’m not saying stop being optimistic

I’m sure that optimists do better than pessimists in all areas of their life.

But I think trying this is an interesting exercise – I really felt the benefits when I tried the practice of losing everything.

After thinking about my wife Pam not being by my side, I had to go across to her and tell her how much I loved having her in my life.

When I saw my grandchildren the next day I hugged them a little harder and a little longer

I know you might be thinking, what a way to live – walking around with all those pessimistic thoughts.

And that’s not what I’m suggesting.

In fact, I am suggesting at least once a day think of two or three things you are grateful for because you can never truly be wealthy unless you’re grateful.

We usually characterize an optimist as someone who sees his glass as being half full rather than half empty.

For a Stoic, though, this degree of optimism would only be a starting point.

After expressing his appreciation that his glass is half full rather than completely empty, he will go on to express his delight in even having a glass: It could, after all, have been broken or stolen.

So I’m not suggesting around all day contemplating potential catastrophes

But I suggest that periodically you should pause in the enjoyment of your life to think about how all this, all these things, could be taken away.

It’s brief and practical.

Furthermore, there is a difference between contemplating something bad happening and worrying about it.

Contemplation is an intellectual exercise.  It prevents us from taking the world for granted.

This is a powerful philosophy to carry over to our financial life.

My favourite author Morgan Housel explains in his book ‘The Psychology of Money’ that to be financially successful you need a bar-belled personality – you need to be optimistic about the future, but paranoid about what will prevent you from getting to the future. 

“You need to save like a pessimist and invest like an optimist.”

Financial planning is, to some degree, a process of negative visualization.

To answer the question of how much life insurance you need we have to work through the scenario of you not waking up tomorrow and at the same time we need to acknowledge that it’s a possibility.

To get your Estate Plan in place, we have to talk about how you want to look after your loved ones when you are gone, again, acknowledging that one day you will be gone.

To think about liability insurance we need to talk about how disaster could strike.

To earn the luxury to invest in what can go right, you first have to protect against what can go wrong.

By going through a process of negative visualization in our financial life we can prepare and plan, and we can balance optimism with realism.

As Morgan Housel says:

“You can be optimistic that the long-term growth trajectory is up and to the right, but equally sure that the road between now and then is filled with landmines, and always will be.

Those two things are not mutually exclusive.”

About Michael Yardney Michael is the founder of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.