7 Money Lessons I Wish Knew in My 20s! (The Step-by-Step Guide to Build Financial Freedom Faster)
In this episode of On Purpose, Jay Shetty explores how people can transform their relationship with money from one of avoidance to security. Drawing parallels between attachment styles in relationships and approaches to money, Shetty explains that financial problems often stem not from money itself, but from the attitudes and beliefs surrounding it.
The episode covers practical strategies for building wealth through automated savings and financial education, while addressing how childhood experiences shape adult money behaviors. Shetty discusses Brad Klontz's work on cognitive scripts and examines how generosity can improve one's relationship with money. He emphasizes that financial well-being depends more on decision-making than income level, and provides guidance on identifying and replacing limiting money beliefs.
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1-Page Summary
Transforming Relationship With Money From Avoidance to Security
Jay Shetty explores how individuals can transform their relationship with money from one of avoidance to security. He draws parallels between attachment styles in relationships and how people approach money, identifying three main styles: secure, anxious, and avoidant.
Shetty clarifies a common misconception, explaining that it's not money itself that's problematic, but rather the obsession and greed surrounding it. He encourages listeners to overcome their financial fears by actively engaging with money through goal-setting and budgeting practices.
Strategies For Building Wealth
According to Shetty, financial well-being depends more on decision-making than income level. He advocates for automating savings through what he calls a "Freedom Fund," echoing Warren Buffett's advice to "pay yourself first." Rather than pursuing get-rich-quick schemes, Shetty emphasizes the importance of dedicating time to learning financial fundamentals.
Impact of Mindset on Financial Behavior
Brad Klontz's concept of cognitive scripts plays a central role in Shetty's discussion of how childhood money messages shape adult financial behaviors. These unconscious beliefs, such as "money's hard to make" or "rich people are greedy," persist until actively challenged. Shetty encourages listeners to identify these limiting beliefs and replace them with more empowering perspectives.
Role of Generosity in Financial Well-Being
Shetty presents generosity as a powerful tool for improving one's relationship with money. He suggests that even small acts of giving, whether through donations, time, or skills, can positively shift one's energy and attitude toward money. Through his experiences, Shetty has observed that increased wealth amplifies existing traits - making generous people more giving and highlighting the importance of cultivating positive financial attitudes early on.
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Counterarguments
- While Shetty suggests that financial well-being depends more on decision-making than income level, it can be argued that income level does play a significant role in financial security, as those with higher incomes have more opportunities to save and invest.
- The concept of a "Freedom Fund" and automating savings is sound, but it may not be feasible for individuals living paycheck to paycheck, who may find it challenging to set aside money for savings.
- The idea that learning financial fundamentals is more important than pursuing get-rich-quick schemes is valid, but it's also important to acknowledge that some individuals may lack access to quality financial education or may be preyed upon by those schemes due to desperation or lack of knowledge.
- Shetty's approach to changing one's mindset about money may not address deeper systemic issues that contribute to financial insecurity, such as wage stagnation, inflation, or socioeconomic disparities.
- The encouragement to identify and challenge limiting beliefs about money is positive, but it may oversimplify the complexities of financial psychology and the difficulty of changing deeply ingrained beliefs.
- Promoting generosity as a means to improve one's relationship with money is noble, but it may not be practical advice for those who are struggling financially and for whom generosity could mean sacrificing their own basic needs.
- The assertion that increased wealth amplifies existing traits may not always hold true, as individuals' behaviors and attitudes can change with their circumstances, and not all generous people become more giving with increased wealth.
- Cultivating positive financial attitudes early on is important, but it may not be enough to overcome structural financial challenges that some individuals face, such as discrimination or lack of opportunity.
Actionables
- You can create a "Money Mind Map" to visually chart your financial goals and the emotions tied to them. Start by drawing a central circle labeled "My Financial Goals" and branch out to smaller circles with specific goals like "Emergency Fund" or "Vacation Savings." For each goal, attach an emotion you feel or want to feel about it, such as "Security" or "Excitement." This exercise helps you connect emotionally with your financial goals, making them more tangible and motivating.
- Develop a "Generosity Jar" in your home where you contribute a small, affordable amount daily or weekly. Label the jar with a cause or person you want to help, and once it's full, donate the contents. This practice not only fosters a habit of giving but also serves as a constant visual reminder of your capacity to positively impact others, regardless of your financial status.
- Engage in a "Financial Traits Amplification" exercise by listing your positive traits and considering how they could be enhanced with increased financial resources. For example, if you're a creative thinker, imagine funding community art projects. Reflecting on this can help you understand the potential of wealth to amplify the good you can do, aligning your financial growth with personal values and societal contributions.
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Transforming Relationship With Money From Avoidance to Security
Jay Shetty emphasizes the significance of changing one's attitude toward money as a critical step in transitioning from avoiding finances to feeling secure about them.
Recognize Money Attachment Styles: Secure, Anxious, Avoidant; Cultivate a Secure Approach
Jay Shetty draws parallels between attachment styles in relationships and individuals' approaches to money, which include secure, anxious, and avoidant styles. He stresses the importance of recognizing one’s own attachment style to money and the necessity of developing a secure relationship with it.
Money Isn't "Evil" - Obsession and Greed Are the Issues
Countering a common belief, Jay Shetty clarifies that the notion "money is the root of all evil" is a misquote. The correct aphorism is "the love of money is the root of all evil." Money, according to Shetty, is simply a form of energy and it is the obsession and greed surrounding it that catalyzes negative outcomes, not the money itself. Shetty asserts that this unhealthy fixation is the true problem, not the currency.
Overcome Fear and Engage With Money Healthily
Shetty urges individuals to step away fr ...
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Transforming Relationship With Money From Avoidance to Security
Additional Materials
Counterarguments
- While recognizing money attachment styles can be helpful, it may oversimplify complex financial behaviors and attitudes that are influenced by a wide range of personal, cultural, and socioeconomic factors.
- The statement that money isn't "evil" but obsession and greed are the issues could be challenged by arguing that systemic issues within economic structures can also contribute to negative outcomes associated with money, beyond individual attitudes of obsession and greed.
- The advice to overcome fear and engage with money healthily assumes that individuals have the resources and e ...
Actionables
- Create a money attachment style journal to track your financial emotions and behaviors. Start by writing down your daily financial decisions and the emotions associated with them. Over time, you'll begin to see patterns that align with secure, anxious, or avoidant money attachment styles. Use this insight to consciously steer your actions towards a more secure approach, such as setting up automatic savings or consulting with a financial advisor when you feel anxious about investments.
- Develop a "Money Philosophy Statement" to clarify your beliefs about money. Take a quiet moment to reflect on your values and write a statement that encapsulates your view of money's role in your life. This exercise helps you separate the tool that is money from negative behaviors like obsession and greed. For example, your statement might be, "Money is a tool for creating opportunities for myself and others, not a meas ...
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Strategies For Building Wealth: Automation and Financial Education
Jay Shetty provides insights into wealth-building strategies centered on making informed financial decisions, automating savings, and the continuous pursuit of financial education.
Financial Wellbeing Relies More On Decision-Making Than Income Level
Shetty asserts that financial well-being is less about one’s income level and more about effective decision-making. He advises listeners to take control of their financial habits, encouraging the use of budgeting apps and auto-saving mechanisms to manage their finances effectively, even on a low income.
Make Saving Seamless With Mental Accounting and Automation
Shetty suggests using automation to separate savings from spendable income, championing the concept of "paying yourself first," as famously recommended by Warren Buffett. He advises listeners to make savings invisible by automating a portion of every paycheck into a separate account, which he refers to as a "Freedom Fund." This strategy is meant to divert funds into savings before one gets a chance to spend, aiding in the growth of that reserve over time.
Prioritize Financial Education Over Impulsive Spending or Schemes
Daily Devote Time To Learning Finance Fundamentals
Shetty emphasizes the imp ...
Here’s what you’ll find in our full summary
Strategies For Building Wealth: Automation and Financial Education
Additional Materials
Counterarguments
- While decision-making is crucial, income level can significantly impact one's ability to save and invest, thus affecting financial well-being.
- Budgeting apps and auto-saving mechanisms are helpful, but they may not be suitable for everyone, especially those who prefer or require more hands-on approaches to manage their finances.
- Automation can lead to a set-it-and-forget-it mentality, which might cause individuals to become disengaged from actively managing their finances.
- The concept of "paying yourself first" is sound, but it may not be feasible for individuals with irregular income or those living paycheck to paycheck.
- A "Freedom Fund" is beneficial, but it should be complemented with other financial strategies like debt reduction and diversified investments.
- Financial education is important, but practical experience and personalized advice from financial professionals can also be invaluable.
- While impulsive spending and get-rich-quick schemes should be avoided, some individuals have successfully included volatile assets like cryptocurrencies or NFTs in a diversified investment portfolio.
- Daily devotion to learnin ...
Actionables
- You can create a financial vision board to visualize your goals and reinforce the habit of saving. Start by gathering images and phrases that represent your financial aspirations, such as a debt-free life, owning a home, or creating an emergency fund. Place this board somewhere you'll see it daily to remind you of your financial goals and encourage consistent saving behavior.
- Develop a habit tracker for your financial education to ensure daily learning. Use a simple calendar or an app to mark the days you dedicate time to financial learning. This visual progress can be motivating and help you replace less productive habits, like excessive social media use, with educational ones.
- Initiate a monthly " ...
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Impact of Mindset on Financial Behavior and Outcomes
Jay Shetty dives into the concept of cognitive scripts and their influence on financial behavior, underscoring the necessity of understanding and managing debt effectively.
Many Money Beliefs and Behaviors Stem From Unconscious Upbringing Scripts
Shetty discusses the money messages people absorb from childhood, such as "money's hard to make," "rich people are greedy," or the taboo of discussing finances. These unconscious messages, coined as cognitive scripts by Brad Klontz, contribute to financial habits and persist until individuals actively work to change them.
Challenge Limiting Money Narratives With Empowering Perspectives
He notes that the lack of financial education limits most individuals to earning, spending, and chasing money without knowing how to grow, invest, or manage it. By recognizing and challenging these upbringing scripts, one can adopt more empowering perspectives. Shetty urges the audience to write down three money beliefs from their upbringing, question if these beliefs still serve them, and then rewrite a limiting belief with an empowering one, such as changing "money is selfish" to "money is fuel for generosity."
Debt Isn't "Evil" – the Real Danger Is In Not Understanding and Managing It Effectively
Shetty touches on the negative stigma associated with debt, emphasizing that ...
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Impact of Mindset on Financial Behavior and Outcomes
Additional Materials
Counterarguments
- Cognitive scripts are not the only factor influencing financial behavior; economic environment, access to resources, and personal experiences also play significant roles.
- Some money beliefs from childhood may be adaptive and beneficial, depending on the context and how they are applied in adulthood.
- Financial education is important, but it is not the only limitation to financial growth; systemic barriers and personal circumstances can also restrict financial opportunities.
- Challenging limiting narratives is important, but it should be done with an understanding of the complexity of financial systems and individual psychology.
- While debt is not inherently "evil," the societal structures around debt can sometimes be predatory, and not all individuals have equal opportunities to manage or escape debt effectively.
- Financial literacy is crucial, but access to financial education and resources is not evenly distribut ...
Actionables
- You can rewrite your financial story by journaling your current money beliefs and then crafting a narrative that aligns with your financial goals. Start by writing down all the beliefs about money you've inherited or developed over time. Next to each, write a counter-statement that reflects a healthier financial perspective. For example, if you believe "I'll never be good with money," counter it with "I am learning to manage my finances more effectively every day."
- Create a "debt diary" to gain a deeper understanding of your debts and strategize repayment. In a notebook or digital document, list all your debts with details such as interest rates, minimum payments, and due dates. Use this diary to track your payments and reflect on how each debt affects your financial health. This practice can help you prioritize which debts to tackle first and identify opportunities to consolidate or refinance for better terms.
- Develop a financial growth ...
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Role of Generosity in Financial Well-Being
Jay Shetty discusses the impact that generosity can have on personal financial well-being and how it can reshape one's mindset regarding wealth.
Even Small Acts of Generosity Improve Financial Mindset and Motivation
Shetty shares his insights on how small acts of generosity can foster a healthier relationship with money and enhance one's financial mindset.
Observe how Donating To Meaningful Causes or Individuals Positively Shifts Your Energy and Relationship With Money
Shetty explains that participating in fundraisers and contributing even modest amounts can produce significant results. His experiences have led him to believe that possessing more resources translates into having more to offer. He elaborates on the deeper responsibility those who are more fortunate have to be generous. Shetty emphasizes the empowering belief that with greater wealth comes the increased capacity to give.
According to Shetty, money serves to amplify inherent traits. Being kind-hearted leads to increased generosity with additional wealth, while having negative traits like greed and pettiness can become more pronounced with financial gain. This philosophy suggests that embracing generosity can lead to a more positive and enriched a ...
Here’s what you’ll find in our full summary
Role of Generosity in Financial Well-Being
Additional Materials
Counterarguments
- Generosity may not always improve financial mindset if it leads to financial strain or stress due to over-giving.
- Donating to causes can sometimes have a negligible impact on one's relationship with money if not coupled with other financial literacy practices.
- The assumption that possessing more resources translates into having more to offer can overlook the complexities of wealth distribution and the systemic issues that prevent equitable resource allocation.
- The idea that those who are more fortunate have a deeper responsibility to be generous can be seen as a moral judgment that doesn't account for individual circumstances.
- The belief that greater wealth increases the capacity to give doesn't consider that some individuals may feel a greater sense of scarcity as their wealth increases.
- The notion that money amplifies inherent traits oversimplifies human behavior and doesn't account for the nuanced ways in which people interact with money.
- The idea that kind-heartedness leads to increased generosity with additional wealth is not universally true, as some individuals may become more protective of their wealth regardless of their kind-hearted nature.
- The suggestion that negative traits like greed and pettiness become more pronounced with financial gain can be challenged by examples of wealthy individuals who use their resources for positive change.
- The claim that embracing generosity can lead to a more positive association with money doesn't consider that some people ...
Actionables
- You can start a "Generosity Jar" at home where you contribute a small amount of money each day, then donate the total to a cause at the end of the month. This daily habit reinforces the positive association with money and generosity. For example, place a jar in a common area and every day add what you can, even if it's just spare change. At the month's end, choose a charity or cause that resonates with you and donate the collected amount.
- Create a "Skill Swap" board in your community where people offer their skills in exchange for others' skills, fostering a non-monetary giving culture. This could be set up online or as a physical board in a local community center. For instance, if you're good at gardening, you could offer to help someone with their garden in exchange for a skill they can teach you, like cooking a particular dish.
- Implement a "Pay It Forward" initiative in your daily routine by d ...
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