The 80/20 Principle for Mastering Money

So today, I’m on page 1 (the Introduction page) of Dave Ramsey’s Complete Guide to Money. And here’s my lesson for the day:

80% of understanding money = behaviors

20% of understanding money = information

On that page, Dave talked about how we was helping out others with his financial counseling classes while he dug himself out of debt and bankruptcy in the ’80s. He was struggling with money and sought to find out every single information/knowledge he could learn about mastering money.

He read lots of books, talked to a lot of people, and, in the process, discovered his life’s passion – helping others master money (another lesson on its own). Anyways: naturally, this led to him teaching others what he’s learnt. That is, the 20% (information).

But as he counseled people, something strange was happening.

It seemed as if: the more he counseled people, the more those people got deep into the exact same financial problems that they were struggling with

For example, if he had talked with someone in the middle of filing for bankruptcy, he would meet them a few months later, and ask for an update. And they’d give some explanation about why things didn’t work out. And about why they eventually had to file for bankruptcy anyways.

Which didn’t make sense: since they already sat knee to knee few months earlier with Dave to discuss the math and lay out all the steps to take.

Eventually, Dave figured it out: the math wasn’t the problem. The real problem was people’s behaviors around money.

You can see a financial counselor for money advice few times a month, and you both can iron everything out to a ‘T’. But if you won’t work hard at adopting new behaviors around money, then all of those brainstorming sessions might be for nothing.

And that, my friend, is the biggest lesson I learnt from the book today.

It’s all good & nice to learn about money, but you gotta ask yourself: “what behaviors do I need to change to make this information work for me?”

Which makes a lot of sense if you think about it:

  • You don’t lose weight by simply reading weight loss books. No, you lose weight by resisting that urge to sleep in when you should hit the gym
  • You don’t learn to drive by simply going to driving classes. No, you learn to drive by getting behind the wheel and following instructions on the road
  • You don’t become a doctor by simply attending classes and taking notes. No, you become a doctor by repeatedly handling medical procedures under the guidance of an expert
  • You don’t build a happy marriage by simply taking marriage lessons. No, you build a joyful marriage by listening more and consistently taming your anger and frustrations

For all these examples and many more, do you need to first learn? Of course you do.

You NEED the information.

For example, you’re already learning more about personal finance here, going through this book with me.

BUT you’re going to need much more than that. To truly master money, you’re going to need to be more intentional about your behaviors around money.

In summary, here’s the lesson for the day: Get information about money 20% of the time, but spend way more time (80%) on using that information to improve your behaviors around money.

That’s all for today. We’ll be continuing on Page 2 of the book tomorrow.

See you then.

-DD

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