Personal Finance

Knowing when to quit

“Of all the stratagems, to know when to quit is the best.” ~ Chinese Proverb

I asked my Dad this week what financial decision had had the most positive impact on his life in retirement and his answer surprised me. I was expecting him to say something about being a good saver, live within your means or being a good investor. What he said though was that he thought the best decision he made was selling one of the commercial buildings he owned at a loss.Although he had rented the retail store premises for a year she only bought the building 12 months before he sold it. The price he sold it for was much lower than he’d paid for it and selling the building meant having to close down that store location and lay off three staff members (who had worked there so long they were like family) because the new owner wanted vacant possession. However, logic and instinct told Dad that he was making the right decision and so he made it. He knew that over the 12 months since he bought the building, the economy had shifted, business in the town was dropping off and it was looking increasingly unlikely that things would get better any time soon. 10 years down the road, it’s more than evident that he made the right decision but at the time it was far from easy. His story was about knowing when to quit.

His story got me thinking about times in my own life where I’ve made decisions to continue down a path that instinctively and logically seemed like a road to nowhere simply because I didn’t want to quit. Whether it was a business venture, a financial decision, a career choice or a relationship, time and time again I continued stubbornly on because I didn’t want to take the loss and, most of all, I didn’t want it to be obvious to everyone looking on that the venture had not been successful.

Ego plays a big role in our decisions; just like a bad night at the casino, until we make the decision to quit and walk away the loss isn’t “locked-in”; there’s still a chance that circumstances might change, a small miracle might occur and the situation will transform from a chronic failure to a magnificent success. The reality is though, that when we look back on every “failure”, chances are that we would have been better off calling it quits, months (or years) earlier.

This lesson is one that rings especially true for me at the moment because I’m in the process of preparing to sell my house. The purchase of the house wasn’t a smart one in the first place; it was overpriced, needed far more work than I anticipated and, shortly after I moved in, life threw a couple of curveballs that made completing that work a much more challenging process than it should have been. Almost, three years later, things are getting back on track but the reality is that, even though the penalty on the mortgage means that I’m barely going to break even, I stand a much better chance of reaching my financial goals if I sell the house than if I continue to live in it. Even though I know that selling is the smart thing to do and that 18 months down the road I’m going to be really happy that I did, it has taken several months to get to the point where I’m actually committed to doing it. I’m not sure what it is in us as human beings that means we’d rather stay in familiar discomfort than deal with the pain of moving into the unknown but I’m sure that if we were more prepared to deal with short term pain to achieve a long term gain we’d be a lot happier and a lot more successful in all areas of life, not just finances.

January is a great time for reviewing your financial situation, setting goals and making changes. Why not take some time this week to identify areas of your life where you’re walking along a path that you instinctively know is likely to be a dead-end and examine them in more detail. Weigh up the cost of continuing on against the cost of quitting and then discuss the situation with professionals and friends you know will give you an objective and informed opinion before you make a decision about how best to move forward. I know that selling my house isn’t my easiest option but as I move through the process it’s becoming more and more evident that it is absolutely the right thing to do to get me where I want to go. Figuring out ‘when to quit’ is a tough process but it’s one we all have to think about from time to time.

What “quitting” decisions have you made in the past that have worked out in your favor? I’d love to hear your stories.

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