The Triple Filter Test For Your Financial Decisions

July 29, 2011

By Carl Brodie

There is a story about Socrates and a triple filter test that can be applied to financial decisions as well.

One day an acquaintance met the great philosopher Socrates and said, “Do you know what I just heard about your friend?”

"The Death of Socrates" by Jacques-Louis David (1787)

“Hold on a minute,” Socrates replied. “Before you talk to me about my friend, it might be good idea to take a moment and filter what you’re going to say. I call it the triple filter test because it has 3 filters. The first filter is Truth. Have you made absolutely sure that what you are about to tell me is true?”

“Well, no,” the man said, “actually I just heard about it and.”

“All right,” said Socrates. “So you don’t really know if it’s true or not. Now, let’s try the second filter, the filter of Goodness. Is what you are about to tell me about my friend something good?”

“Umm, no, on the contrary.”

“So,” Socrates continued, “you want to tell me something bad about my friend, but you’re not certain it’s true. You may still pass the test though, because there’s one filter left-the filter of Usefulness. Is what you want to tell me about my friend going to be useful to me?”

“No, not really.”

“Well,” concluded Socrates, “if what you want to tell me is neither true, nor good, nor even useful, why tell it to me at all?”

Applying the Triple Filter Test to Financial Decisions

So what does this have to do with money? Let’s review the filters and see how they might apply.

Have you made absolutely sure this is true?

Making Wise Financial DecisionsThe core to investing successfully is understanding the investment. To quote a modern wise man Warren Buffet: “Never invest in a business you cannot understand.” Of course, we are not all meant to be investment analysts, but when investing here are some questions you might ask yourself:

  • What have I done to understand my investments?
  • Are my advisors qualified to determine an investment’s merits and its suitability for me?
  • Do I have a process for understanding the risks I am taking and how I will be rewarded for those risks?
  • If ‘no’, do my advisors have this process?


Is what you are telling me something good?

This is where you consider who you are. Different people have a different notion of goodness. It is important for you to consider what is important to you. Whatever your answer, these questions should still resonate for you.

  • Is the investment legal?
  • Will I sleep at night knowing I am involved in this investment?
  • Is the investment ethical?
  • How is this investment in line with my core beliefs?


Is what you are telling me useful?

Everyone has different life goals and as a result everyone has different financial goals. Money is only there as a tool to help achieve your goals. Money without goals is useless.

  • How is this investment going to help me achieve my financial goals?
  • Could the investment be an impediment to achieving my financial goals?
  • Is this the best investment to achieve my financial goals?

The next time you are faced with an investment opportunity, try the triple filter test and see how it works. I would love to hear if it was helpful.

Carol BrodieAbout the Author: Carl Brodie is a certified financial planner from Vancouver, BC. Carl is an Honors graduate in a double major degree at Trent University. He is known for coming up with extraordinary solutions for a wide range of financial issues. Carl specializes in reducing volatility for people within 10 years of retirement and converting assets into tax efficient and stable retirement income.

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