How to take charge of your personal finances

by Claire Emerson

Clarity and control are powerful propellers in personal finance.

Because they make you feel confident and capable of making all your “maybe’s” happen. And that faith spurs progress.

Unfortunately, many of us don’t feel that sense of calm and focus when it comes to our financial future. Instead, we feel shame about the failed shots we’ve taken. Frustration that we didn’t start earlier. And fatigue from trying to negotiate all the uncertainty.

But thankfully, these are things we can fix.

And even if you haven’t been paying much attention to your long-term money goals. Or, you feel a jolt of panic whenever you think about the lack of funding for your ideal future…

Fear not!

Because today, we have a simple solution (plus some excellent book recommendations) to help you reduce all the doubts and unknowns. And provide some clear direction for your path forward.

FI without the RE

Money can’t buy happiness. But it sure can buy you freedom.

And even if “retiring early” isn’t in your game plan, I bet you’d still enjoy:

  • More control over your time and daily schedule
  • Being able to pick projects out of joy and fulfillment — rather than desperation and cash-flow needs, and
  • The peace of mind that comes from reducing any fear and uncertainty regarding your future.

But to have that kind of financial freedom — you need to do more than just stare at online compound interest calculators. And hope you’ll be okay in 20 years.

Instead, you need to:

  • get better at making decisions
  • evaluate what drives your financial goals, and
  • develop the right set of money habits for your specific situation

Ultimately, as Morgan Housel, author of The Psychology of Money puts it:

Financial success is not a hard science. It’s a soft skill, where how you behave is more important than what you know.

Clarity can be the catalyst that shifts your trajectory

But clarity doesn’t come from scrolling through Twitter. And getting life advice from people unaware of your specific wants and needs.

It comes from evaluating how you’re currently handling your money. And taking the time to tweak those behaviors to get better results.

There is no doubt that when you focus on improving your money habits — and build systems to help support those habits — you reduce the time it takes to feel radically more confident and in control of your path to financial independence.

But before we get into how to enhance your money maturity (with our list of required reading) we need to talk about something else first.

Define Your Crazy: Results don’t extend from unfocused effort

If you make money decisions based on what other people are doing, without evaluating why or what they might be working towards, you’re making a huge mistake.

Because we all have different needs, different concerns, and different options when it comes to building wealth.

So rather than blindly follow someones else’s path to financial independence (that might leave you broke and lead you nowhere) — your job is to forge your own set of financial rules and habits, that fit your unique set of circumstances and goals.

When it comes to matching your money habits with your money goals — you need to know exactly what you’re working toward and why.

The good news is, the task of figuring out what your money rules should be, gets significantly easier when you define your version of crazy, first.

In other words, before you make decisions about what to do with your dollars (or take advice from anyone on the internet), first — you need to establish what financial freedom looks like in your world.

And today we have an exercise that is going to help you do that. But before we get to it, we need to address a problem that can arise when we do this type of self-evaluation.

“Money talk” whips up powerful emotions

If you’ve ever had a money discussion with a family member before, then you know how painfully uncomfortable these conversations can get.

Mostly because our financial status is deeply entangled with our sense of self-worth and identity.

And sure, we can always learn to handle these moments with more poise. But there is no denying — finances stir up all kinds of unwanted feelings. Which can make clear-headed money decisions remarkably difficult.

But while that emotional turmoil can wreak havoc on how we deal with our money, those same emotions are the driving force behind why we want to get better with it, too.

And when you intentionally uncover your underlying deep wants and intangible (but often unmet) needs — you’ll unlock a superior strategy for how you should proceed with your financial future.

Taking Stock: 3 questions to ask before you can breeze through making money decisions

Today, I want to help you define those underlying desires that drive your money decisions. And prod you in the right direction, so you can take more focused steps toward your version of financial freedom.

And to do that, we’re going to borrow some wonderful questions from George Kinder, the author of The Seven Stages of Money Maturity.

First, grab a pen and paper, or open your favorite notes app. Then, write down your answers to the following questions:

Question One

First, imagine that you are financially secure, that you have enough money to take care of your needs, now and in the future. The question:

How would you live your life? What would you do with your money? Would you change anything?

This exercise only works if you leave the self-censorship at the door. Let yourself go. Don’t hold back your dreams. Describe a life that is complete, that is richly yours.

Question Two

This time, you visit your doctor who tells you that you have five to ten years left to live. The good part is that you won’t ever feel sick. The bad news is that you will have no notice of the moment of your death.

What will you do in the time you have remaining to live? Will you change your life, and how will you do it?

Question Three

This time, your doctor shocks you with the news that you have only one day left to live. Notice what feelings arise as you confront your very real mortality.

Ask yourself: What dreams will be left unfulfilled? What do I wish I had finished or had been? What do I wish I had done? What did I miss?

Deliberate reflection rewards “future you”

Once you get to the bottom of your deepest wants, needs, and desires — you gain a better understanding of what habits and behaviors you need to adopt to bring them to life.

And this means that when you read your next book on investing, or follow your curiosity into the deep depths of finance Reddit channels — you’ll be able to process what you learn through your unique lens.

Not only does this make picking and applying the most relevant lessons instantly easier. It reduces the time it takes to implement the strategies and tactics that make the most sense for you.

Five books we recommend for boosting your financial wellness

Once you’ve set some boundaries around your money goals, the next step is figuring out what to do and why.

After tapping the brain of Maybe’s in-house financial advisor — we’ve put together a list of excellent books to add to your reading list.

Here are our top five book recommendations for taking charge of your personal finances:

#1 — Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts, by Annie Duke

https://lh5.googleusercontent.com/2Q-d6Jj-SoCgFOdzfbYTQ-VyJcI0mS2FIMQrAmrTpBYXcXqMi3aHHiHFhQe0DJKInp1p50g0wr3Do0cOF7CqWUuimcHwAQzRUa-GydRuT45txO--I13t5C7k0RpRkUeZ2AiL6Fkf

Making better decisions is easily in the top five of “must-have” life skills. But what I loved about this book is that it showcases how to untie results from decisions.

Meaning — poor outcomes don’t necessarily stem from poor decisions. And, perhaps more notably, good decisions can still produce bad results. That simple fact alone can do wonders for shifting your perspective when it comes to “placing bets” with your money, and your future.

Annie is a former World Series of Poker champion turned business consultant. And she draws on examples from business, sports, politics, and (of course) poker to share tools anyone can use to embrace uncertainty and make better decisions.

Her second book How to Decide is also well worth picking up.

#2 — I Will Teach You to be Rich by Ramit Sethi

https://lh5.googleusercontent.com/-e1JeKkv5GcRTZx6T-CJs-qlQYaOh-EVOvDbZt3H7ZGLR-1kwuXsR88pKMBLuudYq5Fd7t2FgdI45f9ZC_43GKjV1hu_Go--2VSyl7j7_FSO8-48MZXT3QQ1afP6bqFwi5FA8Z-t

Making meaningful progress with your money often feels impossible.

But Ramit breaks the process down step by step. And provides a clear system that can be applied to almost any lifestyle situation.

This is a down-to-earth, no BS kinda book. Full of quick, simple solutions for retirement and living a "Rich Life" that will work for 90% of people. And as one reader puts it:

“Likely already 10x better than whatever you're doing right now.”

Ramit’s latest book, Your Move: The Underdog's Guide to Building Your Business, is also a great read if you want some excellent (and practical) advice about starting a business.

#3 — The Psychology of Money, by Morgan Housel

https://lh3.googleusercontent.com/nLINfAWrnAfbCarx2nxKXHvpZ4qAfZO7GtDLJfOhlTDhRZgtZXSuGOMylj5wptS0YJAZ2NzS5AELFjpjKBUQZ241L0a7bszsIi4OzDGBXUKi0YRylIySelVGnLdyrqRyAjIcYOed

The premise of this book is that doing well with money has little to do with how smart you are and a lot to do with how you behave.

Rather than focusing on the hard science we mistakenly think applies to our most pressing money matters, Morgan does an excellent job of using stories to demonstrate the soft skills required in the personal finance game.

Having recently read this, it’s still super fresh in my mind, and one of my favorite early highlights was this:

Here’s the thing: People from different generations, raised by different parents who earned different incomes and held different values, in different parts of the world, born into different economies, experiencing different job markets with different incentives and different degrees of luck, learn very different lessons.

A big theme in the book is that financial freedom looks different for everyone. And the quicker you grasp that — the smarter your money decisions get. (And the less judgemental you are of others!)

#4 — The Four Pillars of Investing, by William Bernstein

https://lh4.googleusercontent.com/dvQZju4_v8eq02jBaen3fePdPj0shjKVkIwiS0TZFnXWMo4pxBhByxVEXPGeyFKxTbtgA5U07qD_ainv2OCe0xjb-nxVIb33xYgWb7wAUw5nF4BMdclLbbHXokHd3MgTfE7gjRru

Looking for a commonsense approach to building an investment portfolio? Then look no further.

This book covers the four fundamental topics that every investor must understand: the theory, history, psychology, and business of investing.

As soon as you understand how they all work together, you’ll feel empowered to build your own version of wealth. And have a significantly clearer (and optimistic) outlook for your financial future.

Mostly — it gives good advice for optimizing your returns while mitigating the risks. It’s easy to read with lots of examples and anecdotes.

#5 — The Geometry of Wealth, by Brian Portnoy

How does money figure into a joyful life? A lot, a little, or not at all? Can it buy happiness, and if so how?

https://lh3.googleusercontent.com/kDvHZh8o4TY-kIv9NcctKt2_mg5vkhiXkwrxLju0CbTTfdzUQsOA336cMdq4kiUwhjxeX-pBO_ashnnUSQ2aZ959-Jxv9-U17EL-pnqeICrBLfUdll9PvfZ6wPXjgw2TRiGG9J_l

The relationship between money and meaning defies easy explanation. But Brian shares some wonderful frameworks for how to manage your finances in a way that’s aligned with your values and needs.

Satisfaction and contentment are powerful drivers. And when you realize we’re all in it for the long haul — in terms of looking after ourselves and our family — you’re reminded that real fulfillment comes from the freedom that money can bring. Not necessarily the money itself.

Brian offers the term "funded contentment" in thinking about wealth specific to every individual's own circumstances and desires.

He then sets forth a playbook on how to think about what matters, setting priorities, making decisions, thinking probabilistically, regret minimization, and striking a balance between more and enough.

Matching your intentions with your behavior

The TLDR version of today’s post is that:

You can’t take charge of your personal finances — or gain the clarity and control that you crave — without setting intentional goals and guidelines about how you behave with your money.

But you can build a solid foundation for achieving financial freedom if you use deliberate reflection and purposeful visualization to define what you really want. And use that powerful picture to align your habits, systems, and decisions — to spur your progress.

And yes, your view of what you’ll want in the future is liable to shift.

But you now have a simple solution (asking yourself the three questions we mentioned earlier) for negotiating that inevitable change. And you can use your answers to gain the clarity and control that will keep you on track toward your goals.

Request early access

Modern financial planning & investment management. Get early access and help shape the product by dropping in your email address.