The Seven Habits of Financial Independence

I am of course paraphrasing the very famous Stephen Covey’s book, method, movement, cult, etc.

As part of the personal development curriculum offered by my employer years ago I took a “Seven Habits” class, a week-long class I believe. I really liked the class, and found many concepts sensible and useful but, as with most such classes, I probably didn’t use much of it later at work on in life in general.

Anyways, I reviewed some of the concepts recently and realized there are many things that can be applied toward financial independence (FI).

Full disclosure: I was indirectly inspired, or at least reminded of the “seven habits”, by a guest post in the jlcollinsnh blog by Shilpan. Oh, and this is not really a book review because I am not even sure I’ve read the whole book, I probably only skimmed through it back during the class, and, if I read it, it was too long ago.

Here are the seven habits and how I relate them to FI.

The first three habits are the conquering of your own self:

1. Begin with the end in mind (#2 in the book)

This is actually the second habit in the book, but I like putting it first.

When I took my class they made us complete a puzzle. It was a map of the US broken up into the states (and groups of states) that we as a team put together rather quickly. The idea is that since you know what the whole map looks like, it will be easy to put together. Had it been a Picasso artwork, or a country we didn’t know, it would have been a lot harder.

One would think we know what Financial Independence looks like, so this should be easy, right? You want to decouple your income from your time and effort. However, you can do this in a million different ways. Go figure yours.

2. Put first things first (3)

This one is habit #3 but I think it fits better here.

In the early days of email, there was a story circulating about a professor who showed their class a big glass jar. First, it filled it with rocks, then with sand that filled the interstices (the gaps… word of the day?) in between the rocks. And then it added water that finished filling the jar. The rocks are the important things in life: family, friends, health; the sand is money, jobs, house, car, etc; the water is everything else (TV? etc). If you start filling your jar (your life) with sand or water there will be no room for rocks.

Life is a series of trade-offs. No, you can’t have it all. Acknowledge what you are giving up by pursuing FI.

Those in pursuit of financial independence (and those already enjoying it) value time and independence(!) more than a fancier car, a bigger house, or another step up the career ladder. Decide accordingly.

3. Be proactive (1)

The first habit makes more sense here (to me anyway), once you know where you are going and what you need to do to get there, you can get to it.

Being proactive is the opposite of being reactive. When you are proactive you take charge, you don’t go with the flow, you decide. And where should you concentrate? On the things you can control, not wasting time on the things you don’t control. In Six Sigma training, I learned that you should “control the controllables” and leave the rest alone. And in FI it is even more important to concentrate on the things you can control because you have a better chance to succeed, as having early successes will help keep focus and persevere.

You can’t decide to “take a promotion” or a raise, but you can decide to quit the rat race. And, as I wrote in a previous post, you have much more control over expenses than over income so concentrate on reducing expenses: from your house (your biggest expense?) to tiny little fees. And invest the savings.

To sum up the first three: you figure out what you want, know what you won’t have, and get to work.

Then you work with others (other people and groups) in the next three habits:

4. Think win-win

Even though you can’t have it all you can develop relationships with others where they win and you win too. Win-win relationships are the most desirable because they are the only sustainable in the long run. Any other relationship will simply not last. So the insight here is to avoid shortcuts and strive for collective long-term sustainable wins.

A “side note” here. It is important that your close family (let’s say the members of your household) embrace the same values you embrace regarding “work/life balance” (is work not part of life?…) so if FI implies having less money and more time they should enjoy having you around more than they would enjoy your spending power, otherwise you’ll be in a short-term relationship.

5. Seek first to understand, then to be understood

If this sounds familiar it’s because it’s almost verbatim the Prayer of Saint Francis: “Lord… Grant that I may not so much seek… To be understood as to understand.”

Everyone has their own value system, has analyzed their options, and has consequently made different decisions. Respect the decisions of others, because everyone is different. And different is always better.

How do you seek to be understood?… Write a blog ;). No, seriously, FI probably goes hand in had with simplicity, so explain your decision in simple terms.

6. Synergize

Synergy is the interaction of two (or more) agents that produce a combined effect greater than the sum of the individual effects (yes, I googled that one). In the context of the seven habits, “synergize” means to cooperate with others to achieve something bigger or better.

Surround yourself with good partners for your financial journey: a bank that doesn’t prey on fees (a credit union?), an investment management company whose interests are yours (Vanguard?), a personal network of organizations and people who share the “FI creed” or help you build it.

Summary of the second three: in relating with others remember FI is not a zero-sum game, be open-minded, and cooperate.

Finally, remember your personal maintenance:

7. Sharpen the saw

Abe Lincoln said “Give me six hours to chop down a tree and I will spend the first four sharpening the axe.”

But in our case sharpening the saw calls us not only to be prepared but also to maintain our financial fitness, and even to improve and learn continuously. Hopefully reading this blog helps you sharpen your saw, as I hope writing it will help sharpen mine. In an earlier post, I also talked about other blogs that have helped me. Check them out. Read (books too), learn and grow.

How did I do?

If you care to know… As an introvert, I did OK on the first three, even though I am still not sure which of the million possible ways will be my way… The next three (4-5-6) are more of a struggle. And #7 is a work in process, as it’s supposed to be.

The original book:

PS What would be the “eighth habit”?

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