There are two important aspects to your finances. I call them the “outer” and “inner” games of personal finance. The outer game is what you can see physically – homes, cars, and fancy vacations (which can be misleading). Our culture focuses on the outer appearance to gauge if someone is successful or not.
The inner game is less discussed but perhaps more important. This, of course, is the personal and mental side of personal finance. You can’t see it but it’s the true gauge of measuring if someone is successful. This is what sets apart people that are able to live a meaningful life, grow their money and use it to better their future. If you don’t have this squared away you will be in for a long rough ride.
Mastering your finances is not a matter of jumping on the bandwagon of some get rich quick scheme, winning the lottery or deciding to invest in bitcoin. It’s a matter of adopting a disciplined, simple approach to how you handle money. This can be quite a lifestyle change for most.
“Discipline is choosing between what you want now and what you want the most”
Too many people are walking around with insecurities. Is all they want is to prove to somebody else that they’ve made it. People buy fancy things so they can look cool in front of their people. Literally, people buy 9 bedroom homes (guys, no one uses their 9 bedrooms). But it’s status. They lease cars to look the part. They wear clothes to look the part. They buy homes to look the part. All because they live their lives on defense. You live your life on defense because you’re worried about other people’s points of view.
Marketers and companies have made obtaining “stuff” easier and easier by creating more and more. The ability to borrow money is sooo easy! You can have something but no one has to know whether you actually own it or not. Then, people overextend themselves and we see it everywhere.
Rich vs. Wealthy
I’m not against having nice stuff. I prefer to have a few nice things instead of a lot of cheap things. It simply comes down to what you value. I have a lot of respect for people who are doing well financially but don’t have to show it off physically to cover up their insecurities. Spend money on what you value but don’t do it to show people that you’ve made it. This is a graphic the Finance Twins put together that I think illustrates my point very well.
Here is the main question you have to ask yourself. Aside from how your peers are doing financially, how do you feel about your financial situation? If you feel good about where you are without comparing yourself to other people, you’re probably in a good spot. If you know your financial house is in order and you don’t need to show off your success, you’re probably in a good spot.
It’s human nature to want more. It’s natural to want to be successful. I want you to be truly successful and fulfilled at the same time.
Wow, we just went really deep right there. I wasn’t planning on that. But, hopefully, you get my point.
How to stay motivated and disciplined when it seems others are more successful
First, understand your money personality.
Once you understand if you’re a big spender or a tightwad or somewhere in between, you can begin the process of finding a balance. You don’t want to be a big spender because you’ll drive yourself into debt. You also don’t want to be a tightwad because let’s be honest, who likes a tightwad? It’s good to find a balance and focus on what is going to help you achieve your goals and have great relationships with the people around you.
Second, you need to understand what’s keeping you from reaching your goals.
The two biggest inner game barriers to achieving goals are lack of motivation and lack of discipline, and most people have to wrestle with them at some point, and usually sooner than later.
What I often see when I meet one-on-one with people is they start their financial plan with complete motivation and clarity, but only within a few weeks they’re already losing sight of their goal. They get busy with work and school, things become confusing so they decided to do nothing, and they stop tracking their expenses.
After resolving to improve things, giving in to these thoughts sends you down a slippery slope of getting less than great results, which leads to wondering why you’re even bothering with it at all, which naturally leads to quitting.
I’m going to share with you simple tricks to help you get mentally prepared to win and stay the course even when the going gets tough.
“Would you have a great empire? Rule over yourself.”– Publilius Syrus
According to a 2010 survey conducted by the American Psychological Association, the lack of willpower is the number-one obstacle people face in achieving their goals.
Personal finance is 80% behavior and 20% numbers. You may have thought that the only way to start reaching your goals is to make more money. This may be true if you’re a broke college student making $400 a month. But for the majority of people, it comes down to behavior, understanding needs and wants and spending less than you make. It’s not a matter of how much money you make, but how much you can keep that matters. I know professionals who make $200,000 a year and spend $210,000. They’re dead broke.
Many educated people pursue their profession academically, but later they find themselves struggling financially. They become broke professionals. Why? If this sounds like you, or you’re in a situation hoping you can do something to improve it, here are four steps:
1. Take complete responsibility for your situation
You may feel like the situation that you are in right now was caused by someone else. They left you, they deceived you, they didn’t teach you. Whatever your situation is, own it. No one else is going to change your finances for you.
If you’re unhappy with where you are financially, change it. Once you take responsibility, something amazing will happen and you will become a student and want to learn how you can improve your situation.
2. Find out where you are
Get clear on how much money you currently make and how much money you spend each month. Start tracking your net worth. Once you do this you’re most likely going to need to make changes. It could be you need to make more income and/or decrease your spending.
This is a scary one for a lot of people because they don’t even know where to start or how to calculate their net worth. If you don’t know where you are how are you going to get to where you want to go?
3. Don’t compare yourself to others
One of the biggest demotivators is to compare yourself to someone else. In the world of fitness, people wear their progress and hard work on their body. You can tell instantly when someone exercises and takes good care of themselves physically (this can also be deceiving when you add steroids to the mix). This is not the case when it comes to personal finances.
You don’t know if the person driving a fancy truck is financing it and is up to his eyes in debt and credit card payments. So it makes no sense to compare yourself to someone that you feel is more “successful” if you don’t understand their “inner game of personal finance.”
4. Don’t get complacent
One phrase I’ve heard frequently, especially among men is “it’s ok, we’re doing better compared to people my age, or in my class, or at my work.” How do you know? You’re comparing yourself, without actually knowing. This leads to complacency and becoming lax on your spending because you believe you are doing better than others.
When things are going well is when people don’t want to improve or change. It’s only in tough times when people will seek out help with their finances.
These steps have nothing to do with money or looking successful. It comes down to competing with yourself and bettering your personal situation. I wish it was as easy as 1,2,3. But in all reality, this goes deep into the human emotions and I want to help you master your emotions around money.
“In order to change the fruits you must first change the roots.”
Take responsibility for your situation, create a budget, track your net worth, don’t compare yourself to others and don’t get complacent. If you implement these steps starting today, you will start to have more confidence in yourself and in your finances, your situation will improve and you will start reaching your goals.
If you’d like help improving your finances feel free to reach out to me.