Hey everyone!!! đđ»đđ»đđ»
I hope youâve enjoyed your weekend, that youâre feeling rested, and youâre excited for the week in front of you. If not, itâs worth reflecting on why you arenât feeling that way, and what you might do to change that. Life is too short to just keep looking forward to the weekend and dreading the work week.
For the past few weeks, weâve been exploring what I view as the biggest mistake people make when changing something significant about their career; not having a solid foundation in place first.
A quick recap of where weâre at:
- âThis was my explanation of WHY itâs so important to build a foundation first, and what the key elements include.
- Then we explored the first foundational element: healthâ
- Next, we dove into the element of mindset.
Now this week, weâll investigate the critical role that finance plays in building this foundation.
Letâs go!!
Tim
đ Breaking Free: Hard Truths About Finance You Need To Hear
I’ve observed a common thread among many successful professionals: the belief that financial constraints are the chains that bind them to unfulfilling jobs. There is some truth to this line of thinking, which is precisely what makes it so dangerous. This type of thinking can keep you stuck in a job you shouldnât be in.
In this article, weâll explore the intricate dance between finance and freedom in our working lives. Whether youâre contemplating a bold career leap or seeking to reshape your current role, understanding the financial aspects of your decisions is key. Itâs way too simple of an idea to think that youâll just quit your job and âfollow your passionâ, going to do something that you think you love. Thatâs just a recipe for disaster. But staying trapped in a job you resent is not the answer either, but is another path to disaster.
The good news is that thereâs a better way. By learning some basics about the essence of money and building a plan, you can position yourself to craft your work life so that it goes way beyond something you need to do to put food on the table.
The Illusion of Safety
There’s a pervasive illusion that is rarely questioned: the illusion of safety in job security. Many professionals cling to their current roles under the belief that it’s a safe harbor, a guarantee of steady income. This is a false sense of security, nothing more than illusion.
Weâve all heard the adage that you shouldnât put all your eggs in one basket, and know that the key to mitigating risk is to diversify. Despite this knowledge, most people rely on a single source of income for financial security. That is a risky gamble in today’s dynamic work landscape. Jobs, no matter how secure they seem to be, can vanishâvictims of economic shifts, industry disruptions, or unforeseen circumstances. Companies get bought up. Companies shed employees when times are tough. Donât be naĂŻve and believe they will always take care of you; theyâll take care of themselves first. Itâs not evil or anything, just reality.
This misplaced sense of security can become a barrier, preventing us from exploring diverse income streams or pursuing more fulfilling career paths. Recognizing that job security is not an absolute, but a relative and tenuous concept, is crucial. Itâs about understanding that true security comes from adaptability, diversification of skills and income sources, and the courage to embrace change. By acknowledging this, we empower ourselves to make proactive choices in our careers, rather than being reactive to circumstances beyond our control.
The Poverty Mindset
We are in a cultural moment where many think that having money is some sort of moral shortcoming, that anyone that has money must have gotten it through something nefarious or unjust.
Thatâs not only a fundamental misunderstanding of what money is and how it is acquired, but itâs also quite a disempowering view.
This mindset can create an invisible ceiling, not just on our financial potential, but on our overall aspirations. If you believe that having money means that youâre immoral, youâll subconsciously sabotage your attempts to gain it. This mindset also leads to self-limiting beliefs like “I can’t possibly afford it.” or “People like me don’t become wealthy.”
Any time you have the thought âI could never afford that.â, stop yourself and reframe the thought into questions to ask yourself. Questions like:
- âHow could I afford that?â
- âWhat would I need to do to afford that?â
- âWho would I have to become to be someone that could afford that?â
Then instead of resenting the fact that today you might not afford something, reflect on ways that you might, if you put your mind to it.
Chance are that when you reflect on these questions, youâll discover one of two things:
- You donât want it as much as you initially thought once you stopped to consider what it would take to acquire it.
- Youâll discover a next step you might take to move yourself towards being able to afford it.
Either of those results is much more positive than just resenting the fact that you canât afford it today.
Money, in its essence, is a tool; a resource that can be used for good or ill, depending on the hands that wield it. Breaking free from the poverty mindset involves recognizing the truth that financial abundance and ethical living are not mutually exclusive. It’s about reshaping your relationship with money, seeing it as a tool for creating positive change in our lives and the lives of others, rather than as a source of evil or a marker of moral failing.
Financial (il)literacy
Money is a critical topic, one that has a massive impact on our day-to-day lives. Yet it is a topic that is not taught in schools and is a subject that many people shy away from learning more about. The financial world may seem complex and overwhelming, but thatâs largely a result of not taking time to learn the basics and build a base understanding.
If youâre going to spend about one-third of your time doing work to accumulate money, it is probably worth learning a bit about it.
Understanding the basics of budgeting, investing, saving, and even the psychology of money is not just beneficial; it’s essential for making informed decisions. You cannot make sensible choices about your career and your future without having a base understanding of finances, as you need money to survive.
Financial literacy is not something âfor the wealthyâ but is for anyone looking to improve their quality of life. It is a foundational cornerstone for achieving a life of freedom and fulfillment. Self-education in finance is not just about managing your money more effectively; it’s about taking control of our personal and professional life, giving you a tool to steer yourself towards the future you envision.
You donât need to go back to school or take a course in finance. You can get far simply by reading some books and financial-related news articles, which is a small investment that will pay handsome dividends. A couple of incredible books on money that I highly recommend:
- âThe Psychology of Money, Morgan Housel
- âI Will Teach You to be Rich, Ramit Sethi
Understand where youâre at
Do you honestly have a good understanding of your current financial state? Most people donât. Many people think they understand their financial state until you ask them a couple of basic questions. Then you realize theyâve been avoiding thinking too deeply about their financial situation, as it might be a bit of an eye-opener, telling a story theyâd rather not hear (been there!).
But you need to face it. Once you understand your position, you can start implementing changes to get you to where you want to go. The hardest part is to stare right at it and learn the truth. Once you understand where youâre at, you can start strategizing about changes you can make to improve your situation. Knowledge is power in this case.
You donât need to get overly elaborate and craft complicated, detailed budget plans. That is often just theatre, a way for you to convince yourself youâve got a plan and have things under control. But there are some basics that you need to know:
- What are your sources of income? (most people, just their paycheck)
- How much comes in?
- How much goes out each month? And roughly how much in each category of expenses?
- Out of your expenses, how much of them are discretionary?
- How much do you have in emergency reserves? (cash on hand or in a savings account)
- What is your net worth and is that number trending up or down?
Get an understanding of those relatively simple things, and youâll be way ahead of many people. Keep yourself up to date on those numbers, reviewing them regularly. It shouldnât become an obsession or anything, but spending an hour a month to go over this information will keep you informed enough to be making the right decisions.
Build a plan
Once you have insights into your overall picture, develop a plan. Again, keep it simple. It is easy to get overly elaborate here. Just decide how youâre going to allocate all your income. Ideally, youâll allocate a portion of that for savings. But when you first attempt this exercise, you might discover that your plan entails spending more than your income. That is obviously not a viable long-term strategy, and it may upset you to discover that youâre over-spending.
Donât be ashamed; it happens to many (maybe even most) people at some point, even to people with high incomes. Again, once you understand what is happening to your money, you can make informed decisions about what you want to happen to it. Change becomes possible.
Automate as much of this plan as possible. The less time you must spend on the logistical details of executing your plan, the more likely you are to stick to it.
Remember that your plan doesnât have to be all about cutting expenses; thereâs two sides to this. Reducing expenses is one obvious approach to improving your financial position, but you can also increase your income. Thereâs a multitude of options available today, more than at any other point in history. The internet and gig economy has made earning money on the side possible for so many. It may mean starting your own business on the side, providing freelance services somewhere, or even driving for Uber occasionally on a day off. There are opportunities everywhere for you to increase your income if youâre willing to put in the work and set aside your ego.
Debt is the enemy of freedom
We live in a society where excessive debt has become a cultural norm. Debt can be a useful tool when used properly, but it can also be a formidable enemy to your freedom.
While it’s common to view loans and credit as mere tools for achieving immediate goals or gaining possessions, the long-term consequences may tether you to financial obligations that limit your choices and opportunities. This societal norm of living on borrowed money creates an illusion of affordability, leading people (and governments!) into a cycle of debt that becomes increasingly difficult to escape.
It’s crucial to recognize that every dollar owed is more than just a financial liability; it is also a set of chains binding your future self to future work. This can have a substantial impact on your ability to make personal or professional changes in the future.
Taking on debt is effectively putting your future self into prison.
Reducing your debt pays one of the greatest dividends possible; peace of mind. Allocate as much of your income as you can to reducing your debt load, and over time, that will free you up to seize opportunities.
Viewing debt with caution and understanding its potential limiting impacts on your future choices will help you gain control of your professional life.
Define what wealth means to you
Many people equate wealth with the accumulation of material possessionsâthe latest gadgets, luxury cars, opulent homes. However, this confuses spending with actual wealth. True wealth isn’t necessarily about what you can buy, but about the freedom and control it grants over your life.
For many, including myself, the greatest wealth is having control over oneâs timeâthe ability to choose how, where, and on what we spend our most precious resource. This shift in perspective, from viewing wealth as material abundance to seeing it as the freedom to live on your own terms, is profound. Itâs about understanding that wealth can mean having the resources to pursue your passions, to support causes you believe in, or to provide for your loved ones without constraint.
Think about it, if you are making a ton of money working 70 hours a week at a job you hate, you barely see your family, and your stress levels are through the roof â are you wealthy?
Maybe thatâs the type of life you want for yourself. If so, no judgement from me. But I donât think thatâs what most people want.
Which is why itâs so important to figure out what you want. You need to define what wealth truly means to you, whether itâs financial independence, time freedom, or the ability to make a significant impact. This self-defined vision of wealth becomes your guiding star, shaping your financial decisions and career paths in a way that aligns what you aspire to.
Conclusion
Much like you donât just start building a house on unstable ground, neither should you undertake big personal or professional changes without having a solid foundation built first.
Key to that is having a basic understanding of financial concepts, knowing your current position, and having a financial plan to lead you in the right direction. If you try making changes without being properly prepared, youâre setting yourself up for trouble, as youâre likely to end up taking decisions that may be required in the short term to provide stability but work against your long-term vision.
Remember, wealth is not just measured by how much cool stuff you have in your life, but by the level of freedom you have. Itâs critical to know what your definition of wealth is, so that you donât work towards the wrong goals. Knowing what you need and want financially, and having a plan to work towards that, is an act of kindness to your future self. Financial instability is one of the top things that keeps people stuck doing work they donât like.
Keep in mind that the actual goal is not to manage your finances better, but to build a solid foundation upon which you can craft an incredible life, one that deeply resonates with your values and aspirations.
Your financial journey is uniquely yours, and it’s time to navigate it with confidence, clarity, and a renewed sense of purpose.
Quotation that I have been pondering
This quote by Robert Kiyosaki, author of the popular finance book Rich Dad Poor Dad, resonates deeply with the themes discussed in the above exploration of finance and its link to freedom.
“Financial freedom is a mental, emotional, and educational process.”
This quote underscores the multifaceted journey towards financial independence, highlighting that it’s not just about accumulating wealth, but also about transforming our mindset and emotional relationship with money. It aligns with the article’s focus on breaking free from the ‘poverty mindset’ and the illusion of job security, emphasizing the need for a holistic approach to understanding finance. This process of mental and emotional education is crucial in crafting a career and life that are not just financially sustainable but also fulfilling and aligned with our personal values and aspirations.
Journal Prompt
Reflect on your current relationship with money.
How has your upbringing, past experiences, and the prevalent ‘money myths’ in society shaped your financial mindset?
Consider areas where you feel empowered and areas where you feel constrained. What steps might you take to transform any limiting beliefs into empowering ones, moving towards a healthier, more helpful relationship with your finances?
Your Call To Adventure
Feeling stuck in your current role and ready to transform the role work plays in your life?
This is the adventure of a lifetime, and you are the hero of your own epic career tale. On every great journey, the hero has a trusted sidekick to keep them on track.
Think of me as your sherpa, experienced in navigating the daunting path of career transformation. I’ve guided many others, helping them attain heights they hadnât imagined possible for them.
Are you ready for your heroic journey? Iâm here, ready to help you ascend to new peaks. Let’s start this adventure together.
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