February 2, 2022 – The best time to ask yourself powerful questions about your finances is always right now! Constantly challenging yourself to think about ways to improve your life might help you break habitual thought patterns and discover new ways to get the results you are seeking.
Our clients come to us for answers, and we are prepared to provide them with advice and recommendations. We see our role as helping clients understand what’s most important to them, reducing their stress, and helping them make better financial decisions. Many times, the questions they ask are indeed pressing, but are not always fundamentally important when looking at the “bigger picture.” So, it is, at times, required that we ask such “big picture” questions.
It’s not always easy to ask and answer these questions honestly. Sometimes it means admitting that you made a mistake, that you failed, or even that you’re failing now. You may find that you have no idea how to even answer a particular question. The possible emotions coming from this exercise can include frustration, embarrassment, failure, helplessness, and guilt, which does not make it sound like a fun exercise.
But if you’re willing to take a good long look in the mirror, asking yourself the tough questions can help you get back on the right track — or progress even better if you’re already on it. You can transition to feelings of hope, happiness, inspiration, appreciation, and a renewed love for all that is meaningful.
Here’s a list of six powerful personal finance questions that can lead to positive change in your life.
1. What Would You Not Do If You Could Go Back In Time?
If you don’t learn from your past, you risk repeating the same mistakes. Hindsight is 20-20, so take advantage of knowing the answer to questions like “Knowing what I now know, is there anything in my life that I would do differently?”
If the answer is “yes,” then you know it’s time to make a change. You don’t have to limit your future by the decisions you’ve made in the past. If you started a business and it’s not working out, don’t be afraid to cut your losses and start over. If you’re working in a career and hate it, find a different one.
I know that these things are much easier said than done, but with planning and effort, they’re possible. The first step is being honest with yourself about the answer to this question.
2. How Much Money Is Enough?
It’s easy to think that more money solves every problem. But when it comes down to it, much of our happiness is derived from inexpensive or free things.
Visualize what your ideal day or week would look like, and what it would cost. Would $10 million in the bank be enough? That $10 million figure isn’t random. It’s chosen because it’s probably large enough to give you financial independence, but not so significant that it transcends reality. The point of this exercise isn’t to fantasize about having all the money you’d ever want. It’s to give you space to think about what matters to you, without the constraints of your everyday financial stress — all the bills and the budgets and the obligations that are constantly weighing you down.
If you are fortunate enough to find yourself in the position of already being financially independent, what is the role of your money now? Is it a second or maybe third home? Would it be luxury cars or nice boats? Extravagant travel and the many niceties of life are specific considerations. In this situation, the most challenging financial skill is getting the “goalposts” to stop moving. To do that, you have to stop comparing yourself to others and determine what is “enough” for you. Always remember, no one is as impressed with your possessions as you are!
3. When Is Your Financial Independence Day?
Knowing and tracking how much you are worth can be fun, and we provide this service to our clients. But knowing your Financial Independence Day — which is the day you no longer have to earn income — can be an even more powerful motivator.
Everyone faces the same two resource constraints in life, money and time. If you don’t have a handle on how much is enough (see #2), Financial Independence could be an illusion because you will always feel you need “just a little bit more.” On the other hand, if you determined what is enough and have attained it, you have achieved “financial freedom,” a stage that allows you to control your most precious resource, your time!
4. If You Lost Your Entire Income Tomorrow, What Would You Do?
The “Accumulation Stage” of your life is the stepping stone to Financial Independence. It is the stage where your investment in “Human Capital” and your unique talents allows you to earn and therefore accumulate “Financial Capital”. The simultaneous financial returns from both your Human and Financial Capital are the growth engine to financial freedom.
It is not unusual that the compounding growth of your Human Capital (your employment) outpaces financial market returns. We all understand the risk inherent in investing your financial capital. Likewise, and for the same reason, you will need to take some risk in your career — to step out on a ledge and take a leap of faith that brings uncertainty. These are calculated risks for sure, but risks that are more in your control than the stock market’s volatility.
We often think these situations are make-or-break moments in our lives; these risks are massive successes or total busts. Most of the time, that’s not the case, especially if you have a plan in place. The foolproof plan is pretty simple:
- Love what you do.
- Be very good at it.
- Get fair pay for it.
- If 1, 2, or 3 are not true, it’s time for a change.
Sure, change is hard. But there’s a danger that’s bigger than trying and failing, and that’s not trying at all. Your chances in your professional life do not come often, so seize the moment.
If you feel like the risks are too significant, you may not act on those opportunities. And you’ll probably make less money and have less professional growth as a result. That’s why you should always have a plan in place for the worst-case scenario; a backup plan that you know you can put into action to ride out the worst of the storm. This plan always starts with a fully funded emergency fund, but could also include some part-time jobs or side gigs you can turn to in a moment of crisis.
5. What Would You Do If You Weren’t Afraid Of Failure?
We often limit ourselves because we’re afraid of failing; we set goals inside our circle of competence — avoid opportunities that force us to stretch beyond our comfort zone. And this sometimes means we’re not pursuing our ideal outcomes, our optimal life.
That’s part of why it’s so important to have a plan for a worst-case scenario. When faced with a difficult life decision, I always ask myself the same question – What is the worst that can happen? What would it look like, how would I feel, and how might it affect the people I love? In almost all cases, the possible outcomes are never as bad as you imagined, and you have created the baseline to help you make an informed decision. Knowing that failure isn’t the end of the world frees you up to think about what you really want to be doing.
I am a firm believer in the power of positive thinking and the distinct advantage that optimists have over pessimists. I say, “Be optimistic, achieve optimally“. We are going through a difficult time as the pandemic has affected many parts of our lives, but, could you ever consider anything positive about this experience? I have and call it a “Silver linings playbook.”
So, ask yourself what you would do differently today if the potential for failure wasn’t part of the equation. And then ask yourself what steps you would need to take to make that a reality. You will be pleasantly surprised at the outcome!
6. What Will Happen If You Stick With Your Current Habits?
The questions outlined above relate to changing your behavior, mindset, and habits. Sometimes, it can be helpful to think about those things from a different perspective.
Instead of just asking yourself how you want things to be different, think about what it will mean to you if you remain on the exact same track. Paint that picture for yourself; it should be clear because you have plenty of experience living it. Think of yourself at a point in the future, 10, 20, or even 30 years from now. Say hello to your “future self.” Now start a conversation with your “future self.” Outline your current plan, if you have one, and explain the rationale behind your plan. Project forward what impact your current plan will have on your “future self.” Now ask your “future self,” how does that sound to you? How has it worked out for you?
There is a school of thought among psychologists that the dynamic between your current self and future self is truly a motivator for change. Daniel Goldstein presented an interesting 16-minute Ted Talk on this topic called “The battle between your present self and future self.”
I also have written about “Lessons to help your future self“, which provides a practical approach to guide that conversation with yourself.
As Daniel explains, this works on a practical level regarding things like your savings rate. If you keep setting aside your current amount per year, will you be satisfied with your retirement account when that day finally arrives? But it also works with bigger-picture questions like your career trajectory. If you stay in your current lane and keep making the same types of decisions, will you be happy with the result 5, 10, or 15 years down the line?
If you find that conversation difficult, now is the time to change the narrative!
As Financial Life Guides, our most meaningful work is not to answer the questions you ask, but to suggest the questions you should ask yourself and guide you to the best answers.