Liberate Yourself Financially

Do you want to liberate yourself, Financially? This article is about implementing a Financial Plan. It is the 3rd in a series of three detailed articles on making lasting positive changes to your financial picture. To learn more about how to put together a plan that will actually work for you, personally, start by reading the first article in this series.

Only you can Financially Liberate Yourself

The process of making lasting, positive financial changes can bring about a tremendous amount of personal growth, not only in terms of your wallet but also in terms of how you live your life. It is both liberating and challenging, and takes an emotional investment to achieve. In reality, there are no magic bullets (get rich quick schemes almost never work), and substantial financial changes rarely come without sacrificing time and energy, or making alterations to relationships you may cherish. But with a good plan and the will to act on it, almost anyone can achieve Financial Freedom.

Change is the opposite of “more of the same”. Therefore, financial rewards need to be both meaningful and effective at reinforcing positive behaviours around money. One needs to be committed to the change for the difference to last, and be willing to break old habits – not just with money, but with thought and social habits as well! It means spending more time in environments that are conducive to your financial well-being, and less time in social and physical settings that work against it. Finance is a technology that involves managing your assets and liabilities, and these things are more (far more) than monetary in nature!

While understanding how you think about money lays the foundation for making substantial changes to your financial picture, proper preparation is essential. The good news is that once you have a good understanding of what Financial Freedom really is, and you have completed your due diligence, making financial changes will not only be far easier, they will be far more likely to last. And they are often very enjoyable, though not always pleasant, to make.

Financial Liberation is the Process, Financial Freedom is the Goal

One of the main reasons people seek Financial Freedom is to be liberated socially. They may want better quality things, a secure retirement, more freedom to do what they enjoy, or money to raise a family, for example. It feels great when we have the wealth to achieve our dreams. Yet even when we don’t, it is easy enough to pretend to be socially liberated when it comes to money: Money Monks and Emotional Spenders do it all the time! But authentic liberation involves winning at the Money Game for real, and people can eventually tell if you’re faking it. Financial Freedom also has to be authentic to be robust and socially liberating.

One of the most common, and most effective, activities for achieving social liberation around money is to form (or join) a group where members engage in discussions about investing. Sadly, many people learn at a young age not to discuss their finances with others. The problem with avoiding informed discussions is it severely limits one’s ability to learn the techniques, skills, risks and rewards of managing money. It pays off to avoid exposure the blame, denial, and delusion about money that comes from people who are ill-informed, and spend time communicating with people who are informed.

Fortunately, there are clubs and organizations in nearly every city in the world where people come together to learn about investing. There is even a thoroughly researched, developed, and tested template that you can use to create such a group for yourself, for free, in the Sublimelime Reference Guide. Feel free to have a look. If you decide to start such a group, you are invited to contact us here so we can keep you in the information loop. Our online community also provides support for leaders who start groups based on the template.

To be able to liberate yourself, you need to be aware of your available options. If you followed the instructions in the last article, you already know plenty about yourself when it comes to money. Now you need to list your choices; engage in a learning plan to discover how to make better financial decisions; resist the pressures in your life to keep things the same; and discover new options for increasing your income and eliminating bad debt. This involves doing due diligence on anyone you might invest with or approach for help. It pays to make a list of the people who are supportive of your financial well-being, in addition to people whom you find financially inspiring, as your starting point.

The narrative we carry in our heads, the stories we tell people about ourselves, are very important to us as individuals. They can also be valuable because through knowing how another person’s story unfolds, we can gain insights into the world of finance. When we hear or read financial success stories, we identify with the feelings of liberation and accomplishment experienced by others. By welcoming the influence of people who have achieved authentic Financial Freedom, the experience becomes easier for us to have as well. A good mentor can be priceless. And by reading (or watching) the biographies of successful people, we can gain insights into what can be done to be as successful as them.

Sometimes, questions of morality arise when it comes to money. The question of whose side you are on can be very perplexing. Are you with the good guys or the bad guys? In desperate times, it is natural to consider changing sides. The problem with this way of thinking is that it confines one to a financial power struggle, or even worse: complete paralysis. The only real way to get your money to work for you is to invest it wisely. You will naturally prevent yourself from taking action on your financial plan if you associate wealth with being a bad guy. But by connecting with other people who are also trying to make their money grow, you will see that good guys succeed financially, too. It pays to keep in mind that authentic Financial Freedom is more like farming than hunting because successful investors live off of the fruits of their investments.

Keep Leveraging the Power of Your Emotions

One way people get stuck is by trying to absolutely certain before doing something. This is true when it comes to relationships, health matters, and finances. But the fact is, you can never be absolutely certain about any financial decision. The best you can hope for is a high degree of confidence that you are making the best possible decision you can given the information available to you and the circumstances you are in at the time. Peter Drucker, the famed business professor from NYU, called it “analysis paralysis” when a person fails to make a decision in time because he or she is too busy collecting and sifting through data. Substituting worry for work like this can be a major impediment to achieving Financial Freedom because money cannot grow until it gets invested.

The elusive magic moment is also largely a myth in the financial world. Yes, market timing is important, but you can’t grow wealth by sitting on the sidelines. You have to participate in the market for your money to grow and produce income. Waiting for just the right time make changes to your financial picture is like praying for rain when you could just turn on a sprinkler and water the lawn yourself. The best time to start investing is almost always now. No amount of wishful thinking will make it otherwise. If you keep on handling your money in the same way that you always have, you will continue to produce the same results. And while it inevitably takes effort to change your financial picture, it all depends on how important these financial changes are to you. The only way your financial hopes can be justified is to be active and realistic about growing your money.

This does not mean you should take premature action, however. It simply means that you should not spend too much time contemplating. Unlike in school, in the world of money mistakes are assets if you learn from them. They are only expenses if you don’t take the time to consider the feedback you get from them. A good example of premature action-taking is the typical New Year’s resolution: will it actually last? A good example of Ready, Fire, Aim action-taking is an experimental approach to investing by researching different options and trying out more than one, then comparing to see which produced the more desirable results.

One way I’ve found to get excited enough to move past the pondering and planning stages is to watch movies, television shows, or theatrical productions where people are doing what I’m thinking about doing. There’s something about seeing a story unfold that leads me to want to act sooner rather than later on my plans. I find it easier to stop trying to perfect my plan and start adjusting it as I go along once I’ve had the emotional arousal of watching someone else do it, even if they are only fictional.

Something else that has been very effective for me, personally, is to hang aphorisms and affirmations on my wall. I see them often and they stimulate me to think about what I really want in life. I use them to help me focus on following through and on having the best possible mindset for accomplishing my goals. Admittedly, I sometimes find them distressing to look at. But that’s good because the goal is to raise my emotions enough to kick-start me into action, rather than getting bogged down in analysis paralysis.

Try this: Fast-forward 5 years. In one universe, you made the changes to your financial picture you’ve been planning to make. In another universe, you made your plans but forgot about them. Which outcome would you prefer? Which one feels worse and which one feels better? The more you can imagine the consequences of not changing your financial picture, the more likely you are to make the changes you want. Do this often, because the more you do it the more you will take steps to ensure the better of the two possible futures comes about.

Improve Your Financial Self-Esteem

Is it rational to keep managing your finances in the same way? Can you honestly say that you are a responsible person if you continue to repeat mistakes with your money? What will happen to your self-esteem if you make the changes you have in mind? Can you truly be the person you want to be if you don’t make these changes? As you make changes to your financial picture, you will continue to re-evaluate yourself in relation to money. Your financial goals need to be good for your self-esteem in the long run if you truly want to obtain Financial Freedom.

One’s present situation, and how one responds to it, is where the opportunity lies to re-evaluate oneself financially. The key is to allow the negative aspects of your current financial picture to push you towards creating the positive aspects of the picture you have in mind for your finances in the future. But don’t let this push become extreme! If you find yourself in a deep, negative rut it is best to stop and focus on the positive until you see it balancing out. However, if you become overly optimistic about the future, past-negatives can come back to haunt you with creeping fears and insecurities. As with many other things in life, the middle path (meaning balance) is essential. Focus on the positive until you are moderately optimistic about the future, and leave it at that. Anything more, and you risk pushing yourself backwards. Anything less and you are being unrealistic about your potential by under-estimating it.

The importance of thinking before acting financially should not be understated. Now that you are moving into action, don’t second guess yourself – just check that relevant variables haven’t changed too much before you take each step. This is important because every plan needs adjustments from time to time. Taking a moment to pause before each step gives you a chance to verify you are on track, handle the unexpected, and do what’s best for your well-being.

As you take each step, you will incrementally develop a new image of yourself in relation to money. If you followed the process covered in this series of articles, it will be a more positive and healthy one. It also helps to keep in mind that the images of financially successful people you see on TV and in the movies tend to highly inaccurate. In the Millionaire Next Door, Thomas J. Stanley presents research that shows the typical millionaire looks a lot like everyone else. For example, most self-made millionaires are more likely to drink beer rather than champagne and live in fairly modest homes. It turns out that most of the trappings of wealth offer no reliable indication of financial success whatsoever! His research shows that honesty and quiet self confidence around financial matters will take you much farther down the path to Financial Freedom than being surrounded by expensive toys and wearing nice clothes. In fact, Dr. Stanley’s research shows that conspicuously-displayed trappings of wealth (like expensive jewellery and cars) are better indicators of financial desperation than financial success! Reliability, hard work, and an enterprising mentality are much more reliable indicators.

Your self-esteem ultimately depends on the decisions you make for yourself, and your follow-through when it comes to implementing them. As you learn from your mistakes and go on to make improvements in your decision-making skills, your financial self-esteem will go up. In the long run, your resourcefulness is what gives you self-esteem about anything. This is especially true about money.

Strengthen Your Financial Willpower

Recall from the last article the segment on getting to know yourself better financially. Your answers to the fourth question (comparing Money Mindsets) also reveals something very important about your commitment to making changes to your financial picture: How sensitive are you to acting from a new Money Mindset? To successfully improve your financial situation you must not only be willing to do whatever is necessary, you must also believe in your ability to make lasting changes. Ultimately, your level of commitment depends primarily on how deeply you want your plan to succeed, as well as how strongly you believe in it.

Sometimes, you will have plenty of good information for moving forward and putting your plans into action. There are laws, regulations, and ethics that are meant to help protect consumers and investors but it is very rare to find anyone has all the information. In fact, the ability to gather sufficient accurate and pertinent information is one of the most valuable skills a person can have financially. In practice, there is almost always some ambiguity, some missing bit of data, that would help you to make a better decision. The question is, is it practical or even feasible to acquire the information before a decision needs to be made? The key financial skill when it comes to information-gathering is gathering sufficient data from reliable sources to make reasonably confident decisions.

It is normal to experience some anxiety or discomfort when you set out to do something new with regards to money. You may have seen other people doing the exact same thing, heard stories of people who took it to the next level, and even visualized yourself doing it. Even when you know for a fact it can be done, oftentimes it can feel like you’ve paused just a little too long at the edge of the diving board and now it’s harder to jump. Anxiety seems to provide an endless stream of excuses to help a person avoid financial woes, rather than deal with them. It’s important to overcome anxieties when making financial decisions in order to be sufficiently committed to acting on financial plans.

Ultimately, you must be motivated from within to make lasting financial changes. There are five keys to getting past anxiety and gathering relevant missing information related to money:

Make each step a step you can handle. Big steps can be broken down into small steps, and small steps can be combined into bigger ones. It pays to keep in mind that when it comes to money, there is almost always something you can do to improve your situation. The key is to adjust the size of the steps you take in order to test your courage so that your confidence grows.

Target specific dates so that you know when your financial picture will improve. If you find that you need to change a date, it’s most likely because you haven’t got the information you need. In this case, go and get the information you need and set a new date. Sometimes, there are circumstances beyond your control that will force you to change a date. The key is to make yourself less subject to things beyond your control when it comes to your finances.

Don’t just let supportive people in on your financial plans, promise them something tangible or measurable. Which are you more likely to deliver on, a promise or a goal? When someone who cares about you expects you to deliver something money-related they can touch or measure , there will be a significant difference in your level of motivation.

Throw yourself into it. You want improvements to your money situation to be real, so be willing to adopt new ways of thinking that will help you and to let go of things and people that hold you back. Expect your mood, your relationships, your performance at work, and many other (sometimes unexpected) areas of your life to change as well. Often, seemingly unrelated changes are necessary before you can improve your financial picture. And often they will benefit you in many ways, not just financially.

Spend 20 minutes a day reviewing, adjusting, and tweaking your financial plan. This includes learning more about finance. Because your plan belongs to you, you control it, and you have a choice whether to follow it, this is one of the most empowering practices you can take up. Questions will come up that you want answered, and details will get sorted out that will help you to be more prepared. If you own your plan, and make it specific, a detailed plan regularly reviewed will serve you well. An example of a good plan appears later in this article.

Ironically, one of the best ways a person can strengthen one’s financial willpower is to go backwards before going forwards. By increasing the degree to which one engages in bad habits around money, acts from the Money Mindset one wants to leave behind, and ignores one’s financial self-knowledge on purpose preceding a target date for making a change, one can create a much deeper desire to make the change. In the meantime, it’s important to also prepare for one’s new way of living for after the target date. On the target date, review what happened to see how bad your financial picture was becoming. Knowing this, really feeling it, can make a huge difference when it comes to following through on commitments around improving one’s financial picture.

Replace Poverty-Mindedness with Wealth-Mindedness

Have you ever wondered how you benefit from not improving your financial picture? There is almost always a secondary benefit for maintaining your current Money Mindset, and it tends to be a way of avoiding some form of stress. Of course, if your money habits cause you more stress, it can become a slippery slope akin to getting addicted to drugs. For example, a Present-Oriented Emotional Spender realizes that she won’t have enough to pay her rent, so she goes to the casino in the hopes of winning but loses what little money she has left. Or a Past-Oriented Employee remembers growing up poor, so he gets another job to provide extra money for his family and ends up never seeing his children. The way they sought to remedy their stresses, by trying to escape from them, actually reduced the amount of freedom they had in life!

People often make poor choices like these because they get too focused on their financial problems, rather than looking at their opportunities. The Emotional Spender would likely have been better off using the money she had left for a deposit on a more affordable place to live. The Employee (and his family) would likely have been better off choosing to spend more time doing free things with his kids. By making decisions that are more adept and using their energy to make life better in other ways, it becomes easier to make better financial decisions in the long run.

While it may seem counter-intuitive, the value of regular exercise when it comes to making changes of any sort (including financial) in a person’s life cannot be underestimated. Not only does it help to work out any tensions that one may be carrying, it also helps to speed up the processes of neurological change. When one adopts a new Money Mindset, one is literally reconfiguring the brain to think differently. This happens on a physical level because new connections between brain cells need to be made. Simply by taking 20 minutes a day to increase your heart rate, you will improve your self esteem in numerous ways; feel better about yourself and your choices; reduce the anxiety discussed earlier in this article; and feel less emotional pain. In other words, engaging in daily exercise makes changing your financial picture much, much easier. And you get healthier!

While adding exercise to your daily routine can make it easier to change your financial picture, improving the quality of your relaxation time has a complementary, amplifying effect. There is ample scientific evidence showing how the combination of exercise and healthier relaxation time is even more potent than either alone. “Relaxation” in this sense means “letting go”, “looking within”, and “releasing”. Not only does it increase your energy levels; reduce anxiety; and help you to sleep better, it also measurably increases the rate of alpha brain waves in your cerebral cortex. Alpha brain waves are associated with pleasure, alertness, and an internal locus of control. In other words, relaxing quietly in a comfortable and safe environment improves your brain’s ability to find pleasure in new ways of being and empowers you to heal faster and move forward in life. When you adopt a new Money Mindset, you are taking on a new way of being and thinking. Exercise and relaxation combine to make the change both easier and more powerful.

Everyone talks to themselves, unless they are in a coma. What is your self-talk like? Often, improving your self-talk is fundamental to changing your financial picture. If you are hard on yourself or others, it will make changing your financial picture much more difficult. If you delude yourself, blame others, or deny your circumstances and opportunities, you will inevitably have a difficult time improving your financial situation. This is why conspiracy theorists tend to be broke: they get so busy explaining how responsibility for their problems belongs to other people that no room remains in their heads for thoughts that can bring them legitimate wealth! If your self-talk makes you feel anxious, it’s time for you to change it. Negative (meaning “makes the experience of life worse”) self-talk is a kind of addiction because over time, it has the same affect on the brain as using hard drugs. Eventually, people can become so desensitised to it they simply cannot tell when they are being negative. Most negative self-talkers crossed this line early in life and have no idea that they are hurting themselves on an ongoing basis.

When your self-talk is absolutist, rigid, or closed to questioning, you are hurting yourself financially. It is important to be willing to question your beliefs and values around money and people, seek new and logical alternatives, and to let go of dogmatic or ideological thinking. Self-talk phrases like “I have to…”, “I need..”, or “I must…” are your cue to question the importance of what follows them. Denying your basic needs (air, sleep, food, bathroom breaks, etc.) is symptomatic of not questioning this kind of thinking. If your objective is to improve your financial situation and you keep coming up with things you absolutely have to do first, when will you get around to doing what it takes to make your financial life better? The key is to recognize that these are all desires, and therefore they can be let go. This brings us back to exercise and relaxation – both come in very handy when you’re trying to improve your self-talk. Letting go of desires that distract you from attaining Financial Freedom, and becoming flexible and adaptive in your self-talk, are essential parts of improving your financial well-being in the long run.

Sometimes, people don’t feel they have the right to grow financially. When you approach someone for financial advice, you have the right to be heard. Lousy brokers and advisors will try to tell you what to do without taking the time to get to know you. People learn by making mistakes, and you have every right to make them because financial improvements require learning to take place. The only person who has the right to judge your financial decisions is you, unless your decisions are harmful to others. It pays to be assertive about your financial goals and objectives, and nobody has the right to demand more than your limits. You cannot be expected to know everything; care more than you do; take responsibility for the thoughts and actions of others beyond the limits of your influence over them; or have more time to devote to your financial picture than anyone else can dedicate to theirs. If you accomplish your financial goals at the expense of others, you are not truly growing because you are trampling on people. But you can (and most financially successful people do) become Financially Free by granting everyone the same rights to do with money. The key is to assert your rights to pursue financial success; respect others’ rights to do the same; and be specific about what you want.

Increase Your Knowledge of the Playing Field

To feel truly liberated financially, you must have the power to manage your finances effectively while reaching goals that are suitable to you personally. Social pressures, norms, intentions, and obligations can offer clues to what liberation means to you. Financial Freedom is personally liberating in the most basic sense: It is much better to be a graduate of the Rat Race than to be stuck in the maze. The most reliable path to Financial Freedom can only be found when you are clear on your goals, as well as focused and active in your pursuit of them. Your plans are the roadmap, your actions are the journey.

To have control of your finances and to maintain your enthusiasm for improving your financial picture, it is important to set and achieve realistic goals. Here is an example of realistic goal-setting: I have credit cards. I pay interest on the debt accumulated on those cards. Interest is the rent paid on borrowed money, so I would like to liberate myself from paying that rent.

I am a Canadian, living in Canada. Just like in other countries, there are tax advantages to investing in local companies. I want to take advantage of this fact, so I choose to purchase Canadian Equities and Exchange Traded Funds in order to qualify. Since my credit card bills come monthly, I want monthly income from my investments to pay the rent on what I’ve borrowed. Therefore, having narrowed down what I’m looking for, I set off to research which Canadian Equities pay monthly dividends. My primary research includes looking for a list of the top monthly dividend-yielding stocks on the Toronto Stock Exchange, amongst other things.
Here’s where a lot of people run into trouble because of a basic fact about the nature of the Stock Market: Information arbitrage is the norm in the financial industry. Profits are often made by knowing things that other people don’t because it takes time and expertise to gather useful, relevant information about stocks and bonds. Due diligence is not given away for free. And nor should it be! Somebody had to work hard to put all the relevant information together.

There are two kinds of due diligence: the kind you do on yourself (explored in depth in the last article), and the kind you do on potential investments. The kind you do on yourself is an essential part of preparing to make a realistic plan because you will only complete the plans that motivate you. Fortunately, once you know yourself financially well enough, you’ll know what will feel right for you when it comes to investing your money.

On the other hand, the kind of due diligence you do on potential investments is subject to the availability of information. You may have a pretty good picture of who you are, but how about what’s out there, in the marketplace? What opportunities are available to you? It turns out that research papers and aggregate information are typically sold to people, while information from specific companies is typically provided for free. Aggregate information has value to investors because it is an essential part of due diligence, but takes time and skills to acquire. Company information also has value, but it’s free because it helps the company (or fund) to raise capital. Securities are required by law to provide certain information about themselves, but the free information is only useful relative to the aggregate. To make good investment decisions, you need to look at both.

So I found a source for the information I needed after conducting a few days of research, and paid to get access to some aggregated data. I learned that the top 12 monthly dividend-yielding Canadian Equities and Exchange Traded Funds offer annual yields that range from 15.3% down to 12.0% (at the time). The average yield was around 12.4%, which is far better than most mutual funds on the market and does not include capital gains.

In order to have the interest on my credit card debt paid by dividends rather than by me, my plan is to buy monthly dividend-yielding stocks. Every dollar in dividend yield I use to pay my credit card debt is a dollar I don’t have to pay the credit-card company out of my own pocket. Over time, it is realistic for me to use my investments to make the interest payments, and then every additional penny I pay lowers my overall debt. And because the dividend yield keeps coming and growing (with regular investments), the rate at which I pay off my debts accelerates while my assets cover the interest payments for me.

Now, here is an example of unrealistic goal-setting: I’m going to invest in GICs and Mutual Funds earning gains of between 3% and 10%. The gains I make from them will be enough to pay off my debts. I will continue to service my debts by making only the minimum payments until the GIC’s mature, and the Mutual Funds go up.

The first example is filled with due diligence, careful calculation, and a high degree of self-knowledge. The goal is set only after getting to know a real-world option that clearly increases the amount of Financial Freedom enjoyed by the investor on an ongoing basis. The goal is also realistic, given the returns on investment are in the form of cash flow from dividends.

The second example involves a low level of understanding about the world of investments, poorly made calculations, and very little self-knowledge. Since Information Arbitrage is the norm, this is an opportunity for both salespeople and con artists to make a quick buck at the investor’s expense. For this reason, my personal preference is to avoid the sellers of financial products until I fully understand the products they offer on my own.

There is an old saying in the investment world, “it’s not how much money you have, it’s how much money you move.” In other words, the name of the game is Cash Flow. Financial Freedom is defined in terms of Cash Flow to people with the Investor’s Money Mindset: When your income from passive sources (your investments) exceeds your expenses, you are Financially Free. The question is, how will you leverage your money to produce more income and fewer expenses?

When it comes to Cash Flow, keep in mind that Assets on your balance sheet are Liabilities on someone else’s. Assets put money in your pocket over time, and involve a commitment from somebody else to pay you. This money is called “income”. Liabilities take money out of your pocket over time, and involve a commitment for you to pay somebody. This money is called “expenses”. The size of an Asset is less important than the amount of income it produces. As well, the size of a Liability is less important than the amount of expense it produces. The money that flows to you, flows from someone else. The money that flows away from you, flows to someone else. This is why the Money Game is primarily about cash flow, not net worth (although net worth is still important). And the goal of the Money Game is to have more income from Assets than expenses from Liabilities.

When you examine all realistic financial plans, they are focused on managing and improving cash flow. Unrealistic plans treat money as static, and often take overly simplistic approaches to solving financial problems. To make wise investment decisions and leverage your money, understanding the playing field is essential.

Know the Players

There are a lot of people who work in the Financial Industry, from Investment Advisors to Bank Tellers. But they are not the whole picture. When you purchase any investment vehicle, corporations, governments, stock exchanges, and a myriad of other regulatory bodies are also involved. And while Investment Advisors must by law help walk you through much of the due diligence found in the last article, they are still salespeople. Therefore, the most important question you can ask as you seek out helping relationships when it comes to your money is “how does this person benefit from helping me?”

There is no nurturing matriarchy, no benevolent paternalism in the world of Finance. The referees – Securities and Exchange Commissions – do their best to protect citizens from dishonesty, but the likelihood of conviction for white-collar crime is very low. It is extremely difficult to catch and prosecute people who offer lousy financial advice, or sell you bogus products. Whereas in a family, a school, or a workplace there are usually people whose role encompasses the responsibility to help you make good decisions, when it comes to finance you are expected to use your own mind to make them for yourself. Ultimately, the responsibility for the outcomes of your choices around money are yours, even if you have someone you trust looking after things for you.

And while the advice of experts and insiders can be hugely valuable, the ethics of what they can and cannot tell you are largely situational. Some of these ethics are codified into law, such as insider trading legislation or the customer intake requirements that every Financial Planner must obey. But even codified standards regarding the sharing of financial information are fuzzy because there are so many variables to consider. Especially for people with the Money Monk, Hoarder, Emotional Spender, and Employee Money Mindsets, this can be very difficult to grasp: The world of finance is a game that’s played for money using incomplete information. There is no central controlling authority manipulating everything from the background because nobody has enough information to be able to do that with total authority.

When it comes to selecting people to rely on for information and services in the financial industry, it pays to know the following four categories: Commensalists, Mutualists, Trolls, and Parasites. Keep in mind these are categories for potential advisors, not corporations or governments:

Commensalists are people who benefit from relationships while the other people remain unaffected. In the world of finance, Commensalists are extremely uncommon. Since practically anyone who will provide you with useful information or offer valuable advice will benefit in some way, there are almost no situations where truly commensal relationships can be established. Eventually, all relationships with Commensalists evolve into something else, or fade away. So even if you do get to know one or two, be prepared for them to change.

Mutualists are people who consciously make win/win deals. Their preference is to offer information (rather than advice) that can benefit both you and them, making relationships with ethical Mutualists Assets. They are interested in developing long-term mutually beneficial relationships, and take an interest in actively sharing complete information. However, before you can have a relationship with a Mutualist, you must both have complementary ways of generating income. Otherwise, your relationship will fall into one of the other three categories.

Trolls are almost the exact opposite of Mutualists. They are often unconscious of their preference for deal-making where everyone involved loses, making relationships with them Liabilities. Typically, Trolls deplete their own resources to the point where they are unable to invest anything but time and opinions. And their opinions typically lead them to believe there are few options available because they focus on limitations rather than possibilities. Trolls are typically the first to blame corporations or governments for their personal financial problems, rather than taking responsibility for their choices and seeking ways to improve them.

Parasites benefit at the expense of others. Relationships with them are also Liabilities. Their preference is to control the information available to you while offering advice that will largely benefit them. They are more interested in getting money, status, or power than in helping others when they make deals. Parasites share information as a way of directing your decisions, rather than as a way of nurturing a relationship or helping you win.

Trolls are very common and Parasites are found in almost every community. Both will do anything to look like Commensalists or Mutualists, and will go to extreme lengths to look legitimate. Thousands of people every year get taken in by scam and shady Financial Planners because of this camouflaged approach. (It pays to be aware of the many different types of scams.) Many professional advisors walk a very fine line in this regard.

If you get offered an investment opportunity that has outrageous returns, is by invite only, or makes you suspicious in any way, a phone call to your Provincial Securities and Exchange Commission can be very worthwhile. They can usually tell you if a company has been properly registered and is allowed to sell investment opportunities, or if they’ve received any complaints about a company. They can also direct you to sources of useful information about almost any general topic in the world of finance. In the Money Game, it is worth your time to keep abreast of the information offered by the referees.

Reward Yourself Intelligently

One of the biggest and most common mistakes people make as they attempt to improve their financial situations is failing to reward themselves after taking each step towards Financial Freedom. Rewards help make a person’s vision of a freer future feel more tangible, more realistic, and more achievable. Ask yourself this: If you aren’t willing to reward yourself for taking action to improve your financial picture, then will you ever really be able to feel Financially Free? If resisting the temptation to adhere to your old Money Mindset was its own reward, there would be no point in celebrating your successes. Success is meant to be celebrated, and celebrating it appropriately will help you to create even greater successes in the future.

Rewards can be as simple as a little self-talk. “I did that well!” and “Way to go!” are examples of how you can pat yourself on the back. Doing this is a way of managing your emotional state when it comes to money. Even if you slip up and indulge your old Money Mindset by making a poor decision, it’s very important not to berate yourself. Rather, find a positive step consistent with your new Money Mindset and take it each time you find yourself lapsing back into your old ways. If the overall balance leans towards your new Money Mindset, then your overall progress towards Financial Freedom will also be positive. In the field of addictions counselling, there is a saying: “A lapse is not a relapse.” Little positive rewards through self-talk help to tip the financial scale in your favour over time.

The opposite of reward is punishment. When it comes to money, punishing yourself for mistakes or bad habits is extremely counterproductive. The most common way people punish themselves is through self-talk, but there are plenty of destructive ways people condition themselves to have bad feelings about money. If you punish yourself each time you make a financial mistake, you are training yourself to avoid taking steps to improve your financial situation and failing to learn from your mistakes. The practice of self-punishment for financial matters increases feelings of distress around money and lowers your financial self-esteem, which in turn can prevent you from acting on good ideas as well as bad ones. The key is to use positive reinforcement, rather than negative, to increase your self-esteem and confidence in dealing with financial matters.

There is a threshold at which your confidence becomes strong enough for you to act on your financial plans. Below this threshold, people often find themselves in a holding pattern until they are fully prepared to move forward. But even when they have the confidence, old habits and distractions can keep people going in circles. If you are close to the threshold, or feel that you have crossed it, you can force yourself to take action by making a contract with someone else. For example, wagering with friend that you will act before a certain date can be very effective if you agree to present evidence that you acted to him or her.

Contracts can work even if they are with yourself, and better still if you write them down. But they must achieve two very important objectives to be effective:

A contract must reinforce not acting from the Money Mindset that you want to leave behind. For example, if you want to let go of the Emotional Spender Mindset, you could reward yourself for turning down chances to spend frivolously by putting some of the money you would have spent towards something personally meaningful that will last for a long time. (When I was getting over this mindset, at first I put my money towards building a cherished collection of music. Later, I saved up for trips to California to visit a girlfriend.)

A contract must also reward you for acting from the new Money Mindset you want to adopt. For example, if you want to adopt the Investor’s Mindset, you could take yourself out for lunch each time to purchase a security. (I still do this, but now I often find someone special to take with me because it’s even more meaningful to me.)

Some people were given a lot of negative reinforcement growing up. This can be a real barrier to acting on a good financial plan, and can even prevent a person from making a plan in the first place. Contracts can be effective for these people, too, but they must be extra-diligent in honouring the contracts they make. Everyone can benefit from focusing on how money has made their lives better in the past, discovering how it can be rewarding in the present, and looking forward to positive financial outcomes in the future. Anyone can break a contract, but by focusing on the positive and sticking to it, anyone can benefit from honouring a contract as well.

The process of changing to a new Money Mindset and accruing the benefits is not instantaneous. It is gradual, and it is shaped by you. The journey is touched by moments of doubt and panic, and sometimes there are discouraging setbacks. But it is possible to make lasting positive changes to your financial picture if you take the time to celebrate your little successes along the way. Each step, whether successful or not, deserves to be rewarded if it comes from your new mindset. These little rewards can add up over time and help your to overcome fears and insecurities. Eventually, your enthusiasm will outweigh any feelings that hold you back, and it will feel natural to act from your new way of thinking about money. The key is to keep in mind that you are worthy of the rewards and never withhold them from yourself; to make your contracts effective; and to make your celebrations meaningful.

It’s worth taking on the challenge in the end

Achieving Financial Freedom will liberate you not only in terms of your pocketbook, but socially as well. It is a challenge that we all face, yet surprisingly few people take the steps necessary to make it happen. By rewarding yourself intelligently for each step; getting to know the playing field and the players; countering your bad habits and self-talk; and committing yourself, you can make worthwhile changes to your financial picture.

Bibliography

The following materials can help you to enjoy the benefits of a healthier Money Mindset, as well as understand the impact your mindset has on your family and community.

Articles
- The 8 Steps to Wealth from Sources of Insight

Books
- The Millionaire Next Door by Dr. Thomas J. Stanley
- Stop Acting Rich: …And Start Living Like A Real Millionaire by Dr. Thomas J. Stanley
- Think and Grow Rich: The Landmark Bestseller–Now Revised and Updated for the 21st Century
- The Richest Man in Babylon: Now Revised and Updated for the 21st Century
- Rich Dad’s Guide to Investing: What the Rich Invest in, That the Poor and the Middle Class Do Not!
- Cashflow Quadrant: Rich Dad’s Guide to Financial Freedom
- Canadian Securities Course Volume 1
- Canadian Securities Course: Volume II
- Get Smarter: Life and Business Lessons
- Ready, Fire, Aim: Zero to $100 Million in No Time Flat (Agora Series)

Please refer to the bibliographies found in the previous two articles in this 3-part series for further reading, audiobooks, and videos:

1. What is Financial Freedom?
2. Making Financial Changes