If you want to master money: start with the basics

I recently read an article “The top 5 lessons I learned from Tim Grover at the Perfect life retreat”. This article was written by Austin Gillis about a man Tim Grover who is the CEO and founder of Attack Athletics, not to mention he was the former personal trainer of someone you may have heard of before, Michael Jordan. As Austin mentions, Tim’s life goal has been to bring people from good to great to unstoppable, and he has mainly done this by hammering down on the basics of whatever it is that he is teaching and forcing his clients to master those basic concepts.

This brings Austin to his first point that he learned from Tim which is You cannot become great without a die hard commitment to mastering the fundamentals. Unfortunately this is tough for so many people because it goes against our human nature. We want things now and we generally don’t have the patience or discipline to stay dedicated to learning the basics which we can relate to many aspects of our lives. One goal I’ve set for myself is learning how to play the guitar. What has stopped me from learning the guitar is the discipline to learn the fundamentals first. Why would I want to sit there practicing chords and finger placement and boring techniques when what I really want to be doing is playing songs. Unfortunately with this mindset I will never end up playing any songs or have the opportunity to play with friends who also play instruments because I haven’t taken the time to learn the basics. The same goes with playing sports, learning a language, and mastering any type of new skills. 

I’d like to quote Austin’s article now as he has made some great points that have stuck with me since reading it. He says, “Before you can become great, you must first master ‘good’ and before you can master ‘good’ you must master average.” He also goes on to say “you cannot build a 7-figure business before you’ve built a 6-figure business. You can’t truly become a great writer before you suffer through the rejection and criticism of being an amateur, and you cannot become ‘great’ until you are first ‘good’.” He illustrated this using Michael Jordan as an example, saying that every day he would start his practice off with one of the most simple fundamental moves, a chest pass. Despite being the best in the game he still practiced the simple things every day. 

This article got me thinking of course about money. What so many people I run into are lacking is knowledge of the fundamentals and basic concepts of how money works and how our failure to act on the basic fundamentals lead to things like debt, stress, and being stuck in a job you don’t enjoy. As I’ve mentioned before in this blog the concepts of saving, investing, and paving a  path towards financial freedom are actually very simple, it strictly comes down to being disciplined just as any guitar player or athlete had to be when they first started their craft. 

So what are the basics of money?

1. Don’t spend more than you earn. 

Sounds simple doesn’t it? Yet, approximately 70% of Americans are in debt and cannot afford an unexpected $1,000 expense. This concept is something that has almost completely faded away in our society. I recently talked to my Grandparents about this idea and was interested in their perspective being that they grew up during the great depression. The idea of living within your means was deeply ingrained into them as children as they had no other choice. Consumer debt was not an option and they had to make due with what they had which led them to be financially successful throughout their lives. If there is one piece of advice I would give, it would be exactly this point, stop buying what you can’t afford.

2. Pay off Debt

All debts other than your mortgage should be treated as an emergency. The goal should be to pay this off as quickly as possible and not accrue any more debt in the process so that you aren’t just throwing money away. I commonly get asked by people what they should be investing in and what stocks are good to buy and I ask them first, do you have any debt right now? The answer is usually yes… My point is that the thoughts about investments and making money shouldn’t be the first thing on your mind right now, the focus should be paying off those debts so you can start earning interest rather than paying it. 

3. Diversify your investments

Now that your debt free you can focus on that goal of making money. What you want to steer clear of is putting your eggs all in one basket. When most people think of investments, particularly stock investments their mind goes to individual stocks and which ones they should pick such as amazon, apple, or microsoft. While these stocks can make you a lot of money they also come with a lot of risk. This is why the FI community has jumped on the index fund investing bandwagon. Index funds allow you to diversify into multiple different companies all while investing in one fund. For example I get exposure to the entire stock market just by investing in the Vanguard total stock market index fund which invests in approximately 3,000 different U.S companies. 

Other options for diversification can be investing in funds you have through your job such as a 401k or 457b fund which give you pre tax benefits, and even investing in real estate by flipping homes or renting them out. 

4. Pay yourself first 

This is one of the most important steps in mastering money. This easy step means that you will set a specific amount on a monthly basis that you want to save/invest and have it automatically taken out of your bank account and invested. By doing this you cut out the need to budget and you know you are hitting your monthly savings goals consistently. Now you can spend whatever money is left over guilt free without the hassle of having to worry about what will be left at the end of the month for you to save. Just make sure you attempt to save as much as possible.

5. Sit back and let your money grow. 

Now that you have automated away your savings you have to do one of the easiest yet hardest things when it comes to investments, which is let it sit and continue to grow. This can be hard because we like to see our investments as gambling sometimes. We get excited about pulling out when the market is high and buying when its low, but we just have to trust the process and let it sit and continue to accrue interest. This takes patience and can seem like a very long drawn out process. I can remember it feeling like it took forever before I hit $100k in my accounts, but I continued to do these basic steps and invest my money and now it is growing faster than ever. 

Now just like Michael Jordan practiced every day on his fundamentals I urge you to focus on these simple fundamentals every day in order to get your accounts to grow and your freedom to increase. Soon these ideas will become second nature and you will not feel as if your sacrificing anything. This will allow you to put yourself in a financial position that not only will make life easier but it will bring you closer day by day to achieving financial freedom.

Thanks for reading, 

Matt