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Financial success is not reserved for the wealthy or privileged. It is not based on insider knowledge or birthright. You don’t need a hot stock tip or an inheritance. You need basic principles that can be followed by anyone to gain success.

We covered the first four principles in this video here. If you haven’t watched or listened to it, pause this and consume that first. Links in the description.

We ended the last video by noting that while knowledge of finances is crucial, if knowledge were enough we’d all be billionaires with six-pack abs. So what’s missing? That leads us to the next principle.

Pillar V – Belief

Action alone improves lives. It doesn’t matter what you know; it won’t change anything if you don’t act on it. Knowing and not doing is the same as not knowing. 

You can read all about finances, but it’s useless if you don’t do any of it. Why do few follow through? Lack of knowledge? Sometimes. Lack of discipline? Yeah, probably. Because life gets in the way? A ubiquitous excuse, and only an excuse. I believe that it is because we don’t believe. 

People act on what they believe, not on what they know.

Knowing is not enough; acting is all that matters. You must know before you can act. But what is the missing link between knowing and acting? It is belief.

Sometimes I find myself in a season of poor eating. I love ice cream—a lot. And I enjoy large lunches with heavy carbs. I’m not too fond of the “blah” feeling afterward, but the tastebuds get the better of my discipline.

Then I might read, “Eating vegetables and nuts for lunch will make you healthier, help you lose weight, and give you more energy and focus in the afternoon.”

Okay. Now I know. But reading that is not going to change my habits or desires. 

I then listen to an audiobook like “Eat Fat, Get Thin” or “Fiber Fueled.” Rather than eight seconds to read a sentence about eating healthier, I’m listening to eight hours of the message. These books are full of testimonies, science, interesting facts, humor, and “ah-hah!” moments. And by the end, I know how to eat healthier, and I want to!

I believe.

I can see how eating better would help me. I’m inspired to try. I want its benefits, and I believe they would work for me. 

Then I hear that my business partner, Michael, has been eating salads for lunch every day for a couple of weeks. The testimony of his improved energy and focus adds additional belief. Now I don’t merely know. I believe. And I act.

I begin meal prepping: I add all the vegetables and toppings I need to the grocery order and chop up all the vegetables on Sunday to be ready to go. Then I prepare my lunch salad for the next day. I create it with a rotating mix of shredded carrot, broccoli, cauliflower, snap peas, multicolored bell peppers, and cucumber. 

But let’s be honest. While all that is packed with micronutrients and vitamins, it doesn’t taste good. At all. Here’s the secret. You can make it taste good by adding healthy toppings.

I add a whole avocado to add rich taste and nutritious fat, and it nearly eliminates the need for dressing. Almonds, cashews, and walnuts give the salad a tasty crunch and provide protein and more healthy fats. Hardboiled eggs supply additional protein and a new texture. A bit of shredded chicken is all I need for a different taste. All the nutrition and so much flavor! 

It tastes so good! I have so much more energy throughout the afternoon. I believed; I acted. The actions reinforce the belief, and I keep acting. That was over a year ago, and I’ve eaten a healthy salad for lunch almost every weekday since. Life-changing. 

First, you know, then you believe, then you act.

Belief in Financial Planning

This video is not about nutrition. What does this have to do with financial planning? 

There are four levels of belief regarding Financial Planning.

1. When you know but don’t yet believe.
2. When you know and believe.
3. When you don’t know but still believe.
4. When no one can know, you still believe.

Level 1. When you know but don’t yet believe.

This level is, “I know I should save more for retirement,” but you don’t yet honestly believe you should and therefore don’t. You heard it once or twice. You know it in the sense that you have accumulated that knowledge. But it has not translated into action.

Many people have this level of belief: none. They have amassed a lot of useful and useless financial information. They haven’t taken the time or hired someone to sift through the information and reorganize it into a plan of action that they can follow. People must push past this level of belief.

Planning your finances so that you can see the relevant information and the effects and benefits of taking action can help push people into the second level of belief:

Level 2. When you know and believe.

This level is where you decide and act.

“I know that if I save $200 more per paycheck, I can reach my goal on the goal date. Time to change my 401(k) contribution.” 

The knowledge, mixed with some inspiration and motivation, leads to action and success. I know this level has been reached when meeting with a new client, and they say, “Ah! The thing is, I’ve always known I should do this. But it makes so much more sense when you put it that way! I’ll get that done right away.” 

This is one of the direct results of financial planning: knowledge, belief, and action. People already know a lot about many financial planning topics. But the planning moves them from Level 1 to Level 2. Then there are complex topics requiring that you move to Level 3.

Level 3. When you don’t know but still believe. 

You cannot reach this level alone. You need someone to bring you there. Perhaps the requisite level of base knowledge has not been reached to fully understand a financial planning topic, even when presented by an author or planner skilled at simplifying concepts. This level is reached when you believe the messenger, not the message.

“You know what, I don’t completely understand how this strategy is going to save us taxes over our lifetime. But I believe that if you say it will, it will.” 

“I don’t understand all this legal jargon in this trust. But if you are telling me that it will do what we want, I believe you.” 

Many people seek to understand a base level of finances and then act only on what they know and believe. Others seek greater expertise to believe and act on levels they cannot know. This is often the complex intersections of investments, tax, estate, and retirement. They can either do the 500-1,000 hours of learning required to understand or delegate that to someone else and get actionable belief in 5-10 hours. 

Levels 2 and 3 work together, allowing you to believe and act on the parts of your plan that you do and do not understand. If you can add the last layer, you can be unstoppable.

Level 4. When no one can know, you still believe. 

Financial planning is all about planning for the future. No one knows the future. Thus, we cannot know that a strategy will work. But we can believe it. For example:

“I don’t know which investment plan will generate the best returns in the long run, but I believe mine will be good as any, better than most. I’m going to stick with it and avoid chasing returns.” 

“I don’t know which companies are going to succeed long term and which will fail. But I believe that if I diversify, my collection of businesses will succeed.”

“I don’t know that equities will continue their permanent upward trend. But I believe they will, as they always have, and staying invested is the best course. There is no reason to try and time the market.” 

“I don’t know when this recession will turn around. But I believe that it will because they always have. Now is not the time to panic.”

When it comes to planning, there is always an element of what Carl Richards calls “irreducible uncertainty.” Specific outcomes are unknowable, either by us or by anyone else. There is a level of uncertainty that we cannot overcome. 

Certainty

People will pay a lot of money for “certainty.” They pay this in the high fees of the financial products that offer a guarantee. But many who are selling certainty ignore the flip side of the coin. The more certainty you want in the short term, the more you lose in the long run.

For example, you may purchase an annuity now because it guarantees a certain income. Perhaps it even has an inflation rider on it to grow by 2% each year. That gives you some certainty now. But even if you ignore the fact that the current income will be lower than you could otherwise get without a guarantee, how certain are you that the 2% increase in the income will be sufficient? It will work if inflation averages 2% or less. But what if inflation grows to 3 or 4%? You have traded the uncertainty of equity returns for the uncertainty in the cost of living.

You cannot know which will be worse. And neither can anyone else. 

A Step of Faith

At some point, you will need to take a step of faith. You will need to believe that an outcome will happen, even if you don’t know when or how. As Nick Murray puts it, “I do not know when things will turn out all right. I only [believe] that they will turn out all right.” 

Historically, those who maintained belief in the face of irreducible uncertainty and stuck with a well-built plan have been rewarded. 

It is time to start believing so that you can start acting. Reject Level 1: knowing and not believing. Embrace Levels 2, 3, and 4. 

Believe in what you already know, and act on it. Believe in someone you can trust about strategies you don’t know, and act on them. Believe in historically based future outcomes, which no one can know, and stick to the plan. That is how we succeed.

How do we begin believing? This leads to the final point.

You Can Build Your Belief

If you want to move from knowing many random facts to believing and acting for your good and the good of your family, do these three things: Isolate, Immerse, and Invite.

Isolate and follow one strategy.

You cannot believe and do anything if you are constantly torn between opposing viewpoints. 

It is similar to diets. This diet says to eat all the red meat because it’s packed with protein and numerous other benefits. That diet says to avoid red meat at all costs because it will give cancer, among numerous other problems. Well, which is it! I guess I’ll keep eating the standard American diet. 

In the same way, you can’t follow one strategy that tells you to pay off all your debt to cash flow your way to wealth and follow another that says to leverage your home and vehicles to invest the maximum amount. You can’t simultaneously purchase additional permanent life insurance and also “buy term and invest the difference.” You cannot follow the 3D Retirement Income model and buy annuities.

Pick one strategy and follow it, to the total exclusion of all others. You cannot believe in conflicting strategies. When you pick a strategy, you’ll want to make sure it works, is comprehensive, and comes from a minimally conflicted source. In other words, you need a comprehensive plan backed by a fee-only fiduciary Certified Financial Planner.

Immerse yourself in the strategy.

Regularly consume content that supports and reinforces the strategy. Read books that align. Listen to podcasts that conform. Continually remind yourself that the strategy you are following is the right one. Do not stray from it or be led astray. Saturate your mind with this one good strategy. It is the primary way you build your belief. 

I repeat many of the concepts in this book for this very reason. I don’t insert the same phrases over and over to bloat the size of the book; I do it to build your belief. A sentence uttered once can be forgotten. The first time you read a concept, you know it, but may forget it. By the second or third time, you start to believe it. And if I can mention it four to seven times, you may act on it.

In Christianity, there is a massive emphasis on belief. Knowing God does not make someone a Christian. They must believe. And they must continue to build that belief. 

Followers of Jesus are encouraged to regularly read the Bible, pray, and belong to a church community. There is an initial belief in Jesus that makes one a Christian. Those whose relationship is vital to them know that they need to prioritize it. Their belief will wane under the deluge of opposing worldviews. The only way to maintain the faith that richly adds to their life is to immerse themselves in the scripture, prayer, and a like-minded community. 

The same is true for a financial strategy.

It isn’t enough to believe in it once. You must reinforce and build that belief. And the best way to do that is to immerse yourself in it. 

Obviously, one can take this concept too far when applied to all of life. Only listening to the opinions of one side of an argument is how we get group think, “otherisms,” and a host of problems. Don’t apply this concept to every area of your life. I regularly consume content by atheists and sages of other faiths. The political and economic books I read are split evenly between progressive and conservative. I like to hear and study other worldviews, and you should welcome opposing viewpoints in most areas of life.

But when it comes to your investments, we can’t afford this. Constantly switching investment strategies is how you get killed by the First Horsemen, Chasing Returns. Abandoning the plan in favor of a new “cut your losses” strategy is how the Fourth Horsemen, Panic, steals half your life savings with no chance of getting it back. With your investments, you must find and stick to one strategy to the exclusion of all others and immerse yourself in that strategy.

Continued Belief

I launched the RetireMentorship Podcast and YouTube Channel for this very reason. To help immerse you in a cohesive strategy that has historically worked, so you can continue to believe in and act on that plan moving forward. Subscribe to the podcast on your favorite player so that you can continue to build your belief. 

A diet does not work if you only stick to it for a week. And a financial strategy doesn’t work if you only stick to it for a year. Indeed, some strategies don’t work until you’ve stuck with them for decades! It is incredibly un-human to stick to something alone for that long. For this reason, we need continual reinforcement of the strategy and help along the way. 

Invite an accountability partner.

People stick to diets better when they have someone doing it with them. CrossFit members remain addicted to their gym because of the community there. People work through their typical human issues with the help of a therapist. Do not go it alone for something as crucial as your lifetime financial success! 

There will be times you lose faith. And in those times, you need someone who is resolutely steadfast to the plan. They will believe for you when you temporarily cannot. And when their steadfast belief carries you through, you will be grateful you did not attempt it alone. 

Find someone who believes in the plan more than you do. Stick with them.

Isolate and follow one strategy. Immerse yourself in the strategy. Invite an accountability partner. That is how you build belief that inspires action that changes lives. 

Know. Then Believe. Then Act. 

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 those of the people expressing them. Any performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be directly invested in.