Finance for the People

1. Acknowledge Your Weirdness About Money

One common thread regardless of gender, race, sexual identity, political affiliation and socioeconomic background is that people are weird about money.

Universal Weirdness. Everyone has a unique and often complicated relationship with money, shaped by emotions, beliefs, and experiences. This "weirdness" stems from a mix of negative emotions, lack of financial knowledge, and societal inequalities. Recognizing this is the first step to improving your financial life.

Capitalism and Consumerism. Modern marketing exploits our unconscious desires, driving us to make irrational spending decisions. This constant manipulation, coupled with societal pressures, contributes to our distorted relationship with money.

Internal Environment and Identity. Our beliefs about money, often formed in childhood, significantly influence our financial behaviors. Unearthing and challenging these subconscious beliefs is crucial for breaking negative patterns and achieving financial empowerment.

2. Gratitude Dampens Scarcity, Amplifies Abundance

The antidote to scarcity is gratitude.

The Power of Gratitude. Practicing gratitude shifts your focus from what you lack to what you have, fostering a sense of abundance. This simple practice can rewire your brain, enhancing happiness, reducing depression, and strengthening resilience.

Grateful Flow Exercise. A simple yet powerful technique involves closing your eyes, focusing on your breath, and identifying three things you are grateful for, paying attention to the physical sensations of gratitude in your body. This exercise can be done in a minute or less.

Combating Scarcity. By consciously cultivating gratitude, you can counteract the scarcity mindset that often drives poor financial decisions. This shift in perspective allows you to make more rational and empowering choices.

3. Separate Spending to Protect Yourself

Paco’s law says that “your spending will equal what you have available to spend.”

Paco's Law. This principle highlights the tendency to spend all available funds, making it crucial to create systems that limit access to money earmarked for specific purposes. This is especially true for those prone to overspending.

The Anti-Budget System. This involves setting up separate checking accounts for "Bills & Life" (essential expenses) and "Fun & BS" (non-essential spending). By allocating specific amounts to each account, you create a framework that eliminates unnecessary spending decisions.

Funding and Maintenance. Fund each account with the necessary amount, either through automated direct deposits or manual transfers. Regularly monitor account balances, especially the "Bills & Life" account, to ensure sufficient funds are available and to identify any potential overspending.

4. Deconstruct Goals into Manageable Behaviors

This year, my goal is to have no goals.

Beyond Traditional Goals. While financial goals can provide direction, they can also be limiting and rigid. A more effective approach involves deconstructing goals into specific, manageable behaviors that align with your values.

Focus on Processes. Instead of fixating on the outcome, concentrate on the processes and systems that will lead to the desired result. This shift in focus allows for greater flexibility and reduces the pressure of achieving a specific target.

Consistency and Momentum. Consistent effort, even in small increments, creates momentum and compounds over time. This approach fosters a sense of progress and makes the journey more fulfilling, regardless of whether the initial goal is reached.

5. Earning More Requires a Shift in Mindset

You can’t out-frugal underearning and you can’t out-earn overspending.

Earning vs. Spending. While managing spending is important, it's crucial to recognize that you can't out-frugal underearning. A focus on increasing income is essential for achieving long-term financial well-being and breaking free from a scarcity mindset.

Value and Communication. Earning more involves understanding the value you create for others and effectively communicating that value. This requires identifying your unique skills, understanding the needs of your beneficiaries, and confidently negotiating your worth.

Earning as a Process. Viewing earning as a series of processes, rather than a fixed outcome, allows for greater creativity and control. This mindset encourages experimentation, adaptation, and a willingness to challenge conventional beliefs about income.

6. An Emergency Fund is Your First Line of Defense

In case of emergency, save.

The Inevitability of Shocks. Financial shocks are a part of life, and having an emergency fund is crucial for weathering these storms. This fund acts as a buffer, preventing you from incurring debt or disrupting your long-term financial goals.

Delayed Gratification. Saving for an emergency fund requires delaying gratification, a skill that can be challenging in a consumer-driven culture. However, the security and peace of mind provided by an emergency fund far outweigh the temporary satisfaction of immediate spending.

Savings Plan. Start saving now, even if it's a small amount. The habit of saving is more important than the initial amount. Gradually increase your savings rate over time, aiming for at least three to six months' worth of essential expenses.

7. Automate Savings to Bypass Willpower

In discipline lies freedom.

The Power of Automation. Since nearly half of our daily behaviors are habitual, automating savings can bypass the need for conscious decision-making. This approach leverages technology to create a consistent and effortless savings habit.

Separate Accounts. Set up separate checking accounts for "Bills & Life" and "Fun & BS" expenses, and automate transfers to fund each account. This system eliminates the temptation to dip into savings for non-essential purchases.

Consistent Contributions. Automate regular transfers from your paycheck to your savings account, even if it's a small amount. This consistent habit will compound over time, building a substantial emergency fund and fostering a sense of financial security.

8. Regulate Your Nervous System for Sound Decisions

Everyone carries a shadow and the less it is embodied in the individual’s conscious life, the blacker and denser it is.

Window of Tolerance. Making financial decisions from a regulated state is key. When outside the window of tolerance, the prefrontal cortex shuts down, leading to impulsive and irrational choices.

Self-Soothing Techniques. Employ techniques like breathwork, exercise, or connecting with loved ones to regulate your nervous system before making financial decisions. This ensures you're making choices from a place of clarity and control.

Address Underlying Trauma. If past traumas are impacting your financial decisions, consider seeking professional help. Addressing these underlying issues can lead to more rational and empowering financial behaviors.

9. Reframe Debt: It's Not a Moral Failing

The story of money is whatever story you tell yourself.

Debt's Historical Context. Debt has been a part of human history for millennia, predating the invention of money. Understanding this historical context can help reframe your perspective on debt and reduce feelings of shame or guilt.

Debt as a Tool. Debt can be a valuable tool for building wealth, but it's crucial to use it strategically. Avoid using debt to finance daily consumption and instead focus on leveraging it for investments that will appreciate in value.

Personal Responsibility. While external factors can contribute to debt, taking responsibility for your financial situation is empowering. This involves understanding your spending habits, setting realistic goals, and seeking help when needed.

10. Play the Credit Score Game Strategically

Knowing the rules to the game is important because whether you recognize it or not, you’re a player in it.

Understanding the System. Credit scores are a key factor in accessing credit and securing favorable interest rates. Understanding how credit scores are calculated is essential for playing the game strategically.

Key Factors. Payment history and credit utilization are the most important factors influencing your credit score. Maintaining a low credit utilization ratio and making timely payments are crucial for building a strong credit profile.

Strategic Actions. Monitor your credit report regularly for errors and fraud. Use credit cards responsibly, paying off balances in full each month. Avoid applying for new credit unnecessarily, and shop for loans within a short timeframe to minimize the impact on your score.

11. Building Wealth Requires Ownership

We need each other. Humanity progresses because we help each other.

Beyond Income. Wealth is not just about how much money you earn, but what you own. Building wealth requires acquiring assets that appreciate in value and generate passive income.

Diversify Your Assets. Consider investing in a mix of assets, including stocks, real estate, and businesses. Diversification helps mitigate risk and ensures that your wealth is not concentrated in a single area.

Create Value. Focus on creating valuable things, whether it's a business, intellectual property, or art. Ownership of these assets provides a foundation for long-term wealth creation and financial independence.

12. Protect Your Assets with Insurance

Each financial shock creates a crisis that some people never recover from.

Transferring Risk. Insurance is a tool for transferring risk, protecting you from potentially devastating financial losses. While it may seem like an unnecessary expense, insurance can provide peace of mind and prevent financial ruin.

Essential Coverage. Consider purchasing health insurance, long-term disability insurance, life insurance, homeowners or renters insurance, and automobile insurance. These policies can protect you from a wide range of potential risks.

Informed Decisions. Understand the terms and conditions of your insurance policies, including deductibles, premiums, and coverage limits. This knowledge will empower you to make informed decisions about your insurance needs.

Last updated: April 12, 2025