5
Money Secrets: Inspiring
New Ways to Think About Your Money
One of the main reasons you and I
are working together is that you’re tired of being driven by fears and desires.
Throughout this lesson, I’ve pointed out that identifying finance as a strictly
intellectual endeavor has not served your needs. My goal is to lead you toward
living your one best financial life.
Although what money alone can do is
limited, its power to create happiness or cause suffering is immense. The
following 5 Money Secrets provide a powerful way to guide your decision making
so that you can take genuine control of your financial life.
1. Your life will be filled with
tough choices.
2. Your entire life is determined
by how you make decisions.
3. Your biases will affect every
decision you make.
4. You will be distracted by things
that really don’t matter.
5. You must have a good process to make good decisions.
Money Secret 1: Your life will be filled with tough choices.
You
Want It All
Part of consumer culture is that
from early on, we’re taught to think big. Every American can dream of owning a
nicer car. We drool over bigger TVs. We vow to take more vacations. We fantasize
about fancier shoes and jewelry. With a combination of envy and disdain, we
read stories of the super rich with their mega mansions and private jets. Sometimes
it’s a blessing; other times, it’s a curse. In either case, we humans have a
limitless ability to dream bigger and to always elevate our aspirations. This
is true whether you’re a schoolteacher struggling to make ends meet or you’re a
billionaire, like Bill Gates, debating how to improve the lives of as many
impoverished people as possible—and, for the more
self-interested super rich, how big
a yacht they can afford! At some point, however, you must acknowledge the
reality of your circumstances. Usually, you can’t have it all. So
you have to make choices.
Neglecting to make tradeoffs can
lead to credit card debt, a persistent inferiority complex, and constant
financial pressure. To reach your fullest potential requires you to identify
the intersection between two elements:
• Your current
dreams and goals
• Your finite
resources
Money Secret 2 Your entire life is
determined by how you make decisions:
Big
Decisions Can Be Both Scary and Exhilarating
Major decisions can keep you up at night.
They sometimes nervously walk the line between big payouts and failures of mythic
magnitude. Consider some of the most significant ones you’ve made in your life.
I’ll list a few possibilities:
• Who will be my
prom date?
• How will I tell
my parents about the car wreck?
• What college
will I attend?
• Should I take
the job?
• Should I quit
and start a new career?
• Should I launch
my own business?
• Will I get
married?
• Will I have
kids?
• Do I want a
divorce?
• What’s the best
cancer treatment?
• How will I live
the rest of my life?
• What do I do
now?
These supersized decisions are
stressful because we don’t have control over their outcomes. Despite this lack
of control, however, we manage to spend an exorbitant amount of time running
through countless what-if scenarios.
Money Secret 3 Your biases will
affect every decision you make:
Everyone perceives his or her
financial situation in a particular way. We each have our own perspective that
is shaped by our personal history and upbringing. I have already discussed the
fact that money helps you do the following three things:
1. Avoid pain—by protecting you
and helping you to take care of what you’re afraid might cause pain in the
future
2. Feel good—by getting you
the things that provide you with happiness and satisfaction
3. Take care of the
ones you love—by meeting your obligations to family, community, and society at large
We all want money to take care of
these things for us. But because of who we are and the life we have led, one of
the three is usually more important to us than the other two. And when it comes
to important or stressful financial decisions, we generally have a primary
focus.
I call this primary focus your Money Mind.
There are only three Money Minds.
They are as follows:
1. Fear (The Protector)
2. Happiness (The Pleasure
Seeker)
3. Commitment (The Giver)
When
faced with important financial decisions, you will revert to your dominant
Money
Mind, which will always affect the way you make decisions.
Money Secret 4 You will be distracted by things that really don’t
matter:
Your Two Worlds: External and Internal
With so much competing for your attention
every day, determining where to direct your resources is a daunting task. No
doubt, there are limitless ways to spend your time and energy. Unfortunately,
you have a limited amount of both. In this regard, time is fair: Whether you’re
the president of the United States or a newborn infant, your daily dose of 24
hours is the same. Therefore, to reach your goals, you must determine where
you’ll direct your focus right now and what you’ll postpone until later. In
this lesson, I’ll first describe what is competing for your time and resources
when it comes to your financial life. From there, you can determine how to
separate essential tasks from nonessential ones. Each of us lives in two
financial worlds: external and internal. Our external world includes taxes,
inflation, the country’s economy, the stock market, and more. All of these will
affect us, but we cannot control them. Meanwhile, our internal world consists
of our job, salary, spouse, and family—in other words, things we can directly
impact.
Control
the Controllable
Imagine that you’ve planned to lose
one pound per week over the next ten weeks. You’ve made it to week three, and
you’ve proudly stuck to your plan. As a result, you’re three pounds lighter.
Two activities have
caused your weight loss: You’ve
walked three miles a day, and you’ve cut your total caloric intake.
It’s now Monday of week four. At
the start of your daily walk, you trip and sprain your ankle. The doctor says
that you cannot bear weight on it for two weeks. Suddenly, an accident, which
was out of your control, has presented you with two realities:
1. You can’t change what happened.
2. You can only change how you
react to new information.
Money Secret 5 You must have a good process to make good decisions.
1. Complete Information
This means you have a comprehensive
understanding of all the issues related to a particular decision you need to
make. Complete information includes a decision’s possible ramifications,
consequences, and long-term costs. You also need an accurate assessment of the
resources you have available to pay for your decision.
2. Objective Analysis
In order to move forward in a way
that will help you avoid hazardous obstacles, you must remove all personal
biases that could cloud your judgment. This is why I had you complete the Money
Mind exercise. Now you must have a methodology to assess the costs, benefits,
and tradeoffs required to move ahead with your decision objectively.
3. Deliberate Action
Simply put, this will answer the
question, “As far as going forward with my proposed decision is concerned, is
it yes or no, or both yes and no?” Once you’ve come to a conclusion, you must
follow a clearly defined and well-organized series of action steps in order to
realize the best possible outcome. The most systematic way to do this is to
have a disciplined process that walks you through all the important steps you need
to take.
Joe John Duran is CEO
and founding partner of United Capital, which consistently ranks as one of the
nation’s fastest growing wealth counseling firms. He’s fueled by his passion to
change the industry and improve lives by empowering people to make better, more
informed financial decisions. From CNBC to CNN, Joe frequently provides
commentary on TV. He has been profiled in numerous publications, including the New
York Times and Smart Money.
No comments:
Post a Comment