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Epiphanies: Catalysts of change

Written by ecannon - 2 Comments

This is a guest post from Terry R. Vergon who wrote “A Journey of Epiphanies:  Learning Leadership,” which looks at the specific epiphanies that enable people to become great leaders and affect change.

Five Cent Nickel offers great suggestions and behaviors to help us become more financially successful, but what drives us to adopt these behaviors? In my research into what changes behavior, I discovered that epiphanies are the reasons we change. In my book, “A Journey of Epiphanies: Learning Leadership,” I define “epiphany” as “… that sudden intuitive realization that causes a behavioral change (along with associated values and beliefs).” In short, epiphanies are such powerful realizations that they actually “… change our perception of reality.”

Consider the story of Jean Claude Killy, a French Olympic skier circa 1968. At some point in his quest for the gold, Killy realized that he would not win races by doing what every other skier did. This realization, or epiphany, caused him to try different methods of coming out of the turns. He discovered that leaning back on his skis at the right moment would push him out of the turns faster than the other skiers. While his style was considered reckless, it gave him such an advantage that he took the gold medal in all three Olympic alpine skiing events, which had been done only once before and has never been repeated. Jean Claude Killy’s revolutionary technique quickly changed the entire sport of alpine ski racing.

Just as Jean Claude Killy’s epiphany changed how he approached skiing, anyone can experience an epiphany that changes how they approach life. We actually have epiphanies all the time. Some of them are minor – realizing that we have the power to change our electrical expenses may cause us to remember to turn off the lights when we leave a room – others are more significant. But unless there is behavioral change, it really can’t be considered an epiphany. In fact, once an epiphany takes hold in your life, it is difficult to operate the same way you did before. For instance, Jean Claude Killy didn’t revert back to his old style of skiing.

Epiphanies are personal. The realization that affects a change in one person’s life may not take hold in another. That’s because epiphanies reflect the cost/benefit analysis we each do based on our individual perceptions of reality and how we value things. Our unique sets of epiphanies actually determine who we are.

So what can drive us to adopt a behavior we know can help us reach our financial goals? All epiphanies start with a realization that your perception does not match reality. For example, when we are young, we often think about the future in terms of our more immediate wants and desires – a better computer, a new car, a great place to live and raise a family. The miracle of “no-money down” makes these things affordable for just a small monthly payment. You have a realization, an epiphany as it were, (often through the help of the media or a particularly persuasive salesperson) that you can “afford” whatever it is. We convince ourselves that we need these things, and that, by just paying a little each month, we can afford them.

To change your behavior, you need a different epiphany. Here’s a thought that could provoke a new epiphany to replace the afford-it mentality: Babies born today may have life expectancies in the 120-year range. If that’s the case, what do you think their retirement age will be? Will their retirements be 30, 40, 50 years? Even if they retire at age 80, they would need to plan for 40 years of living expenses.  Assume you are 25 today, with an average life expectancy (male and female) of 74.9 years. If you retire at age 65, you would need to have 10 years of living expenses. At the moment, my in-laws are 84 and 92. If you are one of the lucky ones, you may need as many as 30 years of living expenses, not to mention medical or assisted-living expenses. How many of you are planning for that? How can you plan for that?

My father used to tell me that people who understand interest collect it and those who don’t, pay it.  It took years for me to realize the meaning of this statement such that I changed my behavior. But this type of exercise is what brought me to finally get the meaning of his words. Let’s assume you are 25 and just bought a house by taking out a 30-year mortgage of $160,000 at 5 percent interest. Your payments at that rate of interest are $859/month. You would own your house free and clear at age 55. But if you were to pay just $100 more per month, you would actually own your house six years earlier, at age 49.

In addition, you would avoid paying approximately $35,000 in interest to the bank as shown below.

At age 49, you would have $959 in disposable income – but if you were to save that amount each month for the next six years, even if you could only earn interest at .2 percent, you would have $70,428.70 in your savings at age 55. Saving the $959 another 10 years, until age 65, you would amass $188,080.07.

Simply making the actual payment of $859 and saving $100 every month for 30 years doesn’t accomplish the goal as well. You don’t own your home free and clear until age 55, and your savings at that point amount to $37,204.93. Saving the $959 another 10 years, until age 65, your savings would come to only $154,185.18. The takeaway is that you put your resources where you get the best return.  If you could save at 5.8 percent interest and you had still had the 5 percent mortgage, then it would pay to save the money rather than to extinguish the debt first.

Maybe this information is causing an epiphany for you now. By searching out information and different perspectives, you can cause your own epiphanies and affect your values and beliefs, which lead to behavioral changes that last. Naturally, life isn’t this simple. But if you dream of a time when you are no longer concerned about your finances or you envision a worry-free retirement, search out what will motivate you, change your perspective, or cause an epiphany. It will change your behavior and, more than likely, your financial future.

Published on July 12th, 2013
Modified on July 9th, 2013 - 2 Comments
Filed under: Miscellany

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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2 Responses to “Epiphanies: Catalysts of change”

  1. 1
    Adelaide Kent Says:

    One of the most profound concepts I have learned is the difference between ‘want’ and ‘need’. I don’t always practice this, but it is in the back of my mind at all times.

  2. 2
    Terry R. Vergon Says:

    Understanding the concept between a want and need is one of the foundational epiphanies that all financially successful people have. Thanks for sharing Adelaide!

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