Book review: Psych Yourself Rich(Read article summary)
Every Sunday, The Simple Dollar reviews a personal finance book or other book of interest.
A couple years ago, Farnoosh Torabi wrote You’re So Money, I book I succinctly described by saying “this book pitches personal finance advice for consumerism addicts.” Nevertheless, I concluded that the book did offer some very solid advice to the crowd that would not allow their Gucci handbags to be pried from their cold, dead hands.
Torabi’s follow-up book takes a decidedly different tack on the arena of personal finance, moving on to the idea that your personal mindset has a good deal to do with whether or not you find money success.
For me, this is the area where personal growth ties deeply into personal finance. Personal growth is all about becoming aware of your actions and choices and considering how you can improve those actions and choices. When you put that spotlight on your money, you can often reveal quite a lot about improving your personal finances, and that’s the sweet spot this book swings for.
What does “rich” mean to you? Once you sit down and start answering that question for yourself, you begin to realize that “rich” doesn’t mean the same thing to everyone. You need to figure out what you define as “rich,” which is, in essence, simply setting, in a very vague way, your long term goals. For me, rich is often defined in security – is my family safe from whatever may come? Others may define it very differently.
From there, Torabi takes the ideas of what makes a person “rich” and transforms them into specific, tangible goals that a person can use. What does it mean for my family to be “safe from whatever may come”? When I’m able to transform that into a specific goal, like a big emergency fund, then I have something to work towards that’s real, as opposed to the vague notion of something that I might just be dreaming about.
Craft Your Money Philosophy
What you’ll find as you move through the process of figuring out what “rich” means to you and establishing goals based on it is that some particular values are going to be important to you. For me, family is a really, really key value, for example, and thus for me, my money philosophy centers deeply around providing for that family. I value having an emergency cash reserve and I’m less interested in chasing big financial growth.
Embrace Your Relationship with Money
The idea here is that many people are detached from their money in many ways. They don’t connect their hard work to the money they have, and they also don’t connect their checking account balance to all of the things they spend their money on. This leads to a deep sense of “where did all the money go?” and often to a sense that there’s something deeply wrong without really understanding what that is. The solution, of course, is to spend time focusing on this type of connection. Keep careful track of how you’re spending money. Talk about money with your loved ones, even if it’s uncomfortable. Keep it in your mind and embrace it.
Organize, Don’t Agonize
Another issue many people have with their money is that it’s difficult for people to figure out what they have and what they don’t have. Their records are disorganized and the information they need isn’t available when they need it, which makes it all the more difficult to really embrace your relationship with your money. The solution is an efficient filing system, where you keep the relevant information you may need in the future in a known place that can easily be retrieved when you need it.
Be Your Biggest Advocate
Another key step is becoming your own advocate – in other words, having a backbone when it comes to talking to people who have an impact on your finances. Don’t be afraid of the customer service representatives. Your approach should be to know what to expect from them before you even talk to them and when they don’t provide it, be insistent and keep going for what you expect (provided your expectations are reasonable, of course). Companies aren’t your advocate – you are.
Make Your Money Count
When you do start to get ahead financially (meaning your net worth – the total of your assets minus your debts – is going upwards), make sure you’re putting your money in places where it really counts. The more return you can consistently earn on your money, the better. If you’re putting it into savings, look for savings options that provide a better return. When you’re considering which debt to pay off, look hardest at the debt with the highest interest rate.
Think Five Years Ahead
Almost always, your best financial choices are made if you ask yourself, with every dollar you spend or invest, what will have the biggest positive impact five years from now. Sometimes, it’s a tricky question, but that question will point you (almost always) in several positive directions: towards frugality, towards repaying debts, and towards good choices with regards to making your money count.
Break from the Norm
For many people, these types of personal changes are very difficult because they’re different, not only from what they’ve been doing before, but it’s different than what the people around them are doing, too. You’ve got to recognize that you’re breaking from the norm in doing this, and this is often the best time to break from the norm in other regards, too. Revise your social circle. Look for new people to associate with. Break other bad habits in your life. Keep the changes simple and straightforward.
Embrace the Entrepreneurial Spirit
One final step is to embrace the idea that you are an entrepreneur. Everyone who exchanges work for money is essentially a small businessperson on some level, and every single small businessperson owes it to themselves to always seek out the best exchanges of money for their time and effort that they can find. This means not only looking for side businesses to start, but also it means focusing on improving yourself, including your abilities and skill set.
Is Psych Yourself Rich Worth Reading?
Psych Yourself Rich does a very good job of taking the broad ideas of the connection between psychology, personal finance, and self-motivation and transforming them into specific tactics that anyone can apply in their life.
From my perspective, psychology and understanding yourself are absolutely key elements for personal finance success. This book makes those ideas tangible and actionable.
The only weak spot, to me, is that Torabi doesn’t dig too deep into these issues at times. This book begs for some follow-up reads, from books like Your Money or Your Life or Mindset.
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