Kicking Financial Ass Read online

  •Learning how to budget and be frugal and not cheap,

  •Learning strategies on how to tackle your debt in the most efficient way,

  •Building a small emergency fund in the shortest time,

  •Minimizing your car expense so that you can focus on growing your money,

  •Having insurance to protect you from unexpected life events, and

  •Learning how to say no to overspending.

  These essentials allow you to propel your finances to the next level. So, get ready!

  CHAPTER ONE

  BE MORE WITH LESS

  THE STORY OF THE MEXICAN FISHERMAN

  A businessman was sitting at the pier of a tiny coastal Mexican village when a fisherman docks a small boat. The businessman compliments the fisherman on the size of his fish and asks him how much time it took to catch them.

  “Not very long,” replies the fisherman.

  The businessman then asks why the fisherman did not stay out longer and catch more fish?

  The fisherman says he has enough to support his family and does not need more fish.

  “What do you do with the rest of your time if you’re not catching more fish?” the banker asks.

  “I sleep late, fish a little, play with my children, take siestas with my wife, and, in the evenings, I go into the village where I drink wine and play guitar with my friends. I have a fulfilling life.”

  The businessman is not impressed.

  “I have an MBA from the top business school in the world and can help you,” he says.

  “You should catch more fish, and with the profits, buy a bigger boat. With the profits from the bigger boat catching more fish, you could buy more boats and eventually have an entire fleet of boats other fishermen can use to fish for you. Instead of being the middleman, you could sell directly to the fish processor, eventually opening your own processor. You could own and control the entire supply chain, everything from owning the product to the processing and distribution of the fish. Complete vertical integration,” he says. “You could then move from this little village to New York City where you would run your growing business.”

  The fisherman, intrigued, asks, “Seems like a lot of work. How long would that take?”

  “If everything goes well, at most 25 years,” replies the businessman.

  “Then what?” asks the fisherman.

  The businessman laughing says, “That’s the best part, when the time is right, you sell your business to the public by doing an IPO and make millions!”

  “Wow. Millions, I can’t even imagine. Then what’s after that?”

  “After that, you’ll be able to retire, live in a tiny village, sleep late, play with your children, catch a few fish, take a siesta with your wife, and spend your evenings drinking and playing guitar with your friends.”

  The moral of the story is that you can become more with less. The Greek philosopher Epictetus said, “Wealth consists not in having great possessions, but in having few wants.”

  The fisherman already achieved his end goal, so pursuing wealth for the sake of money was futile and frankly a waste of time. If you are going to pursue money, pursue it for a reason. Money should only be a process in obtaining your goals, not the means in itself. The first thing you should do then is to determine what your reasons are when wanting to make money.

  Too often, people get wrapped up in the wanting more, more, more, thinking, “If only I had more money, I’d be happy…,” believing, consciously or unconsciously, that the next purchase will be the cure-all to their problems. In the 1943 influential paper, “A Theory of Human Motivation,” American psychologist Abraham Maslow proposed that healthy human beings have a certain number of needs, and that these needs are arranged in a hierarchy, with some, such as physiological and safety needs, being more fundamental than others, like social and esteem needs. Maslow’s ‘hierarchy of needs’ is often presented in a five-level pyramid, with higher needs prioritized only after lower, more fundamental needs are met. Looking at the pyramid, we often are trying to achieve esteem and self-actualization needs by buying our way there.

  If we apply this model to our financial lives, as long as our basic needs are met, money adds little to our happiness. Ironically, by chasing the next big thing, we tend to jeopardize our safety needs by being less financially secure. As a result, we can feel stressed about finances, insecure about where we are in our careers, and dependent on a certain income. If we go too far, we cannot afford to do the things that really make us happy.

  Many people say that money does buy happiness, and they would be right. Statistically speaking, household income is strongly related to both emotional well-being and a person’s evaluation of their own quality of life—up to a point. Past that, however, there are diminishing returns between dollars earned and happiness. Multiple studies show2 that after making $75,000 to $80,000 per year, the difference in the emotional well-being an extra dollar makes in reducing negative emotions becomes less and less. The difference between earning $20,000 and $40,000 is huge and life-changing. The difference between earning $120,000 and $140,000 means your car might have nicer seats. The difference between making $1,000,000 and $1,020,000 is a rounding error. You require a certain amount of financial security before you can move onto your other needs and move up the hierarchy.

  After over a decade of studies, University of Illinois psychologist and researcher Dr. Edward Diener, who specializes in what makes people happy, concluded that money can add pleasure to people’s lives, but it does not bring the true happiness that comes with self-respect, accomplishment, and satisfaction. Diener’s conclusions are supported by Richard Layard, British labor economist at the London School of Economics, who writes, “Despite our huge increase in affluence, people in the West have grown no happier in the past fifty years.” We keep striving for more and more things, living in the most prosperous historical period of all time, and yet, we are not getting happier.

  “The desire for more positive experiences is itself a negative experience,” Mark Manson points out in his book The Subtle Art of Not Giving a F*ck. “And, paradoxically, the acceptance of one’s negative experience is itself a positive experience.”

  Manson goes on to say that the more you pursue feeling better, the less satisfied you become, as pursuing something only reinforces the fact you lack it in the first place. The more you desperately want something, the more you feel inferior. It is a nice thought that we can ultimately reach some sort of “ultimate happiness.” But alas, this can never be. What made us happy today may not make us happy tomorrow, whether it be buying that new $80,000 car or $500,000 house. We constantly feel inadequate. Psychologists refer to this as the “Hedonic Treadmill.”

  This predicament goes by many names. Historian Yuval Noah Harari in his book Sapiens refers to it as the “luxury trap.” He asks, “How many young college students have taken demanding jobs in high-powered firms, vowing that they will work hard to earn money that will enable them to retire and pursue their real interests when they are thirty-five?” He warns, “But by the time they reach that age, they have large mortgages, children to educate, houses in the suburbs that necessitate at least two cars per family, and a sense that life is not worth living without really good wine and expensive holidays abroad.” We become used to life’s luxuries and are caught up with wanting more, never satisfied.

  This is causing some serious social consequences. Economist Arun Abey in his book How Much is Enough? says:

  “Youth and adult suicide rates have doubled or tripled over the past forty years. The biggest-selling drugs are those treating depression, anxiety and stress. The onset of depression now occurs at age fourteen, anxiety at age eleven. Obesity and diabetes have reached epidemic proportions.”

  We are trying to chase happiness but never seem to get there. How can we ever be content?

  WHAT MAKES US HAPPY?

  Most of your assumptions about happiness are likely wrong. Psychologists3 over the years have found
that people are bad at perceiving happiness and estimating what will or will not make them happy. Furthermore, multiple surveys4 show that despite differences in income, geography, culture, and gender, people tend to have the same level of happiness on average. If these are not reliable predictors of happiness, then what is?

  WE ARE BAD AT DETERMINING WHAT MAKES US HAPPY OR UNHAPPY

  Most people believe if they won the lottery, they would be much happier. However, on average, when measured a year later, people who had won the lottery were not any happier than those who had not.5 There have even been accounts of lottery winners taking their own lives because they thought they would be happy, but the money changed their lives negatively, either through changing their relationships with friends and family or feeling like they did not deserve the money.

  We are also bad at remembering what made us happy or unhappy in the past. Previous moments are, most of the time, not as unpleasant or enjoyable as we remember them. Our brain generalizes one feeling for an entire event. If we remember a moment as pleasant and enjoyable, we tend to remember the entire experience as pleasant and enjoyable. Equally so if the experience was unenjoyable.

  HAPPINESS TENDS TO BE MISCONSTRUED AS PLEASURE

  When people want happiness, they tend to seek pleasure, which is not the same thing. Pleasure is related to happiness but is not the cause of happiness. Ask a drug addict how their pursuit of happiness turned out. Ask a recovering gambler, who lost everything, whether the pleasure of gambling made them happy.

  Research proves6 that people who focus their efforts on materialistic pleasures end up more emotionally unstable and unhappy over the years. The seeking of materialistic pleasures often forms the basis of a focus on money. More money can afford more pleasures, yet something rings hollow. There is more to life.

  We have all heard of a story from a coworker, friend, or family member who had a lot of money and yet was still miserable. At the same time, we have heard that saying, “Money may not buy happiness, but I’d rather cry in a Jaguar than on a bus.” The question then becomes how do we make enough money to meet our basic needs while focusing on our self-fulfillment needs? The goal is to have enough money to have our own version of a Jaguar but not cry along the way. We want to be happy right now, however, money is part of the process of getting to where we want to be and should not be the end goal.

  OUR VALUES SHOULD DRIVE WHAT WE DO

  True, long-lasting happiness is derived from the deeper values we define for ourselves. Our ultimate happiness is not defined by what we do and what happens to us, but why we do what we do and why it happens to us.

  Think about what motivates you. Is it an intrinsic or extrinsic motivation? Being motivated to make money just for money’s sake will lead to an unstable emotional state and superficial behavior. Having a deeper purpose like making more money to take care of your family will be more rewarding. Although, it is easier said than done. Most of us compare ourselves to others, trying to keep up with the people we interact with daily and those in our community, both online and in-person. If you compare yourself to someone who makes you feel financially inadequate or broke, change that. How? Focus on your own race, meaning your life.

  Everyone comes from different backgrounds and life experiences. It is likely the people you are trying to keep up with are struggling financially, so keep that in mind if you find yourself comparing yourself to others. When we compare ourselves upward, we tend to feel inadequate. There was a study published in 1992 that compared Olympic athlete’s reactions after winning either a gold, silver, or bronze medal. The researchers, Victoria Medvec, Scott Madey, and Thomas Gilovich, found that silver medalists were unhappier than bronze medalists. The reason? The silver medalists felt they just missed out on winning gold, while the bronze medalists were happy to receive a medal. The same idea goes with comparing our financial situation to others.

  Comparing our financial situation and seeking the approval of others can lead to neediness and be a turn off to those same people. On the other hand, if you are motivated by the approval of your closest friends, then that can help you through good times and bad. For example, I do not let my financial situation define who I am. Who I am is separate from my finances, and I take comfort in knowing my friends love and care for me regardless if I have money or not. Your values dictate your perspective on money. Change your values, and you will change your perspective and allow you to take control of your finances.

  Write down what you want written on your gravestone, and then write down what would be written today if you passed away. Albeit a bit morbid, this powerful exercise develops a perspective and vision regarding your values. On your deathbed, the last thing you want is a list full of regrets and people remembering you for the wrong reasons.

  The top five regrets of the dying7 as observed by an Australian nurse who spent years working with patients during the last 12 weeks of their lives are:

  1.I wish I had the courage to live a life true to myself, not the life others expected of me.

  2.I wish I hadn’t worked so much.

  3.I wish I’d had the courage to express my feelings.

  4.I wish I had stayed in touch with my friends.

  5.I wish I had let myself be happier.

  Focus on limiting your life’s regrets and concentrate on what you feel in your heart. Remember, no one writes on their tombstone how much money they had.

  Steve Jobs said it beautifully:

  “Remembering that I’ll be dead soon is the most important tool I’ve ever encountered to help me make the big choices in life. Because almost everything– –all external expectations, all pride, all fear of embarrassment or failure– –these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.”

  THE HAPPINESS EQUATION

  One way to think of happiness is as an equation:

  happiness=8 reality - expectations

  Another way to think of it, which is advocated by Neil Pasricha in The Happiness Equation, is:

  “Want Nothing + Do Anything = Have Everything”

  The idea is that you can work on lowering your expectations, improving your reality, or both to be happy.

  Reducing happiness to an equation oversimplifies it but can be useful. The largest flaw with this approach is the belief that happiness is derived from being without. In other words, if you decrease your expectations, you still view happiness in terms of external validation. Life is about growing, achieving, failing, and learning from everything in between. It is better than raising your expectations to become happier, as long as you are internally rather than externally motivated. You will be made happier by setting a goal and failing to achieve it than setting no goals in the first place. At the end of the day, many complex factors play a part in what makes us happy.

  According to a November 2017 National Geographic study, the three happiest places in the world were Singapore, Denmark, and Costa Rica. What does each of these places have in common? “Their people feel secure, have a sense of purpose and enjoy lives that minimize stress and maximize joy.” What is so intriguing about the study’s results is that people living in each city do it in differing ways.

  •People in Singapore are very achievement-based, so they are focused on improving their reality.

  •In Denmark, the joke is that people living there are happy because they have low expectations.

  •The people of Costa Rica are somewhere in between.

  I found this to be true with my own experiences abroad. When I was 18, I lived in the Philippines for a time and saw people living on less than $10 per day leading happier lives than most people I knew back in Canada. I saw children with literally nothing but a tattered shirt and worn out sandals playing in the street with a smile on their face. I watched people sacrifice what little they had for complete s
trangers, which brought joy. Close relationships were everything to them, and it did not matter if they had money or not. People in each country focus on different components of the happiness equation to be happy. Which part you focus on determines what you should do in your pursuit of happiness.

  CHANGING YOUR EXPECTATIONS

  “True happiness is to enjoy the present, without anxious dependence upon the future, not to amuse ourselves with either hopes or fears but to rest satisfied with what we have, which is sufficient, for he that is so wants nothing. The greatest blessings of mankind are within us and within our reach. A wise man is content with his lot, whatever it may be, without wishing for what he has not.”

  — Seneca

  Research published in The How of Happiness by University of California psychology professor Sonja Lyubomirsky tells us exactly how much of our happiness is based on our life circumstances. The shocking figure? 10%.

  Ten percent of our happiness is what happens to us, and the other 90% is based on our own expectations of the world. Expectations, not material wealth, play the biggest part in being happy.

  There are two ways to change our expectations: Rethinking our Perspective and Practicing Gratitude.

  1. Rethinking Our Perspective

  There are about 7 billion people on Earth today and 115 billion people who have ever lived in the history of the world. That means 108 billion people are dead. Most people have already lived their lives and will never experience the pleasures of life again. They will never experience having kids, watching them grow up, growing old, and enjoying simple experiences like watching the sunset. Being alive means we have won the lottery.

  Next time you look up in the sky, look at the stars. Hundreds of billions of them are out there, and this planet we call Earth is the only planet we know that has life. It makes any problems you are experiencing small in comparison to the vastness of space.