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Your 2023 Financial Superpower: Part Two

Greater Than Financial | By Wakefield Hare | Fri Feb 03 2023
Blurry Vision

“You can’t hit what you can’t see” is a phrase often heard in sports. I say it often to the tennis players I coach at Savannah High School. Seeing clearly (observing truthfully) is such a crucial first step in all endeavors. 

Your management of your resources, your money, is one of your most important endeavors. But life throws so much at us, that very few can see clearly where they are with their money. If this is you, know that you’re not weird! You’re normal! But sometimes normal is dangerous. And in this case, fostering awareness of our resources can push out the two headed Financial Destroyer. One head is greed, the other, fear. 

All nice talk, but how does resource awareness work on a practical level for you and your family? In my mind, I picture a hierarchy. 

Base Level: Cash Flow

The foundation is an awareness of your cash flow. What money is coming into your control and what money are you sending out to others?

Most could guess the best tool available to help gain awareness of cash flow: budgeting. But there is even an easier step that those who have failed at budgeting before can access that will help tremendously. Examine your statements. Banks and credit cards. Take 5 minutes to actually look through the statements that are already produced for you. 

It’s a lot to ask somebody to adopt a whole new budgeting system and financial management way of life. But would you be willing to take 5 minutes to read your money story for the past month? What if I promised it will be very powerful to do so, potentially life altering? Do you think you could learn anything?

If you want to go beyond just reading your spending story, that is where budgeting can gain you incredible, refreshing money confidence.

I still use a legacy version of YNAB, which you have to dig in the recesses of the interwebs to find, but I would recommend YNAB to most people who want to be better budgeters. Their software is really good and not overly priced. But the software isn’t why YNAB changed my own financial life. 

What changed for me was a change in perspective and it can be summed up in 2 bullet points:

  • Give every dollar a job

  • Embrace your true expenses

It was particularly that second one that took me from financial advisor budgeting hypocrite to a budgeting proselytizer. I’ll be posting some video content digging deeper into those two simple bullets soon.

If you stop there and gain clarity on the money passing through your hands, that might be enough to level you up. However, it’s worth it to keep climbing the hierarchy.

Next: Short Term Needs

If you’re reading this, it’s nearly a guarantee you have savings, probably sitting in a mixture of cash at home, a checking account, and a savings account. Great, good job.

But it’s very common for even the smartest people to have no clear purpose (aka no clarity) on the “cash” they keep (I use the term “cash” interchangeably with savings/short term savings). 

If you actually budget according to the 2 bullet points I listed above, you actually automatically begin to create purpose for your cash. How? Giving every dollar a job includes all the dollars you have in your checking and savings accounts (and maybe even the cash currency you keep close by). 

Whether you are successfully clear on your short term resource needs depends on your answers to these two questions:

  1. What are my short term resource needs?

  2. How much short term resources do I have access to?

Not rocket science, but very few people I know can answer those two questions clearly?

Is it possible to be in a good position to meet your short term needs without answering those questions? Absolutely, and this probably describes you. It describes most I work with. However, without clarity on those questions, your family is draped in an uncertainty that is fostering the virus of fear. And one of the two spouses in your family is fighting anxiety over that feeling (and the other is joyfully oblivious or irritatingly optimistic!). 

So what are you to do? Take 15 minutes to answer those 2 questions and then, and this is important, write it down (I count putting it on your phone or computer as writing it down). If it only exists in your head, the fallacies of our brains can distort things easily, and rot the fruit from the whole exercise. 

There are those who can successfully think and act for long term needs without addressing the two base levels. You probably know a few examples of such types. It’s not about whether or not skipping over those two foundational levels will work: it certainly can. It’s about how often it will work. And I believe to only set your sights on large scale investments while ignoring first things first is like building your house upon the sand.

The Peak: Long Term Needs

Who is better prepared for today? The person who has planned for this day for 10 years, or the one who only started planning for it this morning? As long as the former is able to stay flexible with plans changing (which is inevitable) then they will always have an advantage over the latter.

So what does awareness look like when it comes to this ultimate financial planning level: the long term? 

Answer this: how can a step be purposeful if there is no destination? Sure, a step in any direction could be about discovery, trying to find your heading, but if those discovery steps last indefinitely, then there is no purpose, only wandering, languishing. 

Long term need awareness starts with vision. Vision is the ability to imagine the future. And the more vivid the images, the clearer the vision will be. The clearer the vision, the better able to define the steps to make the vision a reality.

But there is another side of the “long term” coin. And it can be very difficult to navigate. Why? Because this world provides infinite possibilities of where to invest resources that are dedicated to a long term purpose. With so many possibilities, it becomes a near certainty that you will not have the “best” investment by any measure. 

Therefore, it’s not helpful to strive for the best. What you need is to find what works. What works is beyond the scope of this article. However, there are clear investment philosophies that give clear investment strategies that have stood the test of time. Having a clear, consistent investment strategy has given me abundant peace of mind in a chaotic investment world. And a clear framework to keep our human tendencies in check is essential to long term investing success.

JL Collins has created an entire website that summarizes the investment philosophy I’ve been trusting for the last 8 years. It’s simple and more importantly, it works.

If you’re unable to develop and believe in your long term investment strategy, this is a great opportunity to get the input of a professional. A little can go a long way when searching to gain awareness and get clarity.

There is plenty for you to do to develop your financial superpower this year. Becoming more aware is a great way to frame your mission because it’s simple and achievable. And every ounce of progress can mean great gain. You’ll never be perfectly clear on anything in this life, but your strivings matter, and are working, even when it doesn’t seem like it! Keep going!