Start by knowing yourself
I personally find lessons of Sun Tzu’s The Art of War relevant to one’s financial journey. In this strategy text, Sun Tzu famously said, “Know yourself, know your enemy, in a hundred battles you will never be in peril. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you neither know the enemy nor yourself, you will succumb in every battle.”
In the context of money management, “know yourself” means understanding our financial circumstances (how much do we have), money attitudes (how we view and relate to money) and money habits (how we handle money). While “know your enemy” can mean different things to different people. For example, it could be reducing a ballooning debt, changing a habit of overspending or saving enough for retirement etc. If you are wondering where to begin in sorting out your finances, I would suggest to start from looking within before confronting “the enemy”.
Financial Circumstances
Knowing our current financial circumstances involves taking stock of our assets (the things we own) and liabilities (the things we owe others) and keeping track of our income and expenses. For those who are new to these concepts, I will be breaking them down in my upcoming posts. While putting together our own financial information would take a fair amount of effort and time at the start, our efforts will pay off in having clarity on our current financial position. This is akin to having a clear starting point to chart our financial journey from.
Money Attitudes
Do you see money as a tool to meet our daily needs and serve the needs of others? Or are you hoarder who is never satisfied with how much you have in your bank account? Or simply someone who can’t be bothered with money at all? When growing up, we receive lessons and messages about money from popular media, our family, teachers and peers. These lessons and messages may unknowingly shape how we view and relate to the topic of money over time.
For instance, I came across a fable called The Ant and the Grasshopper when I was young. In this fable, the ant worked hard during summer to store up food for winter while the grasshopper was partying away and mocking at the ant as food was plentiful. When winter arrived, the grasshopper found itself dying from hunger and had to beg the ant for food. Looking back, this moral of working hard and saving for the future stuck with me since. Each of us would have our own encounters so it would be useful to think back on our past to assess their impact (be it positive or negative) on our attitudes towards money.
Money Habits
To improve our financial well-being, we need to examine the money habits that we have developed over time. We need to inculcate positive money habits and kick negative ones. I know it is easier said than done but that doesn’t mean we should give up trying. We can start by listing down our money habits, here’s a simple checklist for reference:
- Do you have a budget?
- Are you able to save regularly?
- Do you track your expenses regularly?
- Have you created a financial plan?
From our own list, we would be able to identify one or two most pressing areas that we need to improve on. Remember, never be overly ambitious and bite more than we can chew by working on too many issues at one time.
On average, it takes six to eight weeks for us to break or form a habit. Therefore, we need to stick to a well-defined plan over a period of time. Also, identify the benefits of breaking or forming the habit so that we will stay motivated in making changes. Make the process easier by leveraging on technology where possible. I, for one, used an expense tracking app when I first got started with tracking my expenses on a daily basis.
Conclusion
In sum, make it a point to know yourself better in the area of your personal finances. Not going to kid anyone here. It is not easy to achieve that and that is why many people never got started. But hey that’s the whole point of my blog’s existence, I am here to journey together with you. Trust me, this entire thought exercise will benefit us greatly. Only knowing ourselves and eventually “the enemy”, then we will be able to achieve our financial goals and overcome adversities!