I hope you’ve weathered the lockdown and are itching to get back to normal – regardless of what the new normal is. I assume you’ve read my first two posts, Thriving After COVID-19: Discover Your Money Temperament and Thrive After COVID-19: Discover Your Money Temperament, and have a fresh perspective on your relationship with money. If you haven’t, doing it now will help you understand and take the essential steps recommended below.
The COVID-19 pandemic is undeniably a significant event. Over the next twelve to eighteen months, a new economy will emerge. The steps I recommend below will help you not only survive but thrive, in the new economy.
Money is too important for you to get wrong. The longer you wait, the harder it will be to recover from the impact of COVID-19. So take control of your financial future now.
Managing money today has never been more challenging. Human nature and the conventional wisdom about money conspire to take you off task. You live in a consumer-driven economy that is changing at the speed of life. Add to this the fact that today everyone is self-employed.
You are in charge. You’re responsible and accountable for a multi-million-dollar enterprise — your household. Do the math. If you work for 40 years and average $75,000 per year over that period that’s $3,000,000! Not considering inflation and all that techie stuff (oh yeah, and life happens), that’s still a fair chunk of change. So run your life like a business and don’t squander your time and money. With all the opportunity and money tools available today, you’d think we as a society would all be better at this. We aren’t — because we’re human.
In my first post, I defined the problem we all face with money. And in the second, I gave you a system to help make better money choices. It works, and it will work for you — if you use it. The power of the Money Behavior System is in its simplicity; a money strategy built around your behavior instead of trying to change your behavior to fit a plan. Hey, I’m a simple guy — make it too complicated, and it won’t work.
Here are my notes from my latest book, Discover Your Money Temperament, A Common-Sense Guide to Financial Security, and my two blogs to help you get started.
The problem. Humans are not wired to work well with money; therefore, you sometimes make terrible money choices. Your emotional feeling brain is in charge, and it’s often biased and wrong about money.
Remember, your biology, money beliefs, and culture conspire against you when you spend your hard-earned money. And the rules of money are changing – at the speed of life.
The solution. The Money Behavior System™
- Know your money values — what is most important about money to you
- Know your money temperament — how you think and feel about money
- Know your money knowledge — how you filter and process information
- Know your money strategy — clarity and focus
- Know your money action — high-leveraged execution
- Repeat until you get it right
I’ve worked with people and money all of my life. And the longer I work with people and money, the more I believe that financial success, wealth, and emotional happiness are all about behavior. The products and services you happen to own along the way leverage your time and your money. But the products themselves have little to do with your ultimate success. Here’s a list of things I’ve picked up about money that you should consider as you venture out into the new economy with your checkbook in hand:
- You can’t time the market, so don’t try.
- Stuff happens — often randomly – so know the risks and prepare.
- Given enough data, you can “prove” anything; numbers folks don’t always do numbers well, and it requires a computer to truly muddle things up.
- It takes a committee to build things that cost a lot and don’t work very well; beware of groupthink.
- Numbers scare us. You like a wonderful story more than a long spreadsheet (beware of the sales presentation with no numbers that puts your feeling brain somewhere you can’t afford).
- You can find data, numbers, and experts to support any position you take with your money. Don’t prove the wisdom of your money choice. Instead, try to prove it’s a dumb idea (I just ask my wife).
- Your mind, likes order and patterns — twelve months of high performance in a stock or mutual fund may, in fact, means nothing.
- Just because you saw it does not make it true (your analysis of the twelve months of excellent performance…)
- You like to trust experts — even when they aren’t.
- You’re not as smart as you think; just because you are good at one thing does not mean you are good at something else (listen up, brilliant professional people).
- Even though our brains like to make things simple and orderly, some stuff is just hard and complicated.
- Given enough time, you can rationalize anything — and you will.
- You love your stuff — and it’s worth more to you than anyone else’s.
- The financial media are the experts and have your interest at heart — sometimes…
- Money makes you do strange things, and it always will — but you can manage it.
- You have coaches for everything else you do; is money any less critical than yoga, skiing, golf…
- It’s all about your behavior; embrace your money profile and adapt. You’ll be happier – and in the long run, wealthier.
Steps to Take Now
Congratulations, you now know more about Money Temperament and spending behavior than most of the pros. Don’t squander your newfound knowledge. Use it to thrive in the new economy.
If you’re serious about your future, I recommend the following steps:
- You must know your strengths, the areas you may struggle with, and your ideal work environment. Connect with DreamSmart Academy and discover your Behavioral SuperPowers.
- Read, Discover Your Money Temperament, A Common-Sense Guide to Financial Security. This is your “How To” manual for better money behavior.
- Become a student of money behavior. Realize how you and the surrounding people make spending choices. Also, note how products and services are marketed to you and your reaction to their efforts.
- You are the CEO and leader of “YOU.” You are accountable and responsible for everything you do and failed to do.
- Commit now to thrive in the new economy.
Ted McLyman is the Director of Behavioral Finance, DreamSmart Academy, Founder of Apexx Behavioral Financial Group, and a Lt Col United States Marine Corps (Ret). He is also an award-winning and bestselling author. Ted’s latest book, Discover Your Money Temperament, A Common-Sense Guide to Financial Security, is the reference for this post.