Funny title for a financial blog huh? As always, there is a backstory to it. My 7-year-old boy recently started training Jiu-Jitsu. For anyone unfamiliar with this practice, it involves a lot of grappling, take-downs and submission holds. If you’ve ever seen an MMA fight, there is a fair amount of Jiu-Jitsu employed in those rings. Those athletes have trained for years and years and are amazing at engaging each other. HOWEVER, if you ever watch a 7-year-old new student of Jiu-Jitsu…well it’s just not as amazing. In fact, it “looks more like cuddling than fighting” as my wife so succinctly put it after watching the second class.
My wife is awesome at summing things up like that. But in all fairness, my wife never played sports growing up and she never trained any type of martial art. So what looks to her like “cuddling” looks to me like “the beginning”. I’ve played many sports in my life and I continue to pick up new sports and interests all the time. What I know is that when you pick up a new physical challenge, you start at the bottom and you work your way to average and then to proficiency. If you are lucky, you may have some natural skill set and your proficiency leads to expertise. But it always starts out as rudimentary…it always starts out as “cuddling”.
In money management people make the same mistake again and again. They try to skip the cuddles! There are many outlets out there in the media (like my least favorite radio talk show hosts and TV show hosts) who lead you to believe that money management is easy and that you can become an expert simply by reading their book or listening to their show. But that’s not how it works. In training Jiu-Jitsu, you need an instructor to teach you the blow by blow basics: “grip this area, pull down here, step forward, now PUSH”! Those are basics. Those you can read or just listen to. But then you need to get thrown around the mat for several years gaining experience. And just walking out to the mat and getting thrown around is worth little if there is no coach alongside of you helping you interpret your failures and successes. Same with money. You can’t just employ investing principles because you read a magazine any more than you can throw a blue or black belt around because you watched a YouTube video. The principles are critical, but you need a coach right by your side reminding you of the principles and helping you employ the right ones at the right times.
Think of this: when do you pay off your mortgage? The math may dictate one thing, but emotions the other. When do you sell your stocks? Again, math and statistics say one thing, but your fear and/or greed say another. Should you pay for your kids’ college? Math says no but the heart says yes. And what of your “failures”? Who helps you with the perspective? Maybe the $20,000 credit debt isn’t the end of your life if you use it to propel your behavior in a different direction. Put in that context the 20k of debt could have been the best thing to ever occur to you.
The lesson here is this: you need to start out slowly. Start with these basics:
- Protection first. Insurance is the foundation of any wealth building. It’s not sexy but it’s 100% accurate.
- 20% savings. Again, not sexy…but the only way to reduce your Lifestyle Addiction™ now and to be able to support your lifestyle later is to SAVE.
- Be liquid. You don’t get to advanced wealth building like retirement plans and real estate until you have cash on hand and lots of it.
- Pay down debt. I know you’ve been told to live off “rice and beans” and pay off everything before you do anything else with your life, but that’s not correct. Debt pay down can only occur after the first 3 steps are handled.
There you go. That’s “financial cuddling”. That’s not trademarked yet but I think it should be! Because it doesn’t matter what it looks like to people on the outside looking in. It only matters that you are training yourself right from the start in the basics that will lead you from beginner finances, to average finances to, ultimately, awesome MMA-style finances!