So far posts for Savvy Wealth Tools have been more about Wealth Mechanics because I wanted to share ideas that were eye-opening for me even after absorbing education, mentorships, and hundreds of books, webinars, podcasts, videos, and who knows what else.
I like to frame things not just to understand but so I can make something happen. My framing for wealth building is like this:
Level 1: Wealth Mechanics
Wealth Mechanics is concepts and math. The forces propelling and slowing your wealth building. Principles, models, spreadsheets, diagrams and so on. We have learned in earlier posts that we need enough capital earning a modest, but reasonable rate of return. We have to understand the forces of inflation, interest, taxes, and opportunity cost. We need savvy tools and techniques with leverage and velocity of money to attain sufficient compounding to reach our goals. We need to minimize or avoid volatility, interest, fees, taxes, drawdowns, and other things that interrupt or slow down our compounding.
Level 2: Wealth Practices
Your decisions and actions determine the speed and amount of your wealth building. What you decide and do and when and how all matter. Avoiding what slows you down and managing risk are also part of wealth building.
We navigate Wealth Mechanics to make our compounding happen the way we want with fewer mistakes and surprises.
Wealth Practices is not just about selecting investments that make high returns. We navigate Wealth Mechanics to make our compounding happen the way we want with fewer mistakes and surprises. Through our understanding of Wealth Mechanics, like the forces of inflation, interest cost, and opportunity cost and the tools of leverage, spreads, and velocity of money, we can decide what to do and when. We can be more sophisticated and strategic with what we want our money to do. Swinging for the fences all the time is a recipe for failure. We can be savvy, make smarter decisions, and build wealth much faster.
One of the most important wealth practices for me was discovering what I did not know that I didn’t know. Traveling the wealth journey with humility and curiosity allows me to find ideas I didn’t even know I needed to learn. That’s how I have greatly improved my own Wealth Building Capacity.
Level 3: Inner Game
My view of the Inner Game of wealth building is a nod to Timothy Gallwey’s Inner Game of Tennis, one of the most popular, and in my opinion, valuable tools for improving your skills and performance.
Your work on the Inner Game is to raise your awareness of how your humanness affects your focus, what you learn, how you decide, and what you do (or don’t do).
Your work on the Inner Game is to raise your awareness of how your humanness affects your focus, what you learn, how you decide, and what you do (or don’t do).
In future posts, I will provide many examples as well as strategies for navigating and improving your performance as a wealth builder through your work on the Inner Game. In my own wealth journey, I became aware of many patterns driving my investing decisions. Here are a few of them:
“I promised my wife that I would help her get off the road so she could be home more.” (Fear or anxiety about not succeeding fast enough and therefore breaking a promise.)
“I’m a new investor, so I will be more successful if I have an experienced partner.” (Fear of making big mistakes. Reliance on perceived experts.)
“I have too much idle capital, and I need to get it working.” (Anxiety about finding deals to invest in. Money burning a hole in my pocket.)
There are dozens or hundreds of ways that your mind plays tricks that can lead to mistakes in strategy, decisions, and actions. Being ultra-rational and going only by the numbers is not enough or even the best way. That has its own vulnerabilities. Ask me how I know.
Seizing Your Power to Build Wealth
We build Wealth Building Capacity through the work in all three levels: Wealth Mechanics, Wealth Practices, and the Inner Game.
Savvy Wealth Tools is about the work we do in all three levels but with the focus on what YOU can do to improve yourself to grow your Wealth Building Capacity.