Those are my principles, and if you don’t like them… well, I have others. ~ Groucho Marx
Welcome to RetireMentorship, Your Mentor To and Through Retirement. I am your host, Freeman Linde, Certified Financial Planner®.
Today we examine the Seven Pillars of Victory, Seven Principles to build your financial life on to support your success with your finances.
That’s coming up on the RetireMentorship Podcast.
First, the RetireMentorship Two-Min Tune-In. The primary points of the podcast in two minutes.
No one sets out to fail with finances. No one desires to be mediocre with money. We want to be successful with our salary, capable with our capital, adroit with our assets, and wise with our wealth. We want to win. We want victory.
Most of the media shrieks at us about how to be successful with our money. Hot stock tips, complex investment strategies, and gregarious gurus all promise riches. But do they pan out?
I contend that the foundation for victory in our finances is not in financial products or new strategies.
The foundation for victory is accepting and following the principles of victory. Build your financial success on the Seven Pillars of Victory.
The Principles are:
You may have noticed that there is nothing in there about insurance, taxes, investing, or debt. Those come later. None of those matter if you don’t have these seven principles.
We will look at each of them in turn on this episode of the RetireMentorship Podcast.
The Seven Principles of Victory
Pillars support buildings. A building may still stand if one or two of the pillars is absent. But it will be the most robust with all the pillars intact.
I just finished a thriller audiobook where the protagonists were trying to unravel a conspiracy. There were rumors of a large attack against the U.S. rivaling 911. But they couldn’t find any bomb or large device. It is finally revealed that the planned attack is against the Hoover Building, the FBI’s headquarters. The presidents of the U.S., France, and Great Britain, were all there for a ceremony. The method of attack? Small bombs underground at the base of the support columns holding up the entire building. If they went off, they would destroy the pillars, and the whole building would implode like a controlled demolition, taking everyone inside with it.
Great book, and it makes a great point. Without the foundational pillars, the whole enterprise implodes and is destroyed. Pillars support buildings.
Principles support success. A person may still find limited success without a few of them. But their success will be more assured with all the principles in place.
Principles are timeless. They don’t change with the culture, the weather, or the global economy. They are the rock that you can cling to when the going gets tough and boost your success when all is going well.
I believe there are seven principles we should all abide by to increase our financial success. You may find some success without some of them, but it is impossible to be successful while ignoring all of them. They are the Seven Pillars. Let’s look at each of them and why they are so important.
Pillar One – Planning
No one plans to fail, but we do fail to plan. You’ve heard it before, and it is true.
It will come as no surprise to you that I, a Financial Planner, am a big fan of planning and think everyone should do it. But let’s get the chicken and the egg in the correct order here.
I don’t believe in planning because I am a Financial Planner. I became a Financial Planner because I believe in planning. I’ve seen its power in my own life and the lives of countless others. Once you know and believe, you can’t un-know it or quash your enthusiasm.
You need to plan if you want to be successful with finances. Not just a plan. You need to plan. Present progressive. Ongoing.
No one ever wandered into financial success, but you can wander into financial ruin.
You can’t accidentally acquire assets.
You don’t find funds by a fluke.
You can’t increase cash by coincidence.
You can’t invest involuntarily.
All the practical steps of financial victory (investing, reducing debt, avoiding taxes, act) come after a plan. You plan to make Roth IRA contributions, and then you do it. You plan to save taxes. You plan to have the right insurance.
You can wander through your financial life, hoping things will accidentally work out. (It won’t.) Or you can plan your financial life and massively improve your chances of success.
I suppose there is a third option. You can be sold. You can wander until someone gets ahold of you and sells you an insurance policy, an investment product, or a debt leveraging strategy. You can let life happen to you, or you can plan to happen to life.
As a summer job one year, I worked for a salt packing company. We would fill plastic bags with rock salt (the kind used for water softeners and de-icing roads and walkways). The salt would come in bulk on these gigantic railcars. You have seen railcars, of course. But we usually see them from our cars at a distance. Up close, they are way bigger than they look. The wheels come up to your chest!
A big old train engine would push a railcar full of salt down a dead-end track behind the factory and leave it there. The engine would come back the next day to pick it up. To empty these things, you let the salt out from the bottom. Look again next time you see an industrial train. If it isn’t the basic box containers or a liquid car, it will have three or four funnel-looking structures on the bottom between the wheels.
We would line up the first funnel with a conveyor belt that ran under the track. We would then crank open the funnel door, and the salt would stream out onto the belt and on toward a series of conveyors and augers to bring it to the bagging area. But eventually the flow would end. We would have emptied the first third of the rail car. Now we needed to move the railcar to the second funnel. By hand.
Railcars are heavy. Solid steel. Cold and unforgiving. An empty railcar weighs fifty thousand pounds. Then it gets filled with two hundred thousand pounds of salt. We are talking about moving a quarter of a million pounds… by hand. No motors. Now outside energy. I work out, but that’s a lot of weight. So how did we do it?
We had tools and a track. If the railcar wasn’t on a track, there would be nothing we could do. But others had laid the way before us, and that reduced a lot of friction. We also had tools to move railcars.
It’s called a “railcar mover jack.” It’s a thick shovel handle attached to a simple steel mechanism. You first shove the mechanism under the railcar’s wheel, with the handle stick out at a 45-degree angle. You then push down on the handle, and the mechanism has a lever that pushes up on the bottom back of the wheel. The force is multiplied due to leverage, and the three feet you move the handle translates into three inches of upward movement. It is enough to roll the wheel and the railcar a couple of inches forward.
You shove the mechanism under the wheel again, push down again, and roll it a few more inches. Rinse and repeat until you have the next funnel aligned. And that is how an average person can move a quarter-million pounds by hand: tools and a track.
That is what financial planning is for your life. Finances may seem enormous to you. It’s cold and unforgiving. It seems heavy and unmovable. You can’t make any progress.
Financial planning gives you tools and a track. It maps out your financial life, give you a track to go on. There may end up being some forks and switches along the way, but it still gives you some direction and reduces friction. And it gives you the tools to make progress, such as Roth IRAs and conversion, HSAs, equity appreciation, dividend growth, and your Social Security strategies. Planning gives you everything you need to get going. You simply need to put in the work.
Grab your tools. It’s time to get moving. If you haven’t started planning yet, there is no time like the present.
Pillar Two – Partnership
The enemy prowls around like a roaring lion, looking for someone to devour. Lions don’t hunt packs. They hunt stragglers and loners, those too proud or too naive to join in with a pack.
Too many of us try and go it alone. We go it alone in personal struggles and issues we are dealing with that we hide from our loved ones. We go it alone with our finances that we feel like we must keep them a secret. We are, in the infamous words of Jason Derulo, “ridin’ solo.”
Don’t go it alone! It’s too complex, and there are too many mistakes that we can make.
Partner with your spouse, if you have one. Joint finances are the strongest finances. Work together on your dreams, goals, and budgets.
I can move rail car alone with tools and a track. But I can move it faster with help. And not just twice as fast.
I worked with David, and when we first started working together, we weren’t very coordinated. I would work on one wheel, and he would work on the other. At first, we didn’t go faster at all. We would mistime our pushes, yell at each other, and make a mess of it. But eventually, we learned how to work together. As I was pushing down and rolling the railcar, he lined up his mover jack for the next thrust. And then, as I was pulling my handle back up and aligning it again, he was pushing down on his.
Because we were alternating, the railcar never had a chance to come to a complete stop. And we would achieve something that is just as important in finance as in moving railcars: momentum. The more we worked together, the better we got. Soon, we were able to move that railcar two, three, and even four times as fast as either one of us could alone. It is the power of partnership.
Truly working jointly on your finances may be awkward at first. It may not be any better. But eventually, you learn how to coordinate, and then there is nothing stopping you. If you need help working together, there are excellent resources. We may do an episode on that eventually, but in the meantime, email Questions@RetireMentorship.com and we can send you some. Partner with your partner.
You can also partner with others. Partner with groups and communities to achieve specific goals, like getting out of debt. Partner with CPAs and Planners to achieve greater accountability and encouragement.
If you want to go fast, go alone. If you want to go far, go together. Financial victory is a marathon, not a sprint. Choose far over fast.
Pillar Three – Knowledge
We covered this a bit in Episode 3, but I’ll recap.
You cannot do anything smart with money until you know what and how to do it. It’s not possible. You need knowledge.
Financial literacy is abysmal. Financial education in the system is almost non-existent. It’s no wonder so many people are failing with money. They don’t know how to be victorious.
You must be educated on the financial topic relevant to you. Only then can you do it. There are three ways to learn.
This is probably the worst way to educate yourself.
By “self-directed,” I mean “learning by Googling.” You hear about a financial topic or strategy, and you want to know a bit more about it. So you Google it. You click on a few of the top links and maybe browse an article a bit. Perhaps you get distracted by the banner ads and scroll-with-you ads. Or there are so many ads that you get mad and exit the site. You sort of scratch the itch you had about the topic, and you move on.
You don’t really understand it. Moreover, you haven’t connected it to the other dots in your financial life. You have a skin-deep level of knowledge that is almost useless unless it is pursued further. You don’t have an education; you have a collection of facts.
Sporadic Googling and research will never get you the knowledge you need.
Rather than randomly researching, you can take a guided approach to your education. Let someone else who already understands the bigger picture and the complexities lay it out in a way that makes sense. Let someone else lay down the train track for you to follow.
The easiest and cheapest way to do this is to read or listen to books. Many brilliant authors have written brilliant books about finance that are easy to understand and apply. Reading books is exponentially superior to reading articles. And it doesn’t take any longer!
The most common excuse I hear for why people don’t read books is time. “I’d love to read more; I just don’t have the time.”
But you are already spending that time, probably reading! But instead of well thought out, well researched, well-written books, you are reading FaceBook posts and news media articles. If you spent fifteen minutes less a day browsing the internet and social media and channeled that fifteen minutes into reading a book instead, you would average a book a month. That’s twelve books a year! And you only sacrificed some FaceBook time!
And it doesn’t even have to be regular reading! You can listen! Audiobooks are everywhere, and you can listen while doing other things, as I’m sure you are doing right now.
I consume many books, and about 10% of that is reading, and 90% is listening. I average a book a week because I listen to about an hour’s worth a day. I listen at 1.5-2x the speed, so 30-40 minutes is all it takes to listen to an hour’s worth of a book. Some people claim that you can’t retain that information when you speed it up. But I disagree. Measure any proficient reader, and you’ll see that they can read two to three times faster than an average speaking speed. If your brain can read at that speed, I assure you it can listen at that speed once you’ve trained it.
Think about this: the practice of reading by the non-scholars has only been around for about 500 years. The printing press was invented in 1440, and it took a while before it caught on. It’s only within the last couple hundred years or so that the majority of people have been able to read, let alone do it for fun or information.
But humans have been listening to speech for thousands of years. Obviously! Before reading was widespread, people carried stories and passed them along orally. Listening is how we were built to learn.
Reading overtook listening when the technology to preserve and distribute the written word beyond a speaker was widely available. For 500 years, we had that technology and lacked the technology to preserve the spoken word. Then radio. Then podcasts and audiobooks. I don’t make stock market predictions, but I predict audiobooks will overtake written books in time.
It might take a bit to get used to listening, just like it takes a bit to start reading again if you haven’t in a long time. But it is much easier and more convenient to listen to books than to read them.
And it’s cheap, or even free, to read and listen. There are physical and digital libraries. You can borrow an audiobook just like to do a physical book. Right to your phone. For free.
Later in March, we will have bonus episodes of the RetireMentorship Podcast called RetireRead, which will give short reviews of all my favorite books. If I’ve piqued your interest and you want to know where to begin, start there.
Read or listen to books. It will grow your knowledge and change your life.
A step up from books would be to take a class. You can read Dave Ramsey’s book, The Total Money Makeover. And, or, you can take his class, Financial Peace University. It goes more in-depth than the book, and the format may be more engaging for people. Classes may be “more expensive” than books, but if it’s a good class, it will be worth it.
Advice & Education
Education and advice specific to your situation is the deepest level. If you are working through some mental hurdles, you can read some books or take some classes on Cognitive Behavioral Therapy. Or you can see a Cognitive Behavioral Therapist. The latter is likely more effective, as they can help you get to the root of your specific issue.
Similarly, a good advisor or planner who has the heart of a teacher will educate you on what and why you should do specific strategies and actions in your finances.
You can, and should, use both guided education and advice. Get the basics through books and classes. Get the specifics through advice.
You must know in order to do. No one can make you know. You have to want to. You need the Pillar of Knowledge if you want a solid financial future.
Pillar Four – Belief
We covered this topic extensively in Episode 3 – Belief Over Knowledge. Go back and listen to that at RetireMentorship.com/3. If you haven’t, here is a sneak peek.
People act on what they believe, not on what they know. This is evidenced by the phrase, “I know I should… but…” You know you should do something, but you don’t. In that episode, I argued that you don’t act because you don’t yet believe that you should.
I also argue that belief is essential to successful financial planning. For example, the market is down 40%. You’ve just “lost” tens or even hundreds of thousands of dollars. Historically the markets have always returned, and pulling out has always turned a temporary decline into a permanent loss. Emotionally you want to pull out because you just don’t know when the market will come back. And neither does anyone else. But even though you can’t know when the market will come back, you can believe that it will, as it always has. And if your belief is strong enough, you will stay the course and be rewarded for it.
Belief is critical, and I would contend that it is the only pillar you cannot avoid and still be successful. It is why I have made it the center pillar. If you have lost your faith, your belief, in the essential principles of financial wisdom, all else is lost. Listen to the full episode, Episode 3, for more.
Pillar Five – Action
Knowledge is important. Belief is essential. Action is critical. No amount of knowing, or believing, for that matter, will matter if you don’t act. We also talked about this in episode three. You need to act on everything you need to do.
You don’t save on lifetime taxes because you know and believe in Roth Conversions. You save on lifetime taxes by doing them.
Act! Do! Get it done!
The pillars all support one another. Maybe this is the one you are missing. Or, perhaps you have the propensity to act and are ready to believe, but you lack a plan and the right knowledge of what to do. Get those first. Then act.
Get your will, power of attorney, health directive, beneficiaries, transfers on death, and trust done. Act. Get it done. You know you need it. What is stopping you?
Get your 401(k) looked at so you can get it appropriately invested. Then reallocate it! Get it done. Act.
Maybe the supporting pillar to action that you need is partnership. Who can you partner with to ensure you act? What forcing mechanisms can you put in place to get your affairs in line.
These three, Knowledge, Belief, and Action, are all so necessary. Planning and partnership help. So do the next two.
Pillar Six – Discipline
Some things in personal finance only need to be done once or rarely need redoing. Creating an estate plan, for example. Know what it is and what you need to do, believe that you need to do it, take action and accomplish it. After it is done, you only need to revisit it after one of the five Ds: Death, Divorce, Diagnosis, Decision, Decade. In other words, once it’s done, you won’t have to think about it for a while.
But many of the other aspects of financial planning require discipline: applying the same action again and again over days, weeks, months, and years. Discipline is powerful and inhuman. It does not come naturally to any of us. We need to learn it, practice it, and keep it. It will slip away faster than it is gained.
You will need the disciplines of paying yourself first, budgeting, paying down debt, saving into retirement accounts, living on less than you make, and many others.
Probably the most challenging part of financial discipline is the length of time you will need to maintain it: forever. It is not a 40-Day Lent discipline or a two-year weight loss journey. You will need to build your disciplines and then maintain them for decades, not days. Anyone can save into a retirement account for a few months or even a few years. Can you do enough of it every year for decades?
The overwhelmingly good news about discipline is that it is achievable for everyone! It doesn’t require luck, insider information, the right stock tip, a wealthy family, or anything else. Anyone can build and maintain discipline. The disciplined budgeters and spenders avoid debt and living paycheck to paycheck. The disciplined savers and investors build wealth. When combined with planning and the middle three, discipline will take you to where you want to go, one step at a time.
A crucial step in maintaining the actions of discipline is maintaining the mindset of discipline. We can help with that.
Pillar Seven – Patience
Patience is waiting in expectation of something greater. Discipline may be described as faithfully contributing each month to your Roth IRA. Patience may be described as letting your Roth IRA grow, understanding that it will not happen overnight.
So many aspects of finance require patience, but none more than investing. Real investing (as opposed to speculation or gambling) requires patience. It takes decades to prove successful. But that success is inevitable when discipline and patience are applied.
Patience will help you defend against the First Horseman: Chasing Returns. In episode one, we explored that many investors’ lifetime returns suffer because they are continually seeking investments with the highest returns. When you don’t have the patience to allow your investments to work, you will continuously be chasing other investments’ returns. If you missed that episode, explore The Four Horsemen at RetireMentorship.com/4.
It also requires patience to adopt your true time horizon. Many people, and even professionals, look at investing time horizon as if your time ends when you retire. (We are investing for retirement. Retirement is five years away. Therefore our time horizon is five years.)
But unless you are planning to spend 100% of your money in the first year of retirement, that is not your time horizon. You will need money 10, 20, and 30 years later. Your time horizon is the day you die if you are trying to slide into home plate with zero dollars in the bank, and longer if you are trying to leave a financial legacy. It takes patience to adopt a multi-generational time horizon, and adopting it helps you be patient.
All good things to those who wait, and only to those who wait, come good things.
One caveat. Patience is different than procrastination. “Patiently” waiting for the right time to save for the future is not patience. It’s procrastination. “Patiently” waiting to complete your estate plan until all the children you want are born is not patience. It’s foolishness.
Patience, properly applied, only happens after the first six pillars are in place. You’ve built a plan with the right partners. You know, believe, and act on that plan. You are disciplined in your execution of the plan and replanning as life changes. Now you are patient, knowing that if you work the plan, the plan works.
Planning, Partnership, Knowledge, Belief, Action, Discipline, Patience.
Incorporate these into all the areas of your financial life, and it will go much better for you. Ignore them at your extreme peril.
We will cover many other aspects of finance in this podcast. Some will be on planning; others will be on action and discipline. All of them should help you grow your knowledge or belief, teach you something you did not know, or reinforce knowledge into a belief.
If you’ve enjoyed it so far and believe that it is worth five stars, give us a rating and a review. If you have suggestions or critiques on how it could be better, you can submit those to Questions@RetireMentorship.com. I read all of them.
Next week we will examine “How to be Above Average.” No one wants to be average, let alone below. While it is not possible for everyone in the world to be above average (a side effect of the definition of “average”), it is possible for everyone following this podcast. Subscribe to the podcast to ensure it shows up in your library on Monday.
The following week should be a fun question. The topic: “Is Dave Ramsey Wrong?!” The wildly popular finance personality is loved by his followers and criticized by a lot of financial professionals. Is he wrong? Or are the professionals wrong? We’ll answer that question in two weeks. A lot more fun is coming up after that.
Stay tuned, and we’ll see you next week.
This article is educational only and is not intended to be investment, legal, or tax advice or recommendations, whether direct or incidental. Again, this is not investment advice. Consult your financial, tax, and legal professionals for specific advice related to your specific situation. Never take investment advice from someone who doesn’t know you and your specific situation. All opinions expressed in this article are the opinions of the people expressing them. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. RetireMentorship is not affiliated with any Registered Investment Advisor, Broker-Dealer, or other Financial Services Company.