9 Steps To Giving Yourself A Financial Education That Actually Sticks
“If you don’t have time to do it right, when will you have time to do it over?” — John Wooden
Finance is the study of how money functionally applies to our lives, yet very few of us are taught the concepts and skills when we’re young. I get it. By the time we’re adults, we have so many balls in the air already. Learn a new new skill? No thanks.
Besides the fact that learning money management skills feels new and thus uncomfortable, the idea of looking at things that may need to be changed can be exhausting all by itself. I’m a finance expert who, to this day, would still rather do many things than comb through my bank statements. But taking care of my money has become like brushing my teeth. It’s necessary. It’s good for me. And like all life skills, it’s become easy to do.
You won’t have time to do everything over. Learn to do it right. Here are some ways you can be smarter with your money.
1. Be accountable
You must set yourself up to financially measure your progress and become accountable. Hook your bank and credit card accounts up to any number of free apps out there. Mint.com is a good one to start with. Or, as I recommend, print out your statements, grab some highlighters, and start getting down and dirty with your financial habits by hand. There’s something about manually calculating your cash flow (at least for the first few months) that make your numbers feel very real. Apps can seem distant. Amp up your awareness regarding your numbers. You’ll begin treating the money in your life with the respect it deserves.
2. Google a financial word every week
What you don’t know has the potential to derail you. Challenge yourself to look up one financial word a week you don’t fully understand but have heard a lot. Google it. You can start with:
- Income
- Revenue
- Profit margin
- Depreciation
- Balance sheet
- Asset
- Liability
- Rate of return
- Cash flow
- Credit
These are the ABC’s of money. They’re only tough to understand because you haven’t practiced knowing them yet. Read the definitions out loud every morning, and try to think of personal situations you’ve been in where the concept probably applied. New things can feel scary. Make them not new anymore.
3. Create a “love account” and stick your money in it
Take a moment to think about something you really want. It could be starting a business, or taking a vacation, or maybe paying for your mom’s medical bills. There are no rules around the goal except 1) you have to be able to measure how much money you need to make it happen, and 2) you can’t fund it with debt.
Do you have a dream in mind?
Today, make an appointment at your bank to open a separate savings account, just for the deposits you make toward that goal. Call the account something funny, like “My freedom from judge-y people,” if you’ll be able to leave toxic co-workers behind while you build a thriving freelance business. Call it whatever the money will mean to you.
Then, make regular deposits toward that goal. Once you fund the account fully, either withdraw the amount to make good on the promise you made to yourself, or, if you’re not ready yet, open a new account for another goal and repeat. By doing this, you practice:
- Seeing that money is only valuable to get something else something else. It’s meant to be traded for something more meaningful.
- Setting financial goals.
- Feeling successful based on actual results.
4. Become a hyper-realist
“Success is achieved by people who deeply understand reality and know how to use it to get what they want. The converse is also true: idealists who are not well-grounded in reality create problems, not progress. ” — Ray Dalio, Principles
What do you know you’re not great with? Do you pay your bills late all the time? Do you always pick up something extra to buy (e.g. a magazine, some candy bars, soda) while waiting to check out at the market? Do you find ways to spend your entire paycheck, no matter how much you make, every month?
Know yourself, and take steps to outsmart you. Set up auto-pay for your bills. Take an engrossing book with you to the market to keep you company in the aisles. Create an automatic money transfer from the account that receives your paycheck to a different account. Set yourself up for success by hugging your weaknesses, not ignoring them. Be as realistic as you can be about your problems and solutions.
5. Hit the pause button often
“The key to being proactive is remembering that between stimulus and response, there is a space. That space represents our choice — how we will choose to respond to any given situation, person, thought or event.” — Stephen R. Covey
Most of our financial mistakes are made emotionally.
- We need our parents to be proud of us, so we take on massive student loans to go to an expensive college.
- We need to look financially successful, so we lease cars to impress.
- We need to buy expensive stuff to make ourselves feel better when we’re down.
- We choose a profession that can bring only limited financial gains out of fear.
When you pause, you bring intention to the financial question before you. You become dangerous (in a good way). You think and act asynchronously, rather than remaining caught in a destructive feedback loop.
6. Revisions matter most
While you’re doing something difficult like changing the course of your financial life, it helps to remember that progress is made through revisions.
Every “genius” adheres to this formula:
- Do
- Measure
- Tweak
Over and over again.
It’s not sexy. It’s process. All major contributors from Albert Einstein to basketball coach John Wooden (and every artist who ever became relevant) achieved what they did through practice. Often alone in rooms and for hours on end. Every day.
I’m not saying that you need to become a monk about your finances. Just expect that your most substantial gains will be made through smaller, measurable revisions spread over longer stretches of time.
7. Contribute vs. consume
The key to doing well with money is pretty simple: Contribute more. The richest people in the world have figured out how to give the world what it needs, in a way that only they can. What they have to offer is considered valuable. Their work is usually unique.
Hint: you don’t become valuable to others by being selfish. When you figure out what other people need and get very skilled at making significant contributions, money naturally flows back to you in kind. Can you imagine? Less grasping, choking, or cajoling for money?
Maximize what you can do with the money you’ve got by taking good care of it, and ask yourself how you can make the biggest difference in people’s lives with it. Invest your funds in that direction. Think in 5–20 year time frames. Contribute big. This is not to say that you can’t do middling well without contributing. Plenty of people do. You just won’t find your wealth deeply fulfilling, because you’ll have very few people to share it with.
8. Be an unconventional thinker
We get this one wrong a lot. Unconventionality isn’t a goal in and of itself, but rather a way of thinking about problems. Unconventional thinking means looking at the world through an inquisitive, investigative lens, as you did when you were a child.
You hear cliches like “Think outside the box” all the time. What does that even mean? Simply, that you don’t assume much. Instead of I have to get a college degree or I’ll never be successful, you ask if this is true from what you know. You don’t make big financial decisions out of fear. (You may still decide to get a college degree, but the decision would be the result of a very different thought process.)
Neither Steve Jobs, Mark Zuckerberg, nor Bill Gates graduated from college or got formal management training. But they didn’t drop out of school to be unconventional. They were just willing to consider doing unconventional things in order to achieve their goals in the most effective way possible.
When you think about your finances this way, the whole world blows open. You’re not held back by mental constraints.
You don’t spend your money to keep up with the Joneses.
You don’t buy houses because you vaguely think you should.
You don’t chase the latest hot stock at a crazy price.
You make fewer unintentional mistakes with your money.
9. Practice preserving
It’s very easy to think about making improvements in your financial life through the process of creating. Making new money, perhaps through a side gig, or making new investments. But sometimes, in order to brighten your financial future, you need to know what to keep. A security account that contains six months’ worth of living expenses, untouched. A student loan balance so that you can use any extra cash to pay down high-interest credit card debt. A car that costs less every month than what you could theoretically afford, just so that you make financial room for other things.
A lot depends on your ability to preserve what you have, so that you can build on it.
Conclusion
It’s like they say in finance — the attractiveness of an investment is about the future of the enterprise, not the past. In other words, history can give you a clue, but we always have the opportunity to set a different course. If you can’t implement all nine steps, start with one. They’re each based on classic rules of finance, reinterpreted for the modern age. They don’t change. The question is, will you?
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.
Image via Unsplash
