Friday, November 23, 2007

Our Journey To Financial Freedom #8 - My Personal Finance Mind Tricks

In early October, 2007, I announced that I had retired in my forties. As promised, I am writing a Friday series on "How We Did It," of which this is segment #8. ( #1 is about our childhood , #2 is about education, #3 is about working, #4 is about lifestyle , #5 is about goals, #6 is about staying on track, and #7 is about the role of luck.) This segment is about how I motivated myself by creating new paradigms, which made it easier to be fiscally tough. Here are some of the "mind tricks" I developed and used:

Admiring instead of owning. Somewhere in the journey, I realized that admiring something did not mean I needed to own it. An analogous situation is artwork in a museum. I very much enjoy seeing paintings by the masters, but I wouldn't want to own those paintings, even if I could afford it. Similarly, I admire home theaters, luxury automobiles, iPhones, and other wonderful things that my colleagues, neighbors and friends own. I am happy that they enjoy the items, am genuinely interested in the items, and am complementary about the items. However, in most cases, I don't translate admiration into a need to own it.

Making it a habit or automatic. Early in my career, I would target to have a small amount remaining each month in my checking account, which would be transferred to savings. In my mind, I wanted to have $10, $20, or more leftover each month. At first it was tough, but I soon reached having over $100 remaining each month. Once it became a habit, it was almost automatic.

Later, I did make it automatic. I started paying myself first, by transferring money into my savings at the beginning instead of the end of the month. By putting away part of every raise, I eventually achieved saving 20% of my monthly salary BEFORE paying any bills.

Association with an undesirable situation. I avoid using debt by convincing myself that it is the equivalent to paying more than sticker price for an item. Being a price negotiator, the thought of paying more than sticker makes me cringe, to the point that I don't think I would ever do it. With this association in mind, I easily keep myself from using debt.

While these "mind tricks" are not infallible, they work most of the time for me because they cause me to feel good for making a good personal finance decision for our future. And when I feel good, I usually am very motivated:-)

Here's the series:
  1. Our Childhood Preparation
  2. The Value Of Higher Education
  3. Making The Most Of My Job
  4. Lifestyle and Spending Choices
  5. Setting Goals, Developing Plans and Tracking Process
  6. Staying The Course
  7. How Luck Played A Role
  8. My Personal Finance Mind Tricks
  9. The Professionals We Used
  10. When Preparation Met Opportunity
For more on Reaping the Rewards , check back every Friday for a new segment.

Photo Credit:, Dawn M. Turner

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC


traineeinvestor said...

Mind games can be a useful tool to get things on track and to keep them going in the right direction.

Equally, they can be used for the wrong purposes - to rationalise bad spending or investing decisons.

Super Saver said...

Trainee Investor,

Good point that mind tricks can be used for both good and bad personal finance decisions. A goal for me is to keep most of them on the good side :-)