Merriam-Webster defines peace of mind as a feeling of being safe or protected. What does having peace of mind mean to you?
When I start feeling overwhelmed, stressed out, anxious, or a combination of all of them, I think about the Serenity Prayer:
God, grant me the serenity
to accept the things I cannot change,
the courage to change the things I can,
and the wisdom to know the difference.
And we certainly have a lot of reasons to be less than serene. News and media feeds us a never-ending stream of bad things. COVID, racism, gun violence, climate change, nuclear war, economic disaster, etc.
What about financial peace of mind? Do you have it now? Did you have it when you were a kid? What would you give to have more of it? Do you know what it would take for you to feel good about your financial life?
My work over the past 20 years has focused on money and personal finance. I believe that financial peace of mind allows us to more fully pursue our passions. More simply put, when you don’t have to worry about money, you can be fully engaged in what’s most important to you.
In service of that, I want to share my thoughts on how to do that from a philosophical perspective, as well as provide you with some tactical actions you can take right now. Hopefully, it will help you increase your financial peace of mind.
Here’s what we’ll cover:
Let’s get started.
Goals and values
In order to have financial peace of mind, one must first determine what it means. Does it mean you’re debt free? Does it mean you have $1,000,000 in the bank? This is a question only you’re capable of answering.
So, what does financial peace of mind mean to you? Think about it in terms of debt, short-term savings like the amount in your emergency fund, being on track to reach your mid and long-term goals, and eventually leaving money to loved ones or a community group.
When I think about values, I think about the saying, “You’ve gotta stand for something, or you’ll fall for anything.” In today’s world, we’re constantly having new information come into our heads. We’re constantly having to make decisions about how we’ll spend our time, attention and money. Having clarity around what you value and believe will help make your decision making process a lot easier.
In service of helping you get clear on your goals and values, you can access our Goals and Values Courses at no cost.
Rule number one
The number one rule of personal finance is Pay yourself first. This means that you contribute to your financial goals before you send money to anyone else. If you’re in the habit of paying everyone else first, and waiting till the end of the month to pay yourself, you’ll find there’s no money left over for you.
Far too many Americans are in the habit of paying others first. Two thirds of us are living paycheck-to-paycheck. I know the stress and anxiety this can cause, because I did it for most of my 20s. It’s easy to get stuck in this negative pattern, and especially dangerous because money has a time value. The longer we wait to begin pursuing our financial goals, the harder they are to reach. It’s important to get in this habit asap.
We start paying ourselves first by opening the appropriate accounts and setting up automatic contributions.
Rule number two
The number two rule of personal finance is Stay out of debt. The average American household has over $6,000 in credit card debt. Debt prevents many of us from achieving financial peace of mind. I can recall (also in my 20s) trying to figure out how to manage minimum monthly payments, paying penalties for late payments, and poorly managing my credit card debt.
Getting out of debt must be a top priority. The first step is simply adding up all your existing credit card debt so you know the exact amount. Once you know, you can go through your cash flow and budget to determine what changes you’ll need to make in order to pay down your balances.
In service of helping you do it, you can access our Get Out of Debt course at no cost.
If you have kids, please work as hard as you can to help them avoid having to take out student loans to pay for school. While this may not be possible, do everything you can. It’s too common for young people to casually take on tens of thousands of dollars of debt without thinking about the long-term consequences.
If you’d like to help your kids get good with money, check out our Teaching Kids about Money course.
Rule number three
The number three rule of personal finance is Diversify. It’s risky to put too much of your money in a concentrated investment like an individual stock or crypto currency. Yes, there’s the potential for greater returns, but there’s also the potential for greater losses.
With the inception of digital trading platforms like Robinhood and Coinbase, many more people have become interested in investing. While increased interest is a positive, the majority of people have lost money trading. While there are many reasons this happens, trading individual stocks and crypto currencies is extremely challenging to do successfully.
Before I go any further, I’m not discouraging anyone from trading. I’m encouraging everyone to take a more diversified approach to the majority of your investing. This means investing in low-cost, well-diversified investments like mutual funds and ETFs. These types of investments are a wonderful foundation for the majority of your portfolio. Once you’ve set your foundation, by all means invest in more concentrated investments. Too often, we get the order wrong.
Your company’s 401(k), an IRA, or a taxable brokerage account, offer great mutual fund and ETF investment options. Robo-advisors are also great options for taking a diversified approach to investing.
Companies like M1 Finance can be a great choice.
Bonus and closing thoughts
Teddy Roosevelt famously said “Comparison is the thief of joy.” He was right when he said it, and he’s right today. Fifty years ago, we fell into the trap of trying to “keep up with the Jones’.” Today, we’re still trying to keep up with the Kardashians. None of it’s helpful.
One of the Ten Commandments is “You shall not covet,” which is defined as “yearn or possess something.” Comparing ourselves to others and wanting what we don’t have has always been part of the human condition. The trick is to recognize when we’re doing it.
When I catch myself doing it, I simply remind myself of how fortunate I am to have the things I have. And I remind myself that the only person I should be comparing myself to, is yesterday’s version of me.
Keeping these three rules in mind, and putting them into action will go a long way to helping you find the financial peace of mind you’re looking for.
If you’re ready to take control of your financial life, check out our DIY Financial Plan course.
We’ve got three free courses as well: Our Goals Course, Values Course, and our Get Out of Debt course.
Connect with one of our Certified Partners to get any question answered.
If you’d like help getting on the same page with your partner, check out our Same $ Page Course.
If you’d like to help your kids get good with money, check out our Teaching Kids about Money course.
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