- Stop to think for a second about how to tell you're
doing well financially? Not someone else. you personally. What does that measurement look like? Maybe that you have an emergency fund, no bad debt, max out your Roth IRA or 401k. You make more money than your
wife's sister's boyfriend, or possibly that you're not
living paycheck to paycheck. But I think that there's
a better way to determine how you are doing financially. In fact, after working with many people on their personal finances
over the past few years, I've uncovered better ways to gauge the health of your finances that are not so obvious, and
I want to share 'em with you. While all of these are a way to tell how you are doing financially, I think that it misses one big thing. We are all at different
points on this long journey of doing smart things with our money. It's easy to assume that
doing well financially is an all or nothing game. That to be successful you have to fully unlock
each of these achievements or else you are a complete loser, failure, scum of the earth, but it's not. And I'd argue that setting these sorts of financial destination expectations while we're on the path towards some level of
financial independence, will leave you feeling like
you are always coming up short or falling behind. After noticing this what
I'll call end goal problem, in the people that I've worked with, I've had to come up with different ways to help them measure where
they're actually at financially. Take for instance, someone who is focused
on a specific outcome. So let's use increasing
your income as an example. If Joe makes $60,000 right now but wants it to be $100,000 then how is he doing financially in the context of making more money? Well, if Joe isn't putting in effort, then I'd say he's doing a pretty poor job. Now, on the other hand, if he's actively working through a plan to increase his income, then I think he is doing well financially. No, Joe hasn't hit that
final goal of $100,000 which might actually take
a few years to achieve. But every day he puts in the work towards making that number
a reality, which is a win. In the book "Atomic Habits," James Clear calls this sort
of thing, casting a vote. He says that, "Every
action you take is a vote for the type of person
you wish to become." Therefore, achieving some financial goal is less about the outcome
and more about the identity that you cultivate along the
way through daily practice. So Joe might be working
through this income plan using an Up, Out, In framework
for increasing his income. Every week he's focused on a plan within his current employment
to move up in the company, or he's focused on a plan
to increase his income by finding new opportunities outside of his current employment. Or maybe he's working through a plan to develop an internal skill
to increase his monetary value to the outside world in general. If you haven't fully checked off the box for what you want to achieve financially, but you are actively working
through a plan to get there, then yes, you are doing well financially. So keep going and don't stop. But the plan you are
actively working through has a lot to do with
understanding the game you actually wanna play. I see this trip up so many people, and honestly, that
includes myself as well. We are all bombarded with what
everyone else in the world is doing financially. Some of them we know personally and others are randos on the
internet who we'll never meet. This person just got a new car, that family just bought
a house that's twice as big as their last one. This dude is bragging on the internet about how he made $2
million by the age of 30. Somehow what we see these outsiders doing starts to influence what we are doing and we end up playing their
financial game and not ours. But do you actually know what game those individuals are playing outside of what's visually obvious? And are you sure that their game is the one that you want to be playing? Because if you don't have the
answers to those questions, then it would be like
going into a football game and trying to play it using
the rules of a basketball game. It doesn't make any sense. I'd even bet that most other people have no idea what they want. They're just operating based on impulse and what they see everyone else doing. So you trying to copy them is like a real life version
of "The Human Centipede." You just end up with a stomach full of someone else's recycled garbage. I'm by no means implying
that the financial life everyone else is pursuing should be considered bad or wrong. In fact, I encourage
you to use it as a guide to help you figure out
what you do and don't want. People who are doing well financially have clearly defined their game and they measure themselves
based on those rules. Okay, so you could afford a
$30,000 car like this guy, but cars are not that important to you. So you choose to spend $20,000 instead. You could afford to buy a home like that nice family over there, but you value your time, so you decide to rent
instead because owning a home comes with a lot more baggage
than most like to admit. If you don't choose the financial game that you want to play, then the world will choose it for you. Next thing you know, you'll be sitting there
feeling unfulfilled because you are living
someone else's dream life and not yours. But to know what game you wanna play, you need to have a good understanding of what is enough for you. In John Bogle's book, "Enough," he tells a story about a conversation between two writer friends at a party put on by a
hedge fund billionaire. As they both sat there on the outskirts of the
party to take a break, Kurt leaned in to inform Heller about how this billionaire
made more money in a single day than Heller had earned from his very popular book,
"Catch-22" over its existence. This caught Heller a little by surprise and he responded by saying, "Yes, but I have something
he will never have, enough." Now, I've never actually
read "Catch-22" before, but it's become an American classic and by the 25th anniversary has gone on to sell more
than 10 million copies in the United States. That sounds pretty darn successful to me. The word enough is a funny one because on the surface it
implies that you've settled. There's no reason to try to achieve more because you have what you need. But if Heller truly
believed that he had enough, then why did he go on to
write five more books? Because pursuing more is perfectly fine as long as you don't become
a slave to it in the process. Having enough represents the balance between desire and satisfaction. It's not an exact science though, and mileage may vary
depending on the person. Think of it like the
thermostat in your house. Everyone's set point will be different based on many different factors, so there's always going to be
wiggle room in the numbers. But what we know for sure is that there is such a thing as too much. If you can figure out what
is enough for yourself, then you are doing well financially. Defining what is enough is downstream of one key driver for everything we've talked
about up until this point, and I think that it might be the most important one out of them all. Imagine we have two people. Ethan is investing a
little bit for his future, but he's taking a more passive, kick the can down the road
approach to his money situation. He has debt and pays
minimum payments on time, but largely tries to avoid
looking at the balances since all of this money stuff kind of makes him feel
anxious and overwhelmed. Plus, with all of the negative
content that he consumes, he's convinced that his
future is pretty much screwed. The price of everything
is constantly going up. Social security is running out. He assumes that he'll
probably die sick and broke because the healthcare system in the US isn't getting any better. And he has lost faith in the
people running the country. There's no point in trying to progress. On the other hand, we have Michael who is in the same financial
situation as Ethan, but he does things a little
differently with his money. Michael is constantly working
towards increasing the amount that he's investing and started
to pick up some side work to get those bad debts paid off sooner. While he acknowledges the
potential shortcomings of the same things Ethan
worries about in the future, he decides to approach his finances with a more proactive mindset. The thing that separates Ethan, who isn't doing well financially and Michael who is doing
well financially is agency. You see, Michael knows that he hasn't reached
his full potential yet, but he has made a conscious choice to take full control of how his
future is going to play out. He's decided to take responsibility for his actions and inactions. While Michael knows that there
are many outside influences working against him,
this isn't anything new. History is full of endless examples showing why the future
didn't look that bright, but here we are. It's never been easier to connect and interact with anyone across the world. Food is readily available and can be acquired extremely quickly. Transportation is easily accessible. And everyone has the ability to make money using the phone in their pocket. It's not perfect, but
no one said it would be, and it sure as heck is better than living at any point in the past, trust me. I've never met someone who had agency who decided
to shape their own future and didn't improve their financial life in one way or another. So if you are someone who
lives your life with agency and you really believe that you do in fact have an impact on the way
your future plays out, then you, my friend, are
doing well financially. But to actually get to a point where you have agency with
your financial future, you need to understand that this one thing and that is your personal psychology, it drives all of your decisions no matter how big or small
your account balances are. We are all generally the same, but what makes each of us unique is how we think, behave, and
react to different situations. It's why someone can have
millions of dollars in the bank and still feel insecure
about their finances. It determines the habits that we have around spending and saving money. And it's why some people decide to take more risks with their
money while others don't. Beliefs about money are ingrained in us from childhood experiences
and play out as we get older. The good news is that they can be changed if they're negatively
impacting our behavior. Recognizing and understanding
these deep-seated beliefs about money is the first step towards doing well financially. It involves uncovering the narratives that we've been telling
ourselves about wealth, success and security. Are you holding on to a scarcity mindset, afraid that there will never be enough? Or are you trapped in a
cycle of addictive spending, attempting to fill some emotional void with material possessions? Identifying these patterns
is very important, but it's not just about uncovering these unhealthy beliefs about money. We also have to actively overcome them. Insanity is doing the same
thing over and over again and expecting different results. This might mean challenging
those long held beliefs, altering our behavior, and consciously deciding
to adopt a more positive and abundant mindset towards money. Ultimately, mastering
your personal psychology around money opens up the
door to financial freedom. It's not just about accumulating wealth, but also about creating a life that's rich in experience,
satisfaction and happiness. By understanding and reshaping
our attitudes towards money, we unlock the potential
to live more abundantly. Making informed decisions
not only benefits ourselves, but also the people around us. If you want to improve your
psychology around money, then I'll send you my best tips for free down in the description below. I'll see you in the
next one, friends. Done.
