The Science Behind Positive Financial habits (18)

The Science Behind Positive Financial Habits

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What Physicians Need to Know About Positive Financial Habits

Real quick—which five friends influence you the most?

The answer is the five that you spend the most time with! Helping us truly understand what that means (or should mean) is Nick True from MappedOutMoney.com or Mapped Out Money on YouTube. Believing in this concept more than anyone else I know, Nick, in one of his YouTube videos discusses his belief that your closest friends may bolster or subtly undermine your path to success. Which of your friends are proactive people, who are excited enough to invest their time in developing positive financial habits?

The Science of Positive Financial Habits with Nick True

“You are the average of the five people you spend the most time with”-Jim Rohn

That quote by Jim Rohn, who is a business leader, has been around for a while. The concept of who you allow in your life has been addressed by successful people for ages, even religious texts address the notion.

This makes it quite difficult to achieve your ideal life, right?

In fact, Nick stated that he’s heard numerous quotes on the subject—a commonly heard quote being:

“The wise surround themselves with wise; only a fool surrounds himself with other fools”

Have you stopped to consider how many of your thoughts and actions are influenced by your friends?

Have you found yourself repeating that annoying phrase a friend uses?

What about that bad word? I’m talking about the one that would cause your mother to faint?

The New England Journal did a fascinating scientific study into the subject.

They combed through a load of different factors.

They followed 12,000 individuals, spanning 32 years to answer that question. In 2007, The New York Times published an article with the results.

The subject was who gains weight over time —and why?

According to the study if you have a good friend who is obese, your chances increase by 57%! It doesn’t matter if the friend lives in another state. What did matter was the amount of emotional closeness in the relationship.

Yikes.

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Mirroring – Our Unconscious Mind Tends to Take Control

It seems we mimic the social signals of the people around us.

Watch your friend or coworker during a conversation. Will they yawn, smile or cross their arms when you do? This may be biologically due to mirror neurons.

There is an investigation into Mirror Neurons within the scientific community. They are discovering why we unconsciously start to behave like the people around us. What does this mean for you? It means that we all need to be mindful of what behaviors we are picking up, and who we allow to influence us.The Science of Positive Financial Habits with Nick True

How insidious is this behavior?

Studies have found that the people you spend time around will affect your health and your finances. When you are in a group you tend to pick up the same habits. Some of those habits deeply affect important matters concerning your family.

Nick stresses that if you are emotionally close to friends who are big spenders, you will be tempted to do the same. If they lavish money on their children, you may fall into that trap, too. When you see other new attending physicians going out and buying new cars, you just might start to consider buying one also.

An emotional connection magnifies the feeling. Before you know it, you will be attempting to keep up with the Jones—and lose sight of your own plans.

Flipping the Mirror – Make It Easy to Cultivate Positive Financial Habits

Physicians are not typically educated during their undergrad, medical school, and residency regarding the cultivation of positive financial habits.

And we acknowledge that delayed gratification is hard if you’re at least that much aware of your financial needs.

Is deferred gratification a saving method you have used?

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It is especially tough after all the hard work and sacrifice you’ve made to reach this point. Perhaps when it’s reached, the last thing you think about is what you should do to create a financial plan.

That’s why we advocate building positive financial habits so that you won’t suffer the ultimate in stress—stacking the deck against yourself by becoming financially over extended.

Nick uses the example of a friend who is excited to save. His enthusiasm has the domino effect on you. He will impact you. Your thoughts will easily turn toward the idea of savings, planning and prosperity!

Jumping the First Hurtle – Figuring Out Your Finances Together

The first hurtle is talking about money. We recognize that money is difficult to discuss and deal with.

The Science of Positive Financial Habits with Nick True

However, when you are married, money is a topic where you need to have a lot of open communication. One daunting statistic is that one out of every two marriages will end in divorce. Unfortunately, that is due to failure to communicate and finances. Those are two topics that certainly cause the most friction in marriage and even more of a reason to go on a money date (or dates) with your spouse.

Nick empathizes with the financial situation of residents. They are not seeing their net worth increase, instead they see it decrease every month—and then add student loan debts!

To emphasize his understanding of their situation, he tells us about the beginning of his wedded life. He married at the age of 20. It was during the last year of his education to become an engineer. His bride, Hannah, was 23, and attending grad school for physical therapy.  They planned to save up enough money to get married. The money they saved was specifically for their use during this time. However, he said watching their savings decrease every month was so stressful.

Then in the second year of marriage he graduated and became a fully-fledged engineer, he got a job and his pay increased. They went from scraping by and watching their savings disappear to a sudden substantial increase.

During this time, they needed to figure out how to make the leap from barely getting by to prosperity. There are a lot of ways for handling finances and none of them are a wrong way.

Some couples combine their expenses, others separate them, but the goal is to understand what your combined expectations are and get a good result.

Nick and his wife began by asking “Why”, and then talking about their dreams and plans. They wanted to make sure they were on the same page regarding their future. They didn’t want to mar it with conflict. They were building their life together as partners!

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Tug of War – Pull On The Same Side of the Financial Rope

Just like many of you, Nick and his wife are fans of Chip and Joanna Gaines. Something that caught his attention in their book was how early in their marriage and business they felt like they were playing tug of war.

Chip stated it was a lot easier once they were on the same side of the rope and pulling in the same direction. Our advice to our readers, is to get clear on where you want to go and build those positive financial habits.

Nick has been thinking about why he wants to get clear on his financial situation. Defining the “why” will help you envision what you want and what your ideal life looks like.

He shares that he feels like residents have some things in common with him. He was serious about school and his career; he feels that someone in medical school must feel the same way.

Change Will Happen – Get Ahead With Money While You Have the Chance

Like many people who invest in a career choice, when Nick became an engineer he thought that he would want to be an engineer forever.  However, after he left school he realized that being an engineer was not part of what he wanted for his future. It was time to look at alternatives and glean in on what might smooth the way for change.

What is the one factor that might ease a situation when you want to restructure your life?  The answer is to get ahead with money while you have the chance—so you have options later.

Having positive financial habits allows you to have a surplus ready. Money gives you options; the lack of money limits your choices. You will have more leeway later in life when you put your finances in order today. Some changes that people may consider are in careers, buying a house, having another child, or moving across the country.

Physicians are especially prone to a high rate of burnout. Medicine is always changing, along with the laws, and a physician’s side gig may give them the option to pursue something that allows for more freedom and less stress.

A change may permit them to cut back on their hours or leave medicine for another lucrative option.

We want to make physicians aware that they have choices, but it benefits them to plan. Your future choices depend on learning positive financial habits now. The sooner you start, the sooner you will be free to make changes—if you want.

Opposites Attract – Money Is Dealt With Differently Based on Personality

They say that opposites attract and that is true in Nick’s case. He looks at money in a logical way, his wife is a little more relaxed about the topic. He didn’t understand why his wife couldn’t be more logical.

He states that sometimes it is hard to remember that you are two different people, that have different personalities and have their own way of interacting with money.

Nick is a planner and relates the story of his honeymoon. If you remember, he and his wife, Hannah were married very young.  His parents gave them tickets for a cruise. However, he and his new bride didn’t realize that there were going to be side expenses.

Since Nick is a planner, who was also a student on a tight budget, those extra expenses seemed huge. He is embarrassed to recall that they fought their entire honeymoon. He states most of their fights were because he freaked out over some unexpected expense. He could not understand why Hannah was not freaking out with him!

He states that his disastrous honeymoon spawned their positive financial habits, such as making sure they have a healthy emergency fund, and they have a cushion in their monthly budget.

This means they have a built-in safety net for dealing with any unexpected expenses—and he has peace of mind! The take-away is that you must learn from your mistakes. It is important to figure out your relationship with money. You may have to overcome some preconceived ideas and learn to build positive financial habits!

 “Wants” Versus “Really Wants”

How do you enjoy spending money? This may seem like an obvious question.

Spending is spending right?

The Science of Positive Financial Habits with Nick True

But consider how Nick and his wife differ in their purchase methods. Nick enjoys spending his money by savoring the thoughts of a purchase. He researches the item and lingers over the details. In contrast, his wife enjoys buying something spontaneously.

Now consider my family. We love to travel. One of our positive financial habits is to save for a trip to a pre-determined destination. They place an allotted amount in a savings account. If there is extra money left, we don’t necessarily use that money to save for the next trip. Since the money has already been saved and ear-marked for the present trip, they may go on a spur-of-the-moment, guilt-free excursion.

Curbside Consult with Nick

What are some tips to get you started on positive financial habits?

Nick emphasizes that when considering marriage and money to remember that you are married to this person for life. This is your partner and it is important to get on the same page. On a couple of previous episodes, we discussed the benefits of going on a money date with your spouse.

These dates are a bonding experience for setting future financial and family goals. This ensures that you and your spouse are on the same page when setting these type of goals for your finances.

Another great tip was to remove toxic people from your life.

They are the negative people who devalue your plans. They attempt to plant seeds of doubt about your ability to reach a goal. Then you might consider limiting your time with stagnant people. Stagnant people are stuck in mediocrity—and they have no plans to change the status quo.

You have a busy life; your time is precious, plus you have goals to meet.

“Show me your friends and I’ll show you your future”-Anonymous

How do you envision your future? Chances are you want financial and familial success. A chance to travel and spend time with your loved ones having fun. You see a future with possibilities stretching to the horizon. There is a good chance that will happen, if you are mindful of your goal to build wealth and create a successful future for your family. It will take time and the right environment to build positive financial habits.

The last thing you need is a weight around your neck in the form of apathetic friends. The people you surround yourself with have a direct impact on how hard it is for you to hit your chosen target. By selecting the right people, the ones who have comparable values and goals, you increase your chance of success a thousand-fold!

Journal Club!

THE PHYSICIAN PHILOSOPHER posted an article titled, “Why are doctors burning out? And 3 Ways FI can save them.”

In it, the author discusses a few reasons why physicians are burning out and gives 3 remedies on how financial independence can help combat feelings of being burnt out. He sites the lack of autonomy at work and the lack of support from administrators who enforce the rules as main reasons for burnout. I’d add that incredibly high student loan balances as well as mismanagement of one’s personal finances act as gasoline to that fire.

So, how could Financial Independence come to the rescue? I quote, “Financial Independence allows for increasing autonomy over our life.  Maybe we cut back to 70% of an FTE or even 50%.

Maybe we use that extra time to become human beings again and realize we have other hobbies like playing an instrument, writing, dancing, brewing beer, or playing sports.

Or maybe this additional time will let us be present for the people we love. Physicians often lose their self-identity in their profession.  Financial Independence allows us to get back to our roots and to re-examine what makes us who we are.

The second reason is that is comes with less pressure to keep up with the Joneses. I quote, “FI is part frugality and part aggressive saving. When doctors are exposed to the frugality of the FI community, they then feel a freedom to no longer need to keep up with the Dr. Joneses. This freedom provided by FI allows them to avoid the catastrophic financial mistakes most doctors make when they finish training.”

The third is what he calls The Support Yourself Fund. This is a fund that helps you to support yourself when others won’t.  There is power in saying no when someone isn’t valuing you or your time. Upon achieving financial independence, it provides a certain amount of courage that simply wasn’t there when we first finished training.

What I like really about this article, that it isn’t preaching the second part of FIRE, the retire early part. It focuses financial independence, encourages physicians to take action and understand not only their finances but also tries to shed some light on how understanding one’s finances can free you of the financial burdens that typically plague physicians and their families.

In my experience, I see how poorly managed finances provide a heavy weight or burden on physicians and just magnifies the challenges they face at work. By listening to this podcast, and hopefully reading books or blogs by other experts in the field of finance, you are taking that first step to building yourself a better financial foundation. Never stop learning and keep making progress every day, its important.

The Physician Philosopher, thanks for an amazing article that showing physicians the brighter side of FIRE and provide a framework on why this is so important. At the end, you ask for others to join you in the cause, and I quote, “It may just save a doctor’s life so that they can save yours someday.” That’s really powerful, and job well done. I encourage all of you to go check out this article on thephysicianphilosopher.com

https://thephysicianphilosopher.com/2018/08/20/fi-saves-medicine/

Ryan Inman