“What the wise man does in the beginning, the fool does in the end.” – Investment proverb
There are fundamental principles of personal finance that have the greatest impact in helping you achieve fulfillment and long-term success with money. The question is whether you’re ready to respect them now, or later.
The principles are based on natural laws. They may not be your values, but the laws don’t care. They affect your final outcome. Everyone misunderstands how money is supposed to work in their lives. I did for twenty years — I wasted those valuable years, even as I made money. I didn’t know it, but I had a financial survivor’s mentality instead of a financial winner’s. So, I wrote these simple rules down to remind me of what is true, even when I’m faced with financial decisions that seem complicated. When I started following them, my life began to change. I hope they do the same for you.
1. Your money needs a purpose.
You have to know what the money is for…before you actually have it. Money really won’t bring you happiness. You’ll be more comfortable. You’ll be able to send your kids to private school. You may even feel like a big shot for a short time. But the most successful people in life have a bigger purpose than the money itself; the money remains merely a tool.
I challenge you to think of one person who made money their goal who became significant to you or anyone else. Elon Musk didn’t sit back and count his money when he got paid out from creating Paypal. He plowed everything he made right back into furthering the mission of his companies. If money were his goal, he would never be as successful as he is today.
Even people who are mega-successful in the realm of money management don’t do it for the money. Warren Buffett and his partner, Charlie Munger, love the game of investing. They enjoy buying a company of high value for a low price, and holding the shares until the value is realized by the wider public.
You may not have an idea of what you want to do with the money before you have it, but if you do, the awareness naturally shifts your financial behavior. When you instead go after money like a life goal, your energetic vibrations match the level of your goal. If your goal is the money itself, you emit greed as your vibration. I respectfully disagree with Michael Douglas’ character in the movie Wall Street — greed is not good. Greed is money mis-used.
The financial choices you make without a purpose will be wasteful. Work hard to improve your money management and investing skills (you need to keep your tools sharp and working at optimum levels), but aim to achieve your financial success by pursuing something bigger than money. It’ll make a huge difference in the trajectory of your success.
2. Wealth is built on healthy circulation, not accumulation.
The more you have of it, the more you must invest and give away. The rules of finance are the same as with the body. When you consume high-quality food, your body must expel the energy through exercise, work and love. As a result of this circulation, you grow. You become stronger. When you accumulate money and keep it only for yourself, your soul gets sick. People who are looking for sick find you. Gold-diggers. Users. People who practice selfishness and entitlement. You use them right back. That is the nature of your relationships: taking instead of giving.
When you try to buy people’s love, the same people try to use your material wealth as collateral to get money they don’t have themselves. Don’t be treated as collateral. Be generous, and invest in people and other assets in your life that you believe in. Keep that door open so that wealth can circulate, instead of only accumulate through your life.
3. Your values must be monetized.
There isn’t a venture in the world that can sustain itself without money. Money has to keep flowing to it. If good people don’t monetize (i.e. purchase or invest in) what they cherish, the company, institution, or person who provides the valuable service, cannot exist. Other kinds of companies, institutions, and people who provide different services will take their place. Vacuums are always filled.
For example, take Walmart of the ’90s. Walmart was a company that made money by buying goods from overseas for nothing, and using local labor at rock-bottom hourly rates to make its profits all over the world. At first, the company became “rich.” Over time, however, the company created financially-weakened localities that couldn’t sustain themselves — much less continue to shop at Walmart. The company had to change.
Costco, a competitor, didn’t conduct business with the same values. Its managers viewed taking care of its staff as taking care of itself, and giving back to its communities as the same. The company conformed much more to Rule #2.
The point is not that Walmart was a “bad” company and Costco a “good” company. They’re both examples of strong financial models — but only one proved sustainable according to the natural laws of finance. The natural laws apply to everyone without exception, given enough time. It doesn’t matter a stitch if we’re talking about a for-profit or non-profit. Monetize what you cherish by consciously spending and investing in what you believe represents your highest values. You shape your own environment, which, in turn, shapes you.
“Time is the friend of the wonderful company, the enemy of the mediocre.” — Warren Buffett
4. Your financial life is perfect when you’ve found your personal balance.
Financial success DOESN’T look like:
- Anything that you own or lease.
- Any TV or print ad on what your life should look like.
- Any school that you got your kids into or club you’ve managed to get into.
- Any choice you’ve made based on a bunch of should’s.
- A life built to impress others.
Financial success DOES look like:
- Believing that what you need, you can get (how resourceful you are). No more, no less. (This balance will *physically* look different for everyone.)
- You owe no money to anyone, therefore no one owns you.
- If you do borrow money, you do it only to raise your financial productivity (how much money you can make) so that you can ultimately make greater impact on others, whether it be your family or perfect strangers.
- You radiate gratitude. The way you use your money does as well.
- You’ve built a financial life based on your truth, whatever that looks like.
Financial serendipity is real. We don’t get what we think we deserve. When you accept that sustainable financial success will take longer than you think, require more sacrifice and self-discipline than you currently have, and still possibly remain out of reach, you’re on the right track. Work with your odds and beat them. Forget fairy-land. This following quote on investing applies more broadly to financial success:
“Investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: You can’t produce a baby in one month by getting nine women pregnant.” — Warren Buffett
It will definitely take longer than you expect. It will be harder than you expect. Trust that if you continue to level up your skills, the rewards will come.
Jane Hwangbo is a former investment analyst and portfolio manager who founded Mission Over Money, a personal coaching program designed to change the way individuals see and interact with money. Visit her website or find her on Twitter.
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