One of my favorite non-fiction authors has always been Stephen Covey. Even beyond the 7 Habits, I love to read all of his material and listen to his audio books. His approach is well-structured, principled, and incredibly motivating in a variety of life areas.
The great thing about the 7 Habits is that you can apply it to just about anything life throws at you – including the area of personal finance. Have you ever tried this fun exercise?
Let’s think about each of the 7 Habits and how they can help us to create a better relationship with our money. I encourage you to pick up a copy of the book for yourself and go through this in more detail.
Habit 1 – Be Proactive
Being proactive is all about cultivating your power to choose in any situation. Just think back to the last time you were in a high-pressure sales situation – did you feel in control or were the salesman’s tactics clouding your judgement?
Proactive people also take the initiative when others wait for things to happen to them. With money, being proactive could mean spending more time planning or investing in the future, while being reactive could mean waiting for financial disaster to strike you before you take any action. It also means that we get out of the habit of saying we “can’t” do things and instead “choose” to do or not do them.
An extension of the idea that you have power in every situation means that no matter what, there is a way to get to where you want to be financially. Saying that you can’t do it or that it’s someone else’s fault is counter-productive at best.
One of the financial principles that I live by is to always make decisions that will result in multiple options down the road, instead of getting myself stuck between a rock and a hard place. Many of the people currently losing homes to foreclosure over-estimated their ability to maintain their current lifestyle, and failed to give themselves breathing room to make choices at a later date.
Habit 2 – Begin With The End in Mind
The essence of the second habit involves understanding your destination before you set out on your journey. How important that is with money!
Goal-setting and planning for the future are very important personal finance tasks, and ones that we already practice fairly regularly. For example, this is exactly what you’re doing when you use one of those fun retirement calculators to realize you’re not saving enough.
But I think that sometimes we don’t go far enough. We have a fairly good idea of limited areas of our financial life – planning for retirement, maybe buying a home. But what about the other important things:
- How much money do I want to dedicate to charity?
- How much would I like to leave to my children?
- Do I want to do X (travel, climb mountains, fly a hot air balloon, etc.) and what will it take?
- What do I want to teach my kids about money?
- What place does money have in my life?
Clearly, you can go on and on, but you’ll have to come up with your own list that’s very personal and sometimes very painful to face. Face it anyway, and let your answers guide your financial life from this point on – this is your roadmap.
Habit 3 – Put First Things First
The third habit executes everything the second habit seeks to create. To do this effectively, Covey suggests focusing most of our energy on activities known as “Quadrant II” – those important tasks that are not urgent.
Just think about it – you know exactly what they are because we rarely get to them. In our financial life, examples are:
- Spending time planning and forecasting our finances.
- Talking with our family about money.
- Learning more about personal finance.
- Making sure our insurance needs are met and reviewing coverages.
- Looking for new opportunities for income.
- Finding big and small ways to cut expenses.
- Dreaming about our goals (Habit 2).
- Taking a break from daily money management to gain perspective.
- Thinking about our own money systems and monitoring tools.
By doing more of these things, we can hope to significantly reduce the amount of urgent “stuff” that flies across our desk, clamoring for attention, and sucking up our time.
Moving Into Interdependence
Covey calls the first three habits the “independence” habits, because they deal with control over self. Mastering these three habits allows you to move beyond your own sphere of life, and into the “interdependent” habits – the ones that deal with other people.
Tomorrow’s post will talk about the three interdependent habits, and also cover one of the most important habits of all – that of self-renewal. Read the second segment of this post here…