Don't "Hee-Haw" Your Finances

By DAVID MOON, Moon Capital Management
April 30, 2006

I often think of a recurring scene from that long-running, high-brow, intellectual comedy show, Hee-Haw. In the scene, a buxom Hee-Haw honey would visit her country physician, played by Bulls Gap, Tennessee native Archie Campbell.

'Doctor, it hurts when I do this,' she would complain, as she twisted her arm around her head and tucked her wrist underneath her chin. Each week, the doctor's advice was consistent: 'Well honey, don't do that, then.'

The good doctor may have known how to make her arm stop hurting, but it would have been a lot more helpful if he (or she) could have figured out why she kept contorting herself like that each week. Stopping the contortion was merely treating her symptoms.

This girl had some deep problem that caused her to keep acting like a pretzel.

I thought about this while reading one of the latest 'just pay off all your debts and your financial life will improve' books. For some people, this simple yet often difficult advice is the critical step in improving their economic lot. But for many others, merely paying off credit cards or following a strict set of budgetary rules doesn't address the core reasons that first put them in a tough spot.

Their problem is much deeper.

Compulsive overspending is, for many people, a coping mechanism for anxiety. Some people use food or pain pills. For others it is exercise or meditation. And some people go to the mall.

If you stop the spending or borrowing without understanding why you are inclined to act like that, you are not addressing the problem; you are simply dealing with the current consequences.

You are likely to displace the behavior in some other compulsive conduct. You might start contorting your arm around your head and under your chin.

Rabbi Edwin H. Friedman, a noted psychologist, observed that except in immediate emergencies, treating compulsions is a waste of time and resources. Therapy turned a generation of smokers into former-smoking overeaters. Former addicts of illicit drugs became nicotine junkies.

And through the suggestion of how-to books, we're turning shopaholics into addicts of other types. They may be financially solvent, but if they haven't addressed the reason for their behavior they're really no better off.

Yet books advising people that there are a few simple steps that can change their lives sell millions. Why?

Because people prefer simple answers ' answers that don't require thinking or analysis.

Look at the magazine covers that always seem to be on the shelves: 'Five stocks for 2006!'; 'How to double your money now!'; 'Lose weight on the grapefruit diet!' I never see 'Hours of reading and analysis lead to great stock pick!' or 'Man loses 25 pounds after three years of working out!'

We want someone to give us a set of rules to solve our problems. Yet most sets of rules address only our symptoms.

In this regard, as well as most others, money and investing are just like other areas of our lives.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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