Erik Carter, Contributor
Feb. 27, 2023
Do you ever wonder why it’s so hard to do what we know we need to do, whether it comes to diet and exercise or budgeting and other areas of personal finance? In her new book, Money Strong, Financial Finesse CEO Liz Davidson writes about how to set yourself up for financial success, not by trying to change your behavior through sheer willpower but by understanding and refining your “money script,” establishing your financial identity, and using things that drive your personal success to accelerate your financial progress.
Here are the steps she outlines:
1) Identify and revise your “money script.” Your “money script” is the subconscious set of attitudes, beliefs, and values that influence virtually all of our financial decisions, perhaps without us even realizing it. Start by thinking about how your family, culture, and overall experiences shaped your ideas about money. Write down the key lessons from each of the major influences and look for an overall pattern. What are the positives that are helping you, what is hurting you, and how do you want to intentionally view and manage your money?
For example, my family always stresses the value of health coming first, so growing up, my parents would always be willing to splurge when it came to anything health related. After all, what good is money when you’re not healthy enough to enjoy it? In my own personal experience, I learned that buying material things for luxury or status gave me only short-term satisfaction and that I quickly acclimated to having them. In fact, owning expensive items just increased my stress and anxiety that they would be lost, stolen, or broken. I found that experiences, especially with family and close friends, gave me much more happiness.
As a result, my money script is that money should be largely used to promote health, relieve stress, and facilitate social interaction rather than to pursue luxury or status. I tend to spend money to avoid physical discomfort, save time, and enjoy experiences with family and friends. Fortunately, none of those cost me much and so I’m able to save a good chunk of my money towards financial independence, which is another way to further reduce stress in my life. (Studies show that the anticipation of a vacation can often bring even more pleasure than the vacation itself and I sometimes wonder if that’s true in my case for financial independence as well.)
2) Create your financial identity. Think of how a vegetarian automatically knows not to eat meat because it’s part of their identity. Having a financial identity similarly helps you to automate your financial decisions since they become a part of who you are as a person. The seven financial identities described in the book are a natural investor, a bargain hunter, a minimalist, a planner, a giver, an automator, and a hybrid. You’ll have to read the book to learn more about each and find out which one best describes you.
I’m personally probably a hybrid of the natural investor and planner, which makes a lot of sense given my profession. As a natural investor, the book says I’m future-oriented, a big picture thinker, focused on the bottom line, live by “progress vs perfection,” and independent. That certainly describes my interest in achieving early financial independence. As a planner, the book says I find people looking tme to make plans, love checking things off to-do lists, feel most comfortable when in control of important decisions, create new plans as a way of adapting, and find planning fun. This could explain why I enjoy financial planning for both myself and others.
3) Use your bright spots to achieve financial freedom even faster. The idea of “bright spots” is to discover the things that you’ve done that make you successful in other areas of your life and then apply them to help you achieve your financial goals. To do that, think of at least three of your accomplishments in the face of great difficulty and ask yourself the following “how” questions:
How did you motivate yourself to take action? How did you hold yourself accountable to stick to your plan? How did you reward yourself? How did you recover from setbacks? How did you remove triggers and have an environment that supported your success?
Several times in my life, I had to lose a lot of weight that I gained. Fear of continuing to gain weight and a desire to be more fit and healthy motivated me. I held myself accountable by weighing myself every day and the lost pounds were their own reward. I recovered from setbacks (not sticking to my diet or missing a workout) by understanding that they were a natural part of the process. I removed triggers and had an environment that supported my success by not buying groceries that didn’t fit my diet so I wouldn’t be tempted and by signing up for workout classes that forced me to exercise at specific times.
Saving money is very similar to me. A desire to be financially healthy and eventually independent motivates me. Checking my net worth periodically holds me accountable and seeing the progress is its own reward. I recover from setbacks (overspending or suffering investment losses) by understanding they’re a natural part of the process. I restrict myself to only buying certain things (for both consumption and investment) to avoid temptation.
When it comes to our personal finances, the hard part is often not knowing what to do but getting ourselves to do what we know we need to do. Practically any human being understands the concept of “easier said than done.” That’s because we too often try to work against our natural human inclinations. By using these techniques, you can help set yourself up for financial success by working with your natural inclinations rather than against them.
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