What I’ve Learned From My Mastermind Group, Part 2: Financial Health

In Part 1 of this series I talked about how health trumps everything else in the pantheon of valuable goals to set.  Today in Part 2, I’m talking about a different kind of health vital to living your most successful life: financial health.

Financial health is a touchy topic for more than one reason.  First, we’re socialized not to talk about money.  It’s rude.  Second, talking about wanting more money feels shallow.  If you want to be a millionaire, that’s something you can barely talk about openly in certain company.  There’s also a perception that if you’re aiming to have a lot of money that you must be deficient in some other area.  As if we are supposed to just altruistically pursue our life’s purpose and then just shrug our shoulders and say “Oops” if we happen to run into some cash during the process. 

We share more information with our friends and families about our sex lives than we do about our finances.  As a result, people’s knowledge about issues of personal finance is extraordinary low.   People will make the largest financial decisions of their lives – buying a car or house, accepting a salary at a new job without a hint of negotiation, taking on six figures in student loans – without consulting a single person around them.  It is almost a guarantee that you have a friend who is right now making a decision that will be a financial disaster for them but you’ll never be able to advise them against it because we simply don’t talk about money. 

Our mastermind group decided to take a huge leap of faith and share a general overview of our finances with one another to see if there were ways we could help each other or steer one another towards wiser financial decisions: we each exposed our net worth (defined as total assets minus total liabilities).  You know what happened?  Wasn’t that big of a deal.  No wave of smugness or shame passed over the room after real numbers hit the table.  We all realized that we all have different starting points that don’t necessarily reflect where we will end up when it comes to finances.  And we were able to give each other real helpful advice. 

For example, most people know that if their employer has a 401k plan that matches their contribution, that they should contribute enough to get the match.  It’s free money, right?  16% of people under the age of 25 take advantage of their 401k match.  16%.  And I have a feeling it’s not 100% for people between 25 and 35, or 35 and 45.  This is something that we usually set in stone – we either contribute to our 401k or we don’t – on the day of new orientation at our jobs, and never talk about again.  Talking about your 401k contributions doesn’t exactly qualify as enthralling dinner conversation.  But people can give away literally hundreds of thousands of dollars over a lifetime by ignoring it.  And people either know it or they don’t.  Many people learned it from their parents growing up and assume everyone knows it.  The people who don’t learn it at some point don’t know they don’t know, so they never ask.   

There’s also this inexplicable shame when it comes to talking about money – we don’t want to admit we don’t already know it all.  It’s like admitting ignorance on an issue of personal finances says something about us as a person.  Guess what?  You don’t know it all.  I guarantee that if you gathered a group of 4 or 5 of your friends and had a serious discussion about buying cars, buying houses, investing, paying down debt, or credit card rewards, you would learn 4 or 5 new things in the first 20 minutes. 

What not to do: buy a car without discussing the terms you were offered because you’re scared sharing the interest rate/car price you were offered reveals that your credit score is less than stellar, and instead pay thousands too much for your vehicle; buy a house and sign up for a subprime mortgage because seeking help from those around you would be admitting you don’t know how to buy a house (even if you don’t); enroll in a graduate program without doing the math on how you’ll pay it all back and without discussing it with anyone because you don’t want to be talked out of something you’d love to do even if it means financial disaster in a few years.

Instead, do this: Humble yourself.  Recognize that you could be Warren Buffett and still have something to learn about personal finance.  Use your mastermind group or friends or loved ones as resources and run by at least 3 people any purchase/investment that costs more than $500, from a new HDTV to a house.  Talk openly about your 401k, your IRA, your investments, your credit cards, your interest rates, etc.  See if there is something someone else knows that can help you out.  The discomfort that comes from talking about money will be more than offset by the dollars that stay in your pocket as a result.

Scrap Your New Years Resolutions. Do This Instead.

I have mixed emotions about New Years Resolutions.  On one hand, there’s a lot I like about the idea of setting a New Years Resolution.  The New Year is a natural time for us to reflect on the past year and our lives as a whole.  We are naturally inclined to think about where we are in life and where we’d like to go.  The fact that it follows two major U.S. holidays (read: massive quantities being eaten) means the majority of us have a few extra pounds to get rid of.  And anything that gets us up off our collective butts and doing something to better ourselves is not all bad.  New Years is a great time to set goals to change your life.

There are some serious downsides to New Years Resolutions though.  Actually, make that one downside.  People never keep them.

There are a lot of reasons people fail at keeping their New Years Resolutions.  One of the biggest reasons is people set too many.  If you’ve read most of the posts on this blog, you know that I’m a fan of setting Just One Goal.  Another reason people fail at keeping their New Years Resolutions is they choose something vague like “I’m going to get in shape” as their resolution.  What defines in shape?  In shape by when?  How will you get there?  How will you stay accountable?  It’s no wonder most of those people will set the exact same resolution year after year.  Which brings me to another thing that scares people off of their New Years Resolutions.  To have kept it, you’ve gotta make it an entire year.  Trying to keep up with anything for a year is daunting.

So as the title of this post suggests, I have a better way for you to go after your goals starting January 1^st.  This way keeps all the benefits of the New Years Resolution but avoids the pitfalls.

Plan a 30-day trial.  Give a new habit a trial run.  Pick one thing that you will do for 30 days.  After that time period is up, you can choose to keep doing it or let it go, your choice.

If you have any end-of-the-year motivation at all, you can keep up with almost anything for 30 days.  Exercise every day for 30 days.  Track your spending for 30 days.  Count calories.  Spend 30 minutes writing.  Play the guitar 30 minutes per day.  Study French for an hour.

Spell out what you are going to do in as much detail as possible.  If you’re going to exercise every day for 30 days, what exactly are you going to do?  Walk 30 minutes on 15 days and lift weights 20 minutes on 15 days?  Aerobics for an hour each morning?  10 minutes of jump rope each night?  Make sure it’s doable.  When in doubt, Start Small.

Check your calendar and make sure you can schedule time on each day so you don’t miss a day due to poor scheduling.  Tell the people that need to know or will be affected by the time you spend achieving your thirty day trial.  Don’t bother telling the haters.  Post it on a sign above your bathroom mirror.  Burn it into your brain that you are going to succeed at doing what it is you set out to do each and every day of the next 30.

Each day you successfully complete your task for the day, X off that day on a calendar or a big poster in your house.  At the end of the 30 days, pat yourself on the back.  You’ll have a sense of accomplishment.  You’ll undoubtedly be better at whatever IT is that you chose to do.  Then you can make the decision if it is something you want to continue beyond the 30 days.

The 30-day trial works because it has an end in sight.  It isn’t vague like “lose weight,” it’s a specific activity that you’re going to participate in for a month.  It doesn’t take a ton of motivation to pick something that you want to do for a month.  There’s no lifelong commitment to be a star guitar player; if you don’t like your chosen activity after 30 days, you’re not stuck with it.

If you still enjoy your chosen activity after 30 days, you can choose to extend it for another 30 days.  If not, do something different for the next 30 days.  I can read for an hour each night for 30 days, and the next 30 days avoid fried foods.  Doing multiple 30-day trials is like taking a sampling of which activities bring the most positive change to your life.  Keep the activities that work best.  This next year, scrap the New Years Resolution.  Get better results by doing a few 30-day trials instead.

Get Rich Slowly on New Years Resolutions: One Problem, One Correction

There is no shortage of posts on New Years resolutions out in the blogosphere.  A lot of them follow the same old pattern of using January 1st of the upcoming year as the Day Everything Changes Forever and making a bunch of resolutions that are vague, ill-defined, and destined to be forgotten by the Superbowl.  One of these guys actually talks about 7 different resolutions he plans on keeping in 2011!  He’s making the exact same mistake I used to make before I realized that your best bet is to set Just One Goal.  I’ll keep tabs on the last guy and watch at the end of the year to see where he is (spoiler: he won’t keep all 7). 

One of the posts I found, however, stands head and shoulders above the rest: J.D. Roth at Get Rich Slowly gets it.  He talks about setting One Goal in his post, One Problem, One Correction.  A key point when talking about how he kept his 2010 resolution of getting in better shape:

“The main reason I was able to do this was that it was my only goal for the entire year. Nothing else mattered. I didn’t have other objectives clouding my view. I set one goal, and I worked hard to meet it. I picked the one thing in my life that most needed change, and I committed to changing it.”

The rest of the post is great, and talks about setting “SMART” goals, which is a topic that could be an entire book on its own.  Before you start putting together a list of all the things you think you’re going to change in your life simultaneously on January 1, 2011, read the entire piece by J.D.

Working to Relax

During this time of year, many of us take time off to relax, vacation and spend time with loved ones.  In addition to seeing relatives and other friends, many people spend a lot of time simply vegging out on their couch, watching movies, shopping, or other mindless activity under the guise that that’s what we need to relax.  I say if you really want to relax, how about doing some work during your break? 

Working to Relax?  Your initial reaction upon hearing that may be anywhere from groaning to shouting “sacrilege!”  I don’t mean work in the sense of getting up and going to the company you work for and clocking in.  I mean working on the projects that have been lingering in your life as a way of freeing up some of that mental stress that keeps you from truly relaxing. 

When you look around your house, whether you realize it or not, your brain takes notes of those outstanding to-do’s that are sitting there.  You know the ones.  The closet that you promised you would clean out and donate the things you don’t wear to Goodwill.  The kitchen pantry you were going to organize.  Cleaning out your garage or office or desk drawers. 

Each time you see that part of your house, it creates a little bit of stress in your mind.  It may be so small that it is barely perceptible, and you may think that it doesn’t bother you at all, but each undone item on your to-do list creates a little bit of stress.  Lots of little stresses add up.  Cumulatively, all of the undone things in your life may be weighing heavily on you, to the point that you feel overwhelmed and unsure of where to start.  It may also just be a few things that you’ve been “meaning to get to,” but it’s there, keeping you from resting in true relaxation.

When you’re busy with your normal work schedule, you always tell yourself that you will take care of those pesky household tasks when you have some free time, like a full day off of work.  When the holiday comes along, however, it’s easy to justify sitting on the couch and watching movies all day because you “deserve some time to relax.”  When you return to your busy work schedule with all those tasks still undone, it actually compounds the stress, and you go back to work feeling like you need a second vacation. 

If you have a few days off this holiday, instead of waking up and immediately kicking back on the couch with some leftover ham and a cup of eggnog, spend the first half of your day tackling some of those overdue housekeeping chores.  You’ll gain in a few different ways: you’ll remove the stress of that project that had been sitting around for days; you’ll feel a sense of accomplishment when you do sit down in the afternoon to watch movies or otherwise goof off, and you’ll feel more refreshed when it finally is time to go back to work.  Turns out, the best way to truly relax may be to get up and do some work.

Man vs. Debt: Introduction to an Inspiration

This will be the first time I’ve talked about Adam Baker from Man vs. Debt on the blog.   The subtitle for Baker’s blog, “Sell your crap.  Pay off your debt.  Do what you love.” reflects a philosophy that is near and dear to my heart: minimalism and financial independence. 

One of the biggest keys to making financially smart decisions and eventually becoming financially independent is not becoming frugal, finding sales, cost-cutting, or coupon-clipping.  Sure, all those things can help, but they are band-aids for the killer virus that is consumerism.  The biggest key in my mind?  Learning to want less. 

Adam Baker is a young guy, married with a baby daughter.  In 2008, Adam and his wife had “two car loans, several credit cards, a line of credit at the jewelry store, a loan from the parents, and enough student loans to take down an elephant.”  They had also financed a 8-unit apartment building with no money down.  After learning how to want less, they were able to get rid of all of their non-student loan debt, sold off all their crap, and started focusing on what they loved. 

In 2009, after getting rid of all their stuff, they packed up their last few things and headed with their daughter to Australia, to travel, write, and live.  They have been shockingly transparent with regards to their finances, which is great.  You can see that they don’t make a ton of money, but then they don’t need a ton either.  They’ve gone off the grid and are independent of normal 9-5 jobs because they learned to need less.  Lots less.  Right now, they own 144 things.  This includes counting each pair of underwear separately.  I’m not kidding. 

Still, to me the Bakers are living a dream life.   They are able to go where they want, when they want, and do what they want.  They got there, however, not by coming up with a killer business idea or inheriting millions, but by learning to respect money and by rejecting a lot of what society leads us to believe we should be doing. 

There is a ton of great stuff on Adam’s site, but I found a great post to introduce him that fits right in with what the Mastermind Project is all about:  What makes you cry tears of joy?  Do that.