Are you tenacious when it comes to your finances? Unless you have a trust fund waiting for you, you’ll need financial grit to get through when times get tough.
The path to financial independence is littered with obstacles. I’ve learned that my success financially, as well as in life, has very little to do with my intelligence, income, or general ability. It sounds counter-intuitive, but in your heart, you know it’s the same for you.
Financial Success: Why Them and Not You?
How many millionaires have you heard of that grew their wealth through surprisingly simple ideas? How about the people you work with who have gotten promoted before you without having nearly as much talent and smarts as you possess?
What about ordinary people like Mr. Money Mustache who, retire at the young age of 30 while earning a modest salary?
These people certainly aren’t under any delusion that they’re smarter or better than you – well, at least most of them aren’t. MMM might be. You’re slaving away at your 9-5 like a schmuck, and he’s riding his bike around the Colorado mountains.
When I was young, my Dad had a way of slipping insightful commentary into our conversations.
He told me no matter where he worked, he was never the smartest person in the room – and that was ok. It didn’t matter because there was never anyone who worked harder than him.
He had a pretty hard go of it too. Bosses lied to him and treated him awful. They threw him under the bus and laid him off. It never really mattered because the man never quit. He is the grittiest person I know.
True Grit Beats All
There are a lot of people in the personal finance space that seem infallible; they make no mistakes, can accurately predict the future, and are happy to share that wisdom for three easy payments of $19.95.
We don’t pretend to be knowledgeable at Listen Money Matters. Instead, we regularly discuss our failures and focus on never quitting.
Hearing what not to do can sometimes be more helpful than being told what to do. Learning from someone else’s mistakes can sometimes be more instructive than learning from their successes.
During a dramatic burnout, my friend Andrew M emailed me a link to a TED Talk called Grit: The Power of Passion and Perseverance. The speaker was Angela Duckworth, an assistant professor of psychology at the University of Pennsylvania.
It was incredibly motivating and hit home – I may have even shed a tear while watching. It was what I needed to see. To hear someone explain that no matter what had gone wrong, I could pull out of the tailspin through sheer grit.
The ability to learn is not fixed, it can change with your efforts.Tweet This
The Importance of Grit
In the video, Angela discussed how the ability to learn isn’t fixed and can change with effort. And the most successful people in life don’t believe that failure is a permanent condition. This weaves into embracing a growth mindset.
A growth mindset means skills can be developed. If skills can be developed, natural talent isn’t as important as effort and hard work.
Grit is passion and perseverance for acomplishing long-term goals.
Marinate quietly on that. Remember in the past that we told you to fail fast? The good doctor backs us up. You fail, analyze what went wrong, and move on.
Please don’t dwell on your failures any longer than it takes to cull lessons from them. Failure is not permanent.
I highly recommend watching the video, but these quotes distill it down to its essence. Angela is referring to education in her research, but these two statements apply to most everything in life – especially personal finance.
In the years since I’ve been out of college, I have run a negative budget more times than I can count. I’ve contradicted almost everything we discuss on the podcast, and I very well may be the textbook definition of a person who wastes money.
I often find it ironic that I run a website and podcast that tries to teach people how to manage their finances. A classic do as I say, not as I do situation.
That said, I’ve somehow managed to increase my net worth to multiple six-figures in a brief period. And I didn’t do it by living in a hovel eating ramen and never going out. I still managed it all while traveling the world and drinking enough beer and cocktails for three lifetimes.
I don’t say this to brag because there are nearly 500 hours of podcast episodes on this site, basically documenting me being an idiot and saying stupid things. My ego doesn’t come into this. However, the one thing that sets me apart is that I’m persistent – I’ve got grit.
This is our guide to budgeting simply and effectively. We walk you through exactly how to use Mint, what your budget should be, and how to monitor your spending automatically.
How can you harness grit? In Angela Lee Duckworth’s book, Grit, she distills how to grow grit from the inside out in four ways:
- Interest. If you’re unsure where your passions lie, start with discovery. Ask yourself what do you like thinking about? Where does your mind wander? What matters most to you? There’s also an inverse approach to this exercise: What do you hate, can’t stand, or have zero patience for? Once you have an idea in mind, explore it.
- Practice. Deliberate practice with specific parameters. Angela mentions having a clearly defined goal, 100% concentration and effort, immediate feedback, and refined repetition. Working to the point of dropping dead doesn’t qualify as deliberate practice unless there’s a defined outcome. Try to practice in the same place at the same time every day too.
- Purpose. Does what you’re doing have a positive impact on society? Can you customize the work you’re doing to align with your core values? Is there an inspirational role model already doing the same thing? These are questions Angela suggests asking yourself.
- Hope. It’s more than feeling optimistic about the future. It’s resolve to make tomorrow better no matter what. When you stop searching for ways to improve, you ensure you won’t.
Applying It to Your Finances
Your parents’ definition of retirement isn’t the same as yours. Not many people were retiring in their 30’s. FI wasn’t a thing. Now it’s a movement. The more ordinary people you see retiring in their 30s the more achievable it looks.
Follow in the footsteps of inspirational role models currently doing it. Or, inversely, you can no longer stand living check to check and that sends you down the gritty path.
Practice good money habits with a goal-based saving system. Attach specific outcomes as to why you’re saving money. Is it for a 6-month trip abroad with your spouse or a dream wedding? Perhaps you want to have enough money left over at the end of the month to take your significant other out to dinner?
The size of the goal isn’t as important as the outcome.
Resolve to increase your net worth. Resolve to pay off student loans or credit card debt. True financial grit is born out of a necessity to make tomorrow better.
It takes a bit of financial planning but when there’s a road map, it gets you there quicker.
Grit’s Secret Sauce: Hard Work Over the Long-Term
The purpose of this article isn’t to motivate you. You’ve got to motivate yourself. Any motivation you get from this article will disappear with your next Tweet.
The purpose is to remind you, as well as myself, that success is measured by how far you go and not how fast you start. Last month I sucked, and honestly, the previous year hasn’t been all that great to me, but when I look back at the past eight years, I have crushed it.
I may measure my budgeting success monthly or my marriage health weekly, but when it comes to financial and life success, I measure it in decades. Like investing, personal finance is a marathon, not a sprint.
When the market tanks or you blow your budget, do you give up and sell your investments, or do you double down until you hit your financial goals? Interestingly, Angela’s research suggests there’s almost no correlation between success and intelligence.