2018 is coming to an end. It was uncomfortable, challenging and required a lot of hard work and dedication. To sum up: it was an amazing year. At the end of 2017 my comfort zone and I became complacent in our relationship and decided to take a break from seeing each other for a while. We are still separated at the moment and I seem to have found new friends: anticipation, belief, trust, growth, potential, consistency, commitment.
I introduced these new friends to my coachees and together we were able to re-write a lot of financial stories this year. It was a steep learning curve for both me and my clients and now that the year draws to a close I’d like to share the 6 most significant financial lessons we have learnt together in 2018.
1. Money is fluid. It will slip through your hands if you try to hoard it but it will also create flood damage if you take your eyes off it. You are responsible for turning the tap on and off and for choosing the vessels you want to collect it in. An airtight container is just as bad as a leaking vase so think carefully about where you keep your money and how that arrangement allows it to generate more (in interest, dividends, etc.) or decrease in value (inflation, time value of money, etc.).
What goes around comes around and as much as money offers freedom it also likes to flow free. In order to get more you have to be willing to give more, be that in monetary terms or not: give more money, time, attention, effort, thought. This brings me to the second lesson.
2. Every decision has a financial implication. It might notbe immediately obvious but every time we decide to (not) do something we impact our financial situation. There is no such thing as a non-financial decision because everything has a cost. Deciding to buy something on the credit card can have ramifications all the way up to being refused a mortgage because of a poor credit score. That is a much higher cost than the price of the item bought in the first place. At the same time, a credit card used in a smart, intentional way can actually improve your credit score.
Similarly, deciding to focus on an area of your business to the detriment of another creates an opportunity cost of what you could have generated in terms of revenue if your time and effort would have been spent elsewhere. Being aware of the financial implications of our options is worth striving for.
3. Our financial situation reflects in the bank statements but starts in our mind. There is potential in all of us. Whether we choose to see it or not is a different matter. Whatever threshold you think you might have reached, it is only a bar that you’ve set for yourself. Set the bar higher and you’ll reach that too.
A better financial story starts with a belief that it can be achieved and a determination to take the necessary action to get there. The rest are just details. If you don’t believe it’s possible then no amount of blood, sweat and tears will get you there because your own mind will sabotage your work. There is a saying in my native language which translates into English as follows: “where there is no head, pity the legs”. In other words, get your head straight and the legs will follow. The reverse is a waste of time and effort.
4. Investing in yourself pays dividends. Given that you are the author of your own financial story, it makes sense to take care of your most valuable asset: your mind. Feed your mind with valuable thoughts and information, read and learn as much as you can, surround yourself with people who inspire you and make maximum use of the wonderful machinery you have between your ears.
Prepare yourself for the future, plan and research, do your homework and don’t let life surprise you all the time. Sometimes this requires a minimum monetary investment with a trade-off of having to spend more time researching. There are times however when a higher investment is necessary and that will bring its own benefits which you could not have obtained otherwise: a degree from a prestigious institution, access to valuable and rare resources, access to help and expertise from other people, etc.
What you put in is what you get out and it’s a matter of doing your own cost-benefit analysis to determine how much resources you are willing to invest in order to reach your objectives. However, don’t expect premium results on the cheap. They rarely come.
5. Opportunity is everywhere. But mostly in front of us.What was that? You can’t see it? If you can’t see it then look closer or create it! I spent 2018 creating opportunities out of what seemed to be casual occurrences, coincidences and even bad luck. Some of them brought me financial rewards and some started as liabilities before I could see any benefits.
Everything happens for a reason and it’s our job to be curious about it, enquire further, embrace the challenge and make it our own. Not every opportunity will turn out to be a golden goose, but every unexplored opportunity will inevitably be lost forever. Yes, you will end up saying no to some things but what would you rather do: take your chances on finding a good egg or go hungry?
6. If you fail, make it count. You win some, you lose some – it’s just the way life works. However, if you do make mistakes or things don’t end up going exactly as planned, make sure you still reap some benefits. Analyse what happened, reflect on it and learn the lesson. Plan for how you will deal with similar situations in the future and move on with the satisfaction that you’ve learned something valuable.
When it comes to finances I find it very useful to identify the cost of correcting a mistake and comparing it with the cost of doing things right first time. In almost any case the latter cost is smaller, both in monetary and non-monetary terms. Then I add in the opportunity cost of spending my time correcting the error instead of focusing on something else. It adds up to an eye-opening amount. That being said, don’t be afraid to make mistakes. Not everything is under our control and some things will go wrong from time to time. Make the best of what you have available and make every success and failure count.
What are your reflections for 2018? What did you learn and how will you apply your knowledge in the new year? Remember: a lesson keeps repeating itself until we learn it. Here’s to a great 2019!