A ‘money guy’ imparts a fresh perspective of finances — and reveals an interconnected roadmap to redefining ‘true abundance’
Money may be a cornerstone in your perpetually evolving financial plan, but to what extent is it an essential ingredient for living a rich and abundant life? And ultimately, can money buy you happiness?
As you ponder these questions, you may find that rich is relative, happiness is subjective, and that money can facilitate abundance. But while our answers may be as diverse and unique as each individual in our global society, we can all begin by first stepping back and asking ourselves how we define ‘abundance’ — and how we keep score.
What makes one feel abundant? Bank account or inner peace — can we have it all? I think so… and that’s not a pie-in-the-sky notion. But it requires some self-awareness, reflection and showing up for it all. Mindfulness is not just for yoga mats, it can also be implemented into our interactions with our finances.
I’m a ‘money’ guy, but I’m also a man who knows that without self-care, family love and contentment — my bank account isn’t going to bail me out.
True abundance is realizing joy from the quality of your experiences and relationships, regardless of how much money you earn or the wealth you accumulate. Money is simply a tool that can directly or indirectly impact the quality of those experiences and relationships, for better or worse. Merely pursuing money for the sake of accumulating more of it can be counterproductive and may actually be harmful to your health (e.g., stress) and relationships (e.g., neglecting key personal relationships by spending excessive time on work that you don’t perceive as meaningful and/or is not in alignment with your core values).
Setting Up for Success
Once you’ve defined ‘abundance’ in the context of your experiences and relationships you can immediately start setting yourself up for success by harmonizing your money, your mindset and your values.
Monthly Cash Flow: From a financial perspective, we live in a monthly society, so it’s important to establish a strong financial foundation for creating true abundance by generating more monthly cash flow than your monthly expenditures (living within your means). But how?
Optimizing your most valuable cash flow producing asset… YOU
If you have a career or own a business, guess what your most valuable cash flow producing asset is? It is YOU. So, prioritizing and consistently investing in your intellectual growth, personal and professional networks, and health is vitally instrumental in creating sufficient cash flow and true abundance. Note: Proper sleep, nutrition and physical activity not only promote wellbeing, but also boost productivity!
Aligning your expenditures with your values.
Your bank statements and credit card statements are a reflection of your values from a financial perspective. You value your time, especially as your responsibilities expand. And unless you are living on passive income, you trade your time for money, even if you own a business and actively manage it.
Spend some time each month reviewing your bank statements and credit card statements. Highlight any items of questionable value, especially if they are recurring monthly expenses for products and services that you rarely use, and consider cancelling them immediately. Bonus: this practice will also assist you in promptly identifying incorrect charges (e.g. duplicate billings) and fraudulent activity in your accounts.
Even if you don’t want to look at your statements (for example, if you have debt or feel ashamed about how little you have) — shifting your practices can also help you shift your relationship with money in a favorable direction. Remember, not looking doesn’t shift anything in your life or your bank account.
Financial Safety Nets
Protect your most valuable cash flow producing asset (YOU).
If you are unable to work, then you’re also unable to generate cash flow. One of the most effective ways to protect against this type of personal financial crisis is to have adequate disability insurance coverage. Policies vary regarding several factors, including:
- Definition of disabled: e.g., unable to perform work in your chosen occupation vs. unable to perform work at any job.
- Waiting period (amount of time before benefits begin).
- Percentage of salary replaced (e.g., 60% of base salary).
- Term of coverage (short-term policies typically pay up to one year whereas long-term policies may continue providing benefits until the disability ends or until retirement).
Being able to tap into a cash reserve when unfavorable financial circumstances arise can mitigate the impact of financial and emotional stress (e.g., unemployment, home and auto repairs, medical expenses, and covering the waiting period for disability benefits).
Bonus tip: Once you’ve accumulated enough cash to cover at least 6 months to one year of living expenses, consider allocating a portion of your emergency fund to take advantage of unforeseen opportunities!! I.e., an ‘Opportunity Fund’.
Minding Money Matters
Purposefully investing a portion of your monthly income in (a) your income producing abilities (e.g., expanding your professional skills with professional continuing education and attending conferences or launching a side hustle), and (b) your financial future (retirement plans). Regularly contributing to an employer-sponsored 401k plan or Individual Retirement Account (IRA) can help you save on taxes in the short term by deferring tax on a portion of your taxable wages and expediting the growth of your retirement assets by deferring taxes on investment income.
Employer matching: Some employers match your 401k contributions up to a certain percentage of your salary (e.g., up to 6%). If your employer matches contributions to your 401k plan, then try to at least contribute enough to take advantage of the matching feature. It’s like receiving ‘free money’ toward your retirement.
Index funds: These are mutual funds that track a benchmark like the S&P 500. The S&P 500 is a group of the 500 largest companies in the U.S. ranked by market capitalization (Shares Outstanding x Price per Share = Market Capitalization).
Index funds are considered passive investing because they do not require investment analysis and stock picking skills to manage. By definition, these funds simply invest in stocks (or bonds) that make up the index that they track. Index funds also charge lower fees because they cost mutual fund companies less money to manage.
And there’s more… index funds like the S&P 500 have historically generated higher returns than most actively managed mutual funds, whose objective is to outperform their respective index/benchmark. It’s like paying less for better results!
Cognitive Biases: Being consciously aware of your core values and living in a way that respects those values can fast track your life toward ‘true abundance’. But even the most self-aware, well-intentioned person is susceptible to their cognitive biases including overconfidence bias and recency bias.
Overconfidence Bias is the subjective perception that your knowledge, skills, judgment or abilities are greater than they truly (objectively) are. E.g., a study on overconfidence bias revealed that 93% of drivers claim to be above average.
Left unchecked, overconfidence bias can cause you to make inaccurate evaluations and unfavorable decisions, especially for situations that require objectivity such as investing in the financial markets. E.g., you may practice at the elite level of your profession, but that level of professional excellence does not automatically translate into immediate expert proficiency investing in the financial markets.
Develop a sharp awareness of your cognitive biases by noticing how these biases influence your thoughts, decisions and actions.
E.g., on a personal note, I sometimes catch myself being influenced by another cognitive bias, recency bias,while watching an episode of one of my favorite TV series including Billions and Game of Thrones.
For the final season of Game of Thrones, HBO produced some episodes that were arguably on par with feature films in terms of writing and cinematography. As I watched these larger than life scenes play out in HD I’d notice myself exclaiming phrases like: “This is the best series ever!” and “The writers for this show are absolutely brilliant!” and “This is outstanding cinematography!!”
Yet, a few weeks later I found myself making similar ‘best ever’ statements during the final episode of Billions, Season 4, especially as complex storylines intersected and lead to the ‘big reveal’: “That plot twist was awesome! These screenwriters are the best ever!!!”
No harm done in the context of commenting on a TV series, but how could recency bias influence investing decisions when your hard-earned money is on the line?
Recency Bias can cost you dearly if you make decisions involving significant long-term financial consequences based solely on recent circumstances, especially in markets in which you have little experience.
Speculators who staked large portions of their assets on the rising Bitcoin trend in the autumn of 2017 experienced a reversal of fortune in 2018. After reaching all-time price highs near $20,000 in mid-December, Bitcoin prices began to decline in late December 2017 and continued on a downward trend to around $6,000 in 2018 and did not even rise above $10,000 (half the all-time price high) until the summer of 2019.
By developing mindfulness in the context of your personal finances, prioritizing the care of your most valuable asset (you), and aligning your purchases with your values, you will gain confidence in managing your time and money in a way that serves your best interests.
And as your confidence grows so will your belief that you can control your own destiny and gain the requisite resources for creating and experiencing true abundance throughout your journey.
Due to the nature and location of our jobs, many of us generate income by exchanging most of our waking hours for a salary. As a result, commuting to and from work, time on the job, and addressing our other personal and professional responsibilities can leave little time for self-care and nurturing key relationships.
But what if you could recover some of your valuable time by reversing the time-for-money paradigm?
Specifically, you can use money to ‘buy time’ in little ways each week by delegating responsibilities like laundry, housekeeping, and dog walking. It’s like playing the role of CEO in running the business of you(i.e., your life). Successful business leaders ranging from small business owners to CEOs of major corporations leverage this principle every day. Even though they may be the ‘best suited’ to handle certain lower level tasks, they realize that it is not the best use of their time. So, they ‘buy time’ by hiring employees/independent contractors and investing in technology. Think about where you can buy back some time for yourself.
When I was younger, I performed many tasks including landscaping, car washing and housekeeping. But now that I have significantly more family and professional responsibilities I decided that handling those tasks myself is simply not the best use of my time. Instead, I ‘buy time’ by delegating (paying someone to perform) those tasks and then allocate my ‘purchased time’ to relationships and experiences that I value. On a practical level, it also allows me to focus on areas where I can make more money and support others doing jobs that support me (actually both of us) — a win/win for all.
Money can also cushion significant life transitions like career changes, parenting, or launching a business.
I saved and grew my investments during my 20’s to a point where I was able to pursue a career change (in health & wellness) in my early 30’s before returning to a career in finance.
As you transition through various phases of your life, your definition and perception of ‘true abundance’ may evolve. Coincidentally, we live in a time where even money is evolving, from bills and coins, to digital currency to cryptocurrency. And while money will likely continue to have a place in our lives, keep in mind that it is merely a tool that has no intrinsic value — its value is only in what you exchange it for.
As you pursue and experience ‘true abundance’, mindful money management can facilitate your ongoing journey of self-discovery, self-expression and meaningful connections.
You may also enjoy reading How to Do What You Love and Make Money by Heather Nichols