Personal Finance and the Backward Law

“When you try to stay on the surface of the water, you sink; but when you try to sink, you float; and that insecurity is the result of trying to be secure.” – Alan Watts

One idea that seems true in many other parts of life but seems to fall flat on its face in personal finance is the “backward law,” as described above in the quote from Alan Watts.

In short, the backward law is the idea that the more you try to grab ahold of something, the more it slips through your fingers. Watts explains it above through the lens of swimming — the harder you try to float, the harder it becomes, but if you just let go, you float.

I used to play basketball a lot. I played intramural basketball in college and in a few recreational leagues afterward. When playing basketball, I noticed the same thing: the more I thought about my shot and tried to make it “perfect,” the more likely I was to miss badly. However, if I just let go and took a shot, I was much more likely to make it.

Now, if you take this concept to personal finance, at first glance, it doesn’t make a whole lot of sense. After all, if you just stop worrying about money at all, you’re probably not going to wind up being financially successful. Trust me – I’ve been there. Not thinking about your finances typically leads straight to financial ruin.

So, what gives? Does the “backward law” not apply to personal finance at all?

For me, the answer came from thinking about the act of shooting a basketball.

When I got wrapped up in the physical act of shooting a basketball, my shot was atrocious. I couldn’t hit a layup. I couldn’t hit a jump shot. Everything I did was bad.

Instead, when I stepped back from the act of shooting a basketball and started thinking about the bigger picture of the game — such as where to position myself right after the shot, not committing an offensive foul, where my teammates were, where the person I was defending was at, and things like that – strangely, my shot got much better.

There are a couple key things to note here.

First, the act of shooting a basketball was only a small part of what I needed to be doing to do what I really wanted to do, which was succeed at helping my team to win the game. The shot is important, of course, but it was only one piece of the puzzle, and the real goal included that shot as only one element of the puzzle.

Second, when I let go of that singular focus on the shot and relied on my actual intuitive sense of how to shoot a basketball, built with a lot of deliberate practice, as only a small piece of what I needed to be doing, I got far better at it. In short, the less I obsessed on the shot and the more I kept the big picture in mind and leaned on the work I had put into getting better at shooting a basketball, the more likely I was to make the shot.

So, let’s break that down.

If my entire focus is on personal finance — minimizing all expenses and maximizing every drop of return on that money — I’ll succeed at just that. If that becomes my goal above all else, I will definitely surge ahead in the financial area of my life. I’ll get extremely good at every nuance of frugality, rarely see even a spare dime leave my life, and maximize every dime of my income.

But what does that get me?

If I pursue financial success with just that focus in mind, I’ll have money in the bank, but I will have lost in many other areas of life. Pursuing money with a singular focus means that I’ve not devoted energy to things like maintaining my relationship with my wife, being a good parent, building lots of friendships, having meaningful interests and hobbies, having a broad social network — all of those things are dropped to the wayside in that chase for more dollars.

Life is a bigger game than just money, just as the game of basketball is a bigger game than just shooting a basketball. If I want to be on the winning team in a game of basketball, just being able to shoot a shot well isn’t enough to win. I’ll be unable to defend, unable to pass, unable to rebound, I’ll fail to be in the right position and I’ll be incredibly easy to guard and contain which minimizes the effectiveness of the one thing I can do well.

In life as in basketball, you need a somewhat well-rounded set of skills to win. Being maximally successful at money at the expense of everything else leads to a pretty empty life. Being really good at shooting at the expense of every other element of basketball leads to a giant loss on the final scoreboard.

Instead, having a good jump shot as part of a repertoire of skills and basketball knowledge will make you a really valuable asset on the court and will lead to a lot of victories. You don’t have to have the best jump shot in the land, but being able to fire off a shot almost purely on instinct at the right opportunity while being aware of how that shot fits into the bigger picture is much more valuable than just being able to shoot.

Similarly, having a healthy financial situation and a consistent practice of spending less than you earn will make you much more successful in all of the other areas of your life. Not having financial stress and having the time and resources to do the things that are genuinely important to you is much more important than just maximizing your bank account.

Just like having a good jump shot is vital to a basketball player (but not the only element of a successful game) or the ability to float in the pool is vital to a swimmer (but not the only element of successful swimming), personal finance success is vital to your life, but it’s not the only element in a successful life.

Rather, the key to successful personal finance is to figure out for yourself how to maximize your financial resources so that they don’t take time and energy away from the bigger things in your life.

How do you do that? You can start by prioritizing paying yourself first by saving automatically for big goals and for your emergency fund, keeping all of your bills up to date, having cost-efficient and time-efficient life routines, and having a keen sense of what purchases will actually bring you lasting value and which ones won’t (and avoiding the ones that won’t). These steps turn personal finance from being a major life focus into being a skill you can rely on that carries you to a winning game of life.

Much like a good basketball shot or a good breaststroke, they do take some time to set up and learn and master, but eventually those techniques become natural. They become a part of the bigger picture, a key piece that you rely on almost unconsciously as you aim for the bigger things in life.

Good luck!

Trent Hamm

Founder & Columnist

Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.