Principle #5: Know the Rules of the Game

Initially, this principle may seem very obvious, but it isn’t. If it was an idea that more people truly understood, there would not be nearly the amount of emotional heartache over finances that most Americans are experiencing. Take a look at the picture below of a die. Notice the four dots on the front side of the die. How many dots are on the opposite side of the four dots? If you’re familiar with dice, you probably know. The answer is three. What is on the opposite side of one? The answer is six. The rule with dice is that opposite sides of a die always add up to seven. Therefore, on the opposite side of the five are two dots. When you know the rules, it is really easy to predict what will be on the back side of the die. How many times do you make a financial decision when you are not able to really examine the decision pick it up, so to speak, turn it around, and look at what is on the “back side”? 

Many financial decisions are very difficult; not being able to see the final result can make us feel very frustrated, even out of control. Has it ever made you feel at the mercy of what others know over your own basis of knowledge? You can see from this little ex- ample with the die that knowing the rules can be very powerful. Here’s another example of why it is so important to know the rules. Sandy and Bart Owen* came to us very upset about refinancing their debts. They found as they went through the process of consolidating some of their debts that a prepayment penalty of $2,200 had been written into the agreement for one of their loans. This stipulation was clearly stated in the agreement the Owens had signed when they obtained the loan. It was easy to read and understand, yet Sandy and Bart had never known it was there because they didn’t take time to read the contract before signing it. Now, when it came time to consolidate they could not do so without paying the $2,200 penalty. Not knowing the rules in this case cost the Owens. Knowing the rules is just like playing the game of tic-tac-toe. If you have played it before, you can pretty much predict who will win within the first few plays of the game.

 If both parties know how to play tic-tac-toe usually there won’t even be a winner; the end result is a tie. In the case of the Owens, the lending institution was adept at the game it was playing, while Bart and Sandy never took the time to learn the rules of the game. If they had learned the rules, even if they couldn’t win, they could have at least had an equal advantage. In this case, they ended up the losing. When you know the rules of the game, you have a much higher chance of winning or at least playing even. Now let’s meet another individual who lost big time because he did not know the rules of the game he was playing.