Tom's Finance Guide Part 2: The principles

reading time 3 min

This was a draft. The final version is now available as a pay-what-you-want self-published book called Tom’s Finance Guide: Retire Rich!

The remaining blog posts try to stick with a few basic principles:

  1. Default Good - The default action should move you forward
  2. Make it “fun” - Gamify to maintain interest
  3. Lie to yourself - Create positive fictions that benefit you

1. Default Good

The default action should move you forward. If I forget to do something on a given month, the default action (what happens if I do nothing) should be the right thing.

For example, if you pay your rent by check each month, and you forget to pay your rent, the default is bad: you’re late on your rent.

However if you have automatic payments set up, and forget to do anything that month, the default is that the bank sends the same amount to your landlord as last month. See? The default was good.

In this situation, the only time you need to take action is if the amount you pay changes, which should be very rare.

In this system, the default (no work) action is the right thing. The work that is left over is the exception that needs your intevention.

You can also call this “automate your work”. You have to update the payment any time your rent amount changes, but otherwise the process is automated.

(If you like this concept, you might enjoy The Automatic Millionaire by David Bach. Disclaimer: I have only read summaries of this book.)

2. Make it “fun”

Even a good plan fails if we don’t follow through. Therefore we’re going to gamify the process so that we maintain interest.

If we can’t gamify something, we’ll at least make it a a very easy and repeatable process … something you do the exact same way every week or month. That way there is less congative load of thinking “what am I supposed to do next?” and instead you develop a habit of doing a rote series of steps. Less thinking, more doing. It will become a habit.

You should make a bookmark in your browser (or shortcut on your desktop) to the spreadsheet so that you eliminate the barrier to get started: One click, you are in the right place to make this week’s entry. This way you avoid the problem where getting started in a pain in the butt and becomes an excuse to skip this week’s task.

3. Lie to yourself

Sometimes we’re going to create positive fictions (or a “healthy lie”) that help us.

For example, if we get a $100/month raise, we’re going to pretend that we didn’t get a raise and instead put that $100/month towards our retirement savings. You didn’t have that money last month, pretending you don’t have it now should be easy. It is a positive fiction that will help us stick to the plan.

You’ll see these themes throughout the remaining chapters.

Tom Limoncelli

Tom Limoncelli

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