8 Essential Non-Financial Skills that Will Help You Master Money
There is no question that there are certain financial skills that are necessary to perform well in the world of money over a long period; however, there are also certain personal, non-financial skills that are essential to mastering money consistently. The mathematical and systematic skill sets that are commonly associated with proper money management are narrow in scope and focus — meaning that they are best expressed in the financial world. Conversely, there are much broader personal skill sets that are not directly associated with finance but have an immensely powerful capacity to effect it.
Moving forward, I will share with you eight non-financial skills that will help you create a foundation that will support proper money management.
You are probably wondering what in the world does self-awareness have to do with money management. Self-awareness is important in every area of life, including the management of money. The great philosopher Socrates once said, “To know thyself is the beginning of wisdom.” He also said, “A life unexamined is not worth living.” One of the key components in determining how you will function as an investor is natural risk aversion. People who are highly risk-averse find it hard to make investment decisions beyond minor low-risk mechanisms.
Self-awareness will assist you in understanding your risk aversion. It will also help you to understand your compulsions to engage in consumerism. The more you understand about counterproductive behavior, the better equipped you will be to overcome it. Self-awareness also introduces your to your strengths — identifying things you can build upon to become more successful with money.
You can expand your self-awareness by being mindful of certain emotional responses to different types of stimuli, such as advertising, as well as noticing which portions of your budget are easier for you to manage in comparison to those components of your budget you find challenging.
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In case you didn’t know it, we live in a nation that is driven by a debt-based economy. The U.S. Dollar was once backed by the gold standard, but this only works when you refrain from printing more currency that your Gold stores can support. Because the U.S. was constantly raising its currency circulation despite its limited gold stores, the value of the dollar was decreasing rapidly. President Nixon decided to remove the gold standard and the dollar became backed by the debt accrued by the nation and its citizens.
Allow me to elucidate what I am saying here. This nation needs its citizens to spend more money than they have to spend, accruing debt. In fact, accumulating debt has become the American way. Consumerism drives the economy. Unfortunately, the number one force moving against the building of wealth is the accumulation of debt.
In order to avoid getting caught up in the vortex of consumerism, you will have to demonstrate an enormous amount of self-control (self-discipline). People who have mastered money are highly adept at resisting impulse buys — spending through their emotions. You might be surprised at how much of what you buy is your emotions convincing you that you need something that you actually do not need.
You probably receive a complete stack of pre-approved credit cards every week, and the latest model of your favorite car is enticing. Shred the credit cards and drive your current car as long as it remains dependable. It is hard finding purchases that are more counterintuitive to wealth building than care purchases.
I am sure that you have heard the term “keeping up with the Joneses,” This is something that has become an American pastime. What most people are not cognizant of is the fact that attempting to keep up with the Joneses is the result of a lack of self-confidence. If you are measuring your self-worth and personal importance by how close you can live your life to someone else’s, it is because you are not confident and comfortable in who you are.
To master money, you will need to evolve beyond the point of constant personal comparisons that will only drain you of time, energy, and money. To do this, you will need to develop and cultivate an authentic self-confidence that allows you to find comfort and fulfillment in being you. You must understand that who you are is far more than what you buy.
4. Expanded and Projected Thinking
People who have mastered money are always operating with the end-goal in mind. They have an uncanny ability to focus on the big picture. The ability to focus on the big picture enforces the need to make certain personal sacrifices along the way. Thinking about the big picture will keep you focused on paying down student loan debt and building the proper mechanisms to facilitate your retirement.
Note: When it comes to retirement, saving a nest egg is not good enough. People are living longer than at any time in the past, and many of them are outliving their retirement savings. You should focus on creating passive income that will provide multiple streams of income for the remainder of your life.
We live in a world in which everyone is seeking immediate gratification, but most things worth having and enjoying require work, dedication, and patience. Unless you have relatives who are independently wealthy, your progression to financial security, and eventually financial freedom, will be a slow progression. You will have moments that you will make major leaps, but most of your growth with require patience.
When you possess patience, it will allow you to focus on the long-view when considering investments, instead of always aiming for the fence. When you lack patience, you become an easy target for get-rich-quick schemes — constantly exposing yourself to negative risks.
6. Critical Thinking
While I don’t want to frighten you, the truth is that there are hordes of people who are after your money in one way or another. There is no shortage of shady investment opportunities and scammers looking to separate you from your money. Every day, there are shady dealers in the money market developing new and more innovative ways to separate you from the money you have worked so hard for. In an environment that is so hostile to your financial well-being, critical thinking is an essential skill. Money masters never approach expenditures lightly — considering each expenditure with care — gather all available unbiased data, and developing the ability to spot things that are too-good-to-be-true.
Critical thinking solicits the left side of the brain, and most people assume that all money management skills are connected to the left side of the brain. Actually, the right side of the brain can be a powerful resource when dealing with money. There are certain financial laws that are completely immutable; however, the number of ways that they laws can be exploited for financial gain is endless. The person who invented cryptocurrency simply used the creativity to produce a new way to move into the world of money.
Creativity will also help you survive during those lean times when money is scarce. I have had people tell me that they can’t afford to save, and my response was, “you can’t afford not to.” I often tell the story about Theodore Johnson, a man who worked for UPS his entire life. Theodore never earned more than $14,000 a year his entire 30 years at UPS; however, he happened to know someone who was wealthy. This person convinced him to invest a portion of his earnings into products that produce compound growth. By the time that Theodore retired, he was worth over $70 million dollars. There are other stories that show that no matter where you are, you can build wealth if you are creative and committed.
You are probably saying that you are already overextended and there is nowhere to pull savings from. But if the government raised taxes by 10, 15, or even 20 percent, you would protest, but at the end of the day, you would pay it. Why not tax yourself and use that tax to create wealth for you and your family.
Communication is an essential skill in life because it feeds all of the other skills that are so essential to your success. Money masters are great communicators with their partners, in negotiations, and in the sharing of knowledge with others. They know what questions to ask, and they know how to listen, which is also a part of communication.
I teach financial literacy, and I am a staunch advocate for developing financial skills. Simultaneously, the personal skills that are presented here are immensely valuable in creating the capacity to optimize what you know and understand about money. There are a lot of people who understand finance, but they don’t have the personal skills that facilitate the proper use of the knowledge they possess. I know licenses financial advisors who are horrible with their own money. They give great counsel, but they lack the capacity to follow their own advice. These non-financial skills will serve as the foundation on which you will build your wealth building and savings strategy. ~ Rick Wallace, Ph.D., Psy.D.