We cover five pillars: financial psychology, increasing your income, investing, real estate, and entrepreneurship. It’s double-ii FiiRE.
Today, I’m diving deep into the first pillar: financial psychology.
Pillar I | Financial Psychology
Most of us have one of three attitudes towards money: we’re anxious, we’re avoidant, or we’re obsessed.
Those of us who are anxious can sometimes express that in the form of frugality, which means we might be making the right decisions for the wrong reasons.
Financial anxiety might take the form of clutching onto every penny. While that might mean your savings rate is fantastic, it also keeps you locked into a scarcity mindset — which inhibits growth.
Those of us who are avoidant might be selectively so. Perhaps we enjoy the game of checking our Robinhood account, but we tend to dodge looking at the credit card statement.
Or perhaps we spend way too much time tweaking at the margins, perfecting our Amazon Subscribe and Save cart, but not enough time learning about the right mix of investments.
Frugality, in fact, can be a form of avoidance because it keeps us focused on consumption rather than production.
Sure, we’re consuming for less, but we’re fundamentally still focused on the consumption aspect of our lives.
And that means there’s no fear of failure. There’s no taking a risk or venturing into the unknown in the way that there is with entrepreneurship and investing. There’s no imposter syndrome.
Your side hustle idea might flop. Your rental property might turn cash flow negative. Your foray into private investing might run into problems. But stacking coupon codes with the right credit card rewards? There’s no risk of failure there.
An excessive focus on frugality, therefore, is safe. There’s a surefire reward. Minimal risk. And in that regard it can be an avoidance mechanism.
There’s also that third element — those who are obsessed with money. Often there’s both a fear and a worship combined.
This can be hard to spot, but I’ve noticed it most often comes out in people who let the tail wag the dog — who make some of the most important decisions in their life based not on what they want, but rather on what makes sense on paper.
They’d love to live in XYZ location (California, NYC, Europe, Hawaii, etc. — whereever suits their fancy), but they won’t because the taxes are too high.
They can’t stand their boss, but the paycheck is just too good — even though they’re not in any type of dire financial situation. They have the means to leave, to look for other work, but they don’t.
The telltale sign of money obsession? Money is the first — and often only — factor you consider when making any major life choice.
If money is your default filter, then you need a richer filter.
Because richness is deeper than financial wealth.
It’s tempting to make the life choices that “make sense on paper” (what major to study in college? what city to live in? what career to enter?)
But those simply lead to discontent and resentment. You ultimately end up spending more in the long term to undo those misaligned decisions.
The better investment is to let the heart lead and the mind execute. Make the decision that reflects your calling, and then figure out the most cost-effective way to do it.
Dog first, then tail.
