By Jerry Fetta
Making financial decisions is something I have a talent for. All of my financial decisions at this time of my life lead to the improvement of my personal finances. I don’t lose money, I don’t do things with money that I later regret, and I don’t get involved in things I don’t understand. But it didn’t always start that way.
For years, I was plagued with bad financial decisions. Financing cars at double digit interest rates, blowing money on things I don’t even remember now, charging up credit cards, and trying to find “loopholes” where I can get more by doing less. This is just a handful, but the mass of bad decisions for me was much larger.
You see my problem, like many Americans, was that I would make sense of my financial decisions by asking the simple question “Is this a good idea?” and if I could answer “yes” to that question I did it. I look back and laugh about it now because every bad idea for every person in the history of world begins with a good enough reason why it’s a good idea. This is called justifying.
If I could think of a good enough reason to do it, it became a “good idea”. Congruently, if I saw enough other people doing it, it must have been a “good idea” and I’d do it. There are several ways we can fit something into the category of “good idea”, but that doesn’t mean it really is one.
The key to this puzzle we’re going to solve today is to understand 2 main things about money.
#1 Money is inanimate.
Inanimate means it is not a living, breathing thing. It cannot act or do anything on its own accordance. Leave money to itself and it will just sit there and eventually rot. It won’t buy anything, it won’t grow, and it won’t magically transfer itself to someone else. It is inanimate. Which means that any result, good or bad, achieved with money is due to the user. The user takes an inanimate object and uses it. So if a bad result comes from a certain financial tool or concept it doesn’t mean the tool or concept was bad, it means the person using it used it poorly and created a bad result.
#2 Money is amoral.
This means that money doesn’t have ethics or morals. It doesn’t know right from wrong. It doesn’t know good from bad. Mainly because of the fact that it is inanimate. Right, wrong, good, and bad usually categorize actions. Since money doesn’t act, it doesn’t have those qualities. This is important to understand because it means any good or bad perceived around a financial tool or concept is automatically incorrectly placed and should instead and once again be placed on the user. The user of the money uses money in a way that is morally good or bad. Money itself has no say in the matter.
So when we ask “Is this a good idea?” that question really is pointless. Not to be overly blunt, but I’m saying the question does not lead to a point because we are measuring a character quality that doesn’t exist because the thing we are measuring it in has no character at all.
So what should we ask instead? How do we determine if something is a “good idea”?
Great question and I have two solutions for this.
The first question I ask myself personally is this:
Is this a good idea for ME?
You see, when I take something and apply it to myself I can instantly see if it will have a positive or negative impact. It also places the right/wrong-good/bad characters squarely on my shoulders. It’s kind of like asking, “is this edible?” versus “should I eat this?”. Is this edible is very open and probably anything is edible to someone or something somewhere. But when I ask if I should eat it, I automatically know if it’s edible or not for ME. See, in the world of finances everyone is in a different spot and so everyone is going to have a different answer for whether or not a financial tool or concept is a good idea or not. But what matters is your answer for you. Will this improve my situation or will it make it worse? Something that may be a good idea for you may be a bad idea for me and something that may be a bad idea for you may be a good idea for me.
The second questions I ask myself goes like this:
Is this a good idea RIGHT NOW?
Money decisions are largely dependent on timing. Believe it or not, financial success happens in a certain sequence and if I do things out of that sequence I will fail because of it. An example of operating outside the sequence is spending money before I earn it. The proper sequence is to earn it first. So if I saw something and asked Is this a good idea for ME? and my answer was yes, but didn’t then ask Is this a good idea RIGHT NOW? then it could quite easily lead to me going out of sequence by buying or investing in something before I’ve earned the income for it. Now I’m in debt to a financial institution and insolvent.
Another example would be investing. The right sequence would be to earn more than I spend, own more than I owe, have reserves, protect against risks and liabilities, and then invest. Let’s say I bypass this correct sequence and decide to earn more than I spend, and then invest and skip over owning more than I owe, having reserves, and protecting against risks. Now I’m insolvent once again. Yes I have investments, but I’m insolvent. If I lose my job, my investments are not accessible in most cases and so I won’t have any reserves to keep myself afloat. In that situation, my investments aren’t really going to help me.
When I learned to ask myself these two simple questions, money got easier. I began making the right decisions and avoiding the wrong decisions. And then I realized money is simple. It isn’t a complicated subject. Money is just an accounting system and like any accounting system it operates on non-negotiable principals and when I violate those principals there will be a consequence to account for and reconcile the violation. So like if I spend more than I earn, money will reconcile the numbers and that amount I overspend will be accounted for somewhere. Most likely I’ll go in debt and it will cost me. Nothing goes unaccounted for with money because money is math and math has to make sense one way or another.
Now, remember when I said money was inanimate and amoral? Well here’s the part of that which sucks if I’m prone to violating the accounting principals of money. Money does not care what happens to me because it doesn’t care at all. So if I make a bad money decision, money will emotionlessly and routinely deliver me a financial beating that causes the math to work. It doesn’t have any regard for what will happen to me, how I’m going to cope, or even what’s going to happen to me and my family. It’s like being cold clocked upside the head by a robot. It is very effective at delivering the blow and it has no feelings regarding the matter.
Like I said in the beginning of this article, I used to be chalk full of bad financial decisions. What changed for me is that I got tired of taking the beatings that money would coldly deliver to me. When I got tired of it, I decided to learn the accounting principals that money operated on so that I didn’t have to financially get my ass beat anymore. Once I understood them I realized how simple they were and never took another beating.
Now these beatings aren’t literal. They come in the form of being paycheck to paycheck. They come in the form of having little to no savings. They come in the form of being in debt. They come in the form of the car breaking down and not knowing how to pay for it to be fixed. They come in the form of a family member getting sick and needing help, but having no means to help them. These financial beatings are easy to overlook because everyone around us receives them on the regular and they’ve come to feel normal.
Well they’re not normal.
You don’t have to live paycheck to paycheck. You don’t have to be in debt. You don’t have to continue life being broke.
You have a choice.
But your choice is to learn the principals money operates on and comply with them or continue with the beatings.
I made my choice years ago and I’m glad I did.
If you’re ready to make that choice, you can start by grabbing a free copy of my book How To Create Wealth. This will teach you some of the basic principals of money. Coupled with these 2 questions I taught you today, you’ll be well on your way to a great relationship with money. One that has a lot less bumps and bruises and one that helps you live a life of abundance and prosperity.
Click here to get a free copy of my book!
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To Purpose, Wealth & Freedom,
Jerry Fetta is the CEO and Founder of Wealth DynamX. He is a nationally recognized financial expert featured in Forbes, Fox, Chicago Weekly News, and other publications with dozens of features on popular podcasts and has earned endorsements and affiliations with names like Grant Cardone and Dave Ramsey. Jerry’s mission in life is to help create millions of financially educated and wealthy families navigating their economic futures with certainty and building more prosperous communities around them. Learn more at www.WealthDynamX.com