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When it comes to money, things can become very confusing. This confusion can lead to stress, which leads to poor spending habits. As you’ll hear in the accompanying podcast, we all know people who make little money but seem to be better off financially than those who make significantly more. It’s not all about how much you make, but rather what you do with the money you do make. There are also several key financial habits you need to develop in order to be successful with money in the long-term. Below are what we consider to be the four pillars of financial success.

1. Understand the Power of Small Decisions

Sometimes it can be difficult to fully grasp how powerful small decisions can be over the course of time. The best example, from a financial perspective, is the power of compounding. By now, you know what this means. But just to drive it home I am going to do a little math for you.

When you invest a small amount on a regular basis, the power of compounding takes over and you end up with (as Rob says) a pile of cash. If you were to invest $100 per month over the course of 40 years at a 7% rate of return, you’d end up with $241,000 after annual compounding.

$100 per month is a little over $3 per day. So $3 per day turns into almost a quarter million dollars after 40 years. Imagine if you pump more money into an investment account each month? This grows exponentially.

The idea of compounding isn’t new, and the above, overly-simplified, example shouldn’t shock you. But we so often forget about the power of small decisions. It’s easy to forget about the power of that $3 when we are hungry at work and justify spending $7 on a Jimmy John’s sub. Or spending not $3, but $6 on a large vanilla latte with two extra shots of espresso because we’re just so darn tired from working that week and we deserve it.

We might deserve it, but don’t we deserve to retire even more?

Related: The “Latte Factor” is Not About the Latte

The power of small decisions expands far beyond money. It impacts us in all walks of life. Exercise is another great example. If you go to the gym one time and run for an hour on the treadmill, then lift weights for an hour, you aren’t going to magically be in shape. In fact, you’ll probably be really sore.

But if you did one-third of that time (40 minutes) on a more regular basis (say, three times per week) and were consistent with it, you’d get in shape over time. This won’t happen overnight, no. But over the course of months and years, if you consistently make the relatively small decision to exercise for 40 minutes, you’ll soon see your body changing and you’ll get in shape.

This goes along with eating healthy. Eating nothing but salads for a single day won’t do anything for you. But if you consistently replace one to two meals per day with a healthy salad, over the course of time your health will improve.

I think the big issue with this whole concept is our painstaking desire for instant gratification.  Shahram Heshmat Ph.D. of Psychology Today says that “generally speaking, we want things now rather than later,” and that “there is psychological discomfort associated with self-denial.” He goes on to add that “from an evolutionary perspective, our instinct is to seize the reward at hand, and resisting this instinct is hard.”

So it’s in our DNA to want things instantly. We have to be conscious about making these small decisions. It’s not sexy, and it will take time, but over the course of a long period, the rewards are unmatched.

2. Know What Makes You Happy

The example Rob gives in the podcast is about a mocha latte he used to get every day when he went to Starbucks. At the time, this made him happy. But after a while, he realized it wasn’t good for him and cut it out after a painful few weeks.

When it comes to finances, you have to know what really makes you happy. Sometimes there will be things that, to others, make no sense to spend money on. But they might make you happy. For me, it’s still video games. Even though I barely have time to play them, when I do, they provide me a complete escape from the stress of work and running a business. It’s mindless fun and I don’t mind dropping $60 on a new game I’ll play every once in a while.

But where the problem comes in is when you’re spending money on things that you think make you happy, but they’re really more of a habit. Most examples of this correlate to addiction–such as smoking or drinking.

But a softer example might be clothing. With clothing subscription services like Stitchfix, clothes can become more of a habit than an actual need and something that truly makes us happy. If on a monthly basis you spend $200 on clothing, you might reach temporary pleasure, but it won’t be long-lasting. Eventually, those clothes will either not fit you or they’ll wear down. Or maybe you will just grow tired of them and not want to wear them.

So what do you do?

You buy more clothes to fill the void.

Tim Carey Ph.D. of Psychology Today says that “finding the wellspring of happiness is, for some people, a ceaseless quest,” and that “…we have lots and lots of wants. Often, we want some things only because they help us get other wants.” This never-ending cycle of desire can decimate our future financial well-being.

A great book to read on this topic is The Power of Habit, by Charles Duhigg. In the book, Duhigg talks about how habits shape our lives and we begin to live by them without even knowing it. But you can break a habit by following a few simple steps, such as introducing a different type of reward at the end of a habit.

The point is, you should step back from the spending loops you’re in and determine what it is that really makes you happy. From there, determine what you can cut out and what needs to stay. Whatever money you can save by cutting out unnecessary purchases can go right into your savings. And from the point above, the power of compounding will thank you.

3. Know What Things (Really) Cost

Rob mentions this in the podcast, but we need to start thinking about the cost of goods and services beyond the dollars.

It’s basic economics.

There’s an opportunity cost to everything, and when you think beyond dollars, you move into thinking about how much time you’re spending on something.

You also have to factor in the multitude of opportunity costs that contribute to the overall expense.

Confused? Don’t worry, I’ll explain.

Here’s an example:

Let’s say you make $60,000 per year. If you get paid bi-weekly, your gross pay is about $2,300. That makes your gross hourly rate about $28.85.

Then you need to factor in taxes. For simplicity, I’ll use at 22% tax rate, so this brings your net hourly rate down to $22.50. Keep in mind, there are many other taxes and deductions you’ll probably experience, but to keep this simple I’ll just use the 22%.

Now you have to factor in the overall cost it takes to hold that job. This means buying work clothes, paying for gas and parking, and getting the occasional lunch out.

Let’s say you spend, on average, $15 per week in gas and your parking is $150 per month. We’ll also assume you spend $75 per month on work clothes and you get two coffees per week, each at $2 per cup.

This is all fairly reasonable.

Those costs add up to just over $300 per month.

Breaking this up into four weeks ($75), this brings our net hourly rate down $1.88.

So our final, net hourly rate, after we consider the cost of holding the job, is $20.62.

That’s a far cry from your original $60,000 per year salary, isn’t it?

And this isn’t even considering 401(k) contributions, HSA contributions, and other regular expenses you have throughout the month.

So if you make $20.62 per hour, you should start thinking about the cost of goods and services with that in mind.

Rob gives the example of an Apple Watch, which is about $400. Assuming you find the cheapest way possible to buy this (i.e., you order it online and it gets sent to your door so you don’t pay for gas to drive and go pick it up), the new watch ends up costing just over 19 hours of your time–not including sales tax.

That’s nearly three days worth of work for a single watch.

Does that put things into a different perspective for you?

If not, it should.

We need to start changing the way we think about how much things cost–and looking at it in terms of hours spent working.

You spend so much of your life working, by shifting the focus, it can help you spend less.

Another quick example is Netflix, which is about $11 per month. So using the scenario above, you’re spending 30 minutes of working time just to pay for Netflix.

It might seem worth it, but it also changes your perspective.

A $7 sandwich? That’s about 20 minutes of work.

If you factor this concept into the first pillar we discussed above (the impact of small decisions), it can lead to significant financial changes for you down the road.

4. Challenge the Assumptions We Live By

A work colleague of mine always seems to have the discussion about how we’ve become corporate lemmings and everyone just follows a path that they think they’re supposed to.

Everyone has the same routine it seems like in the morning. We all grab our coffees, we all load up on the elevator, we all get off at our individual floors, and we work until the day is done. Then we all rush to our cars to try and beat the traffic home. This process repeats itself day in and day out.

It’s all part of this pre-programmed life that somehow we think we’re supposed to have. We go to college, we get a job, we get married, we have a baby, and we move to the suburbs.

And when we do that, we have to buy a big enough house to accommodate the two kids we’ll eventually have.

Guess what? This doesn’t have to be the way you approach life.

In fact, more kids are graduating from high school, but fewer are enrolling in college.

And those jobs we’re supposedly commuting to? According to CNBC, 70% of people across the world are working remotely at least once a week now.

We’re also getting married later in life and, Millennials especially, are wanting smaller homes.

So it’s time to start challenging conventional social “norms.”

The assumptions we live by can inadvertently misguide us in our path to financial success.

We don’t all need to buy massive four-bedroom homes and lease a new car every few years.

Those types of financial mistakes can severely hamper your ability to retire early.


While personal finance can get complicated, it doesn’t have to be that way. By following a few simple guidelines, you can put yourself in a much better financial situation than many (even ones that make significantly more money than you). To recap, here are the four pillars of personal finance:

  1. Understand the power of small decisions – making small decisions today can lead to exponential future growth, but you have to be consistent and hold yourself accountable.
  2. Know what makes you happy – be able to step back and evaluate when you’re in a “spending loop” and determine things you can do to change your habits so you can determine what truly makes you happy.
  3. Know what things really cost – stop looking at the cost of goods and services in terms of dollars–instead, look at costs in terms of time.
  4. Challenge the assumptions we live by – just because people you know have a huge home and a new, leased car, doesn’t mean you have to as well.


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