Knowledge is the difference between really living and just existing. Existing is instinctual; living is the exercise of certain learned skills, attitudes, and abilities that you have acquired and honed to a sharp and focused edge.
—Phillip C. McGraw (“Dr. Phil”)
I don’t know the circumstance of your life, but I am going to make a few assumptions. Something prompted you to pick up this book, quite possibly a desire to improve or change the way you handle your money. Good. You’re still here, which means you know what the 7 Rules are. Even better. That tells me that you are motivated to apply this information to your life.
Any kind of life change should be approached as a challenge that calls for endurance and a survivor’s spirit. Again, I don’t know the circumstances of your financial life, but I do know something about what it takes to make permanent life changes. It is hard work. If it were easy, no one would be in debt, no one would struggle to spend less than they earn, and the world would be a much different place.
There is no elevator to the top when it comes to changing the way you manage money. It’s one step at a time. And if you are in a difficult financial situation, it’s going to be uphill for a while.
Endurance and Survival
I am totally fascinated by stories and documentaries that depict the remarkable will to endure and survive that we find in the animal kingdom.
Take the emperor penguins of Antarctica. Every year in autumn, they leave their cozy ocean habitat and take a journey that spans hundreds of miles, walking across a frozen continent to their inland breeding grounds. In a tortuous march that takes many months, these birds brave unspeakably brutal conditions to bring new life into the world.
I am no less amazed when I read accounts of pets who by some set of circumstances become separated from their human families. Many years and thousands of miles later, Fido or Fluffy turns up on the front porch. How do animals know the way, and how do they find the stamina and courage to survive in the face of such insurmountable obstacles?
There’s no doubt that many animals, fish and fowl alike, are endowed with supernatural survival skills. But they’ve got nothing on you.
You, too, have been created with a tremendous capacity for endurance and survival. But with one important addition: you can think. You have a human brain. You have the capacity to learn, reason, and make decisions. More than that, you can choose your thoughts. And by virtue of that, you have the power to change your life.
Knowledge or Entertainment?
You have just spent the better part of this book learning 7 essential rules for managing money. You’ve added to your knowledge bank. But so what?
Don’t get me wrong. Knowledge is a wonderful thing and I am thrilled that I might have imparted something of importance to you. But until what we learn moves us to action, it’s nothing more than entertainment. If you do not apply these rules to your life, you’ve wasted your time and money. And ended up with another book gathering dust on your bookshelf.
Please don’t let that happen. Don’t stop with the knowledge. Determine right now that you will turn these rules into tools; that you will move from knowledge to action.
Because you are still with me in chapter 11, you know the 7 Rules. The next question is: what will you do with them?
By applying each of the 7 Rules to your life by setting specific goals, you will activate them in your life.
7 Rules, 7 Tools
If there’s a lesson I’ve learned on my journey from debt to solvency it’s this: goals not written are but a dream. A dream is great, but it’s no financial plan. Dreams are flighty, fickle, and forgettable.
For your dreams to become reality, they have to become written goals. Write down your goals, make plans to achieve them, and then work on those plans every single day. This is where your human brain is going to come in handy because of what I just mentioned: you have the capacity to choose your thoughts.
You can choose to think about your goals every day or you can choose not to. Either is a clear-cut choice. When it comes to thoughts there is no neutral default point. Not thinking about your financial situation and not doing everything you can to change the course of your financial life is a conscious choice. Not a good one, in my opinion, but a choice nonetheless.
Write, Commit, Become Accountable
A Dominican University study offers enlightening data on the value of writing goals, as opposed to just thinking about them.[39] Participants in the scientific study were divided between those who wrote their goals, those who simply thought about them, and those who became accountable to a supportive friend for their progress.
The results bear out what I know to be true in my life: those participants who wrote their goals accomplished significantly more than those who did not write their goals. And those who wrote their goals and became accountable by sending weekly progress reports to a trusted friend accomplished the most.
Once you write a goal, no matter how simple it is, it takes on power of its own. You have something specific on which to focus. Your thoughts point to it like a laser beam, which leads to another powerful benefit of your human brain: you become what you think about most of the time.
By deciding what you want to achieve, writing it down, and then choosing to focus on it, you begin to move toward it. It’s an automatic response and one you can count on.
Here’s a nonfinancial-type goal that we’ll use as an example. Let’s say that you have decided to begin eating more healthfully. Your doctor has suggested you should do this and you’ve read studies on the health benefits of eating organic foods and avoiding preservatives. You’re convinced that it’s time to make a change. You purge the pantry, create healthy menus, and load up on the foods you are determined to eat from now on. And you create a simple journal on your computer.
First entry:
My Healthy Eating Goal. In 30 days I will drop 5 pounds by eating more healthfully. To do this I will cut out all soda, include 5 servings of fresh fruits and vegetables in my diet each day, and eliminate all refined sugar.
That is a reachable goal because it is clear, written, and specific. Its progress is measurable at any time by stepping on the scale.
Last, you make a conscious effort to focus on this goal by pledging to read it at least once daily and developing any thoughts you have or changes you need to make.
If your goal is written, reasonable, and measurable—and you choose to focus on it most of the time—I will make a bold prediction: you will achieve it.
Let’s say you are tempted to duck into the ice cream shop. Go ahead, but just be prepared for the loud megaphones that will go off in your head, pushing your goal right into your face, making you rethink what you’re about to do.
When you find yourself in a restaurant, menu in hand, about to order the deep fried apple pie, loud reminders will go off between your ears.
When you need to buy groceries, you’ll be duly prompted which aisles to visit. And if you swerve down the candy aisle and feel the need to stop, it won’t be guilt tapping on your shoulder. It’s your natural capacity to achieve goals that will suggest you should just keep going.
Setting goals, working toward them every day, and finally reaching them is the way to change your financial future. Your goals need not be huge. In fact, setting smaller goals makes sense. With shorter benchmarks, you’ll reach your goals more quickly, providing the boost you’ll need to set a new goal, or 12, until finally you’ve changed your life.
One Step at a Time
I love to knit. That is not to say that I am a fast knitter or even that good at it. It’s not the finished product that I find so enjoyable. It’s the process, the way it works. It’s the gentle rhythm, the pulling of one loop of yarn through another, over and over.
Curiously, knitting has only two stitches: knit and purl. That’s true for me and even the most advanced knitter on the face of the earth. Just two stitches. No matter if I go fast or slow, how intricate or ordinary the pattern, I can make only one stitch at a time and one stitch makes absolutely no visual difference whatsoever. That’s just the way it is with knitting.
Now and then I come to the last stitch, bind it off, and surprise even myself by what I’ve created. How did that happen? It’s remarkable that just one stitch at a time can bring such pleasing results.
As you begin to make changes in the ways you manage your money and take control of your future, don’t set yourself up for failure by making giant goals that are unreasonable and therefore unreachable.
The Rule Team
You could approach your overall money management plan one rule at a time, opting to master it, then move on to the next rule. But as I said earlier in the book, I do not recommend that. The 7 Rules work together. They are part of one whole. So if you choose to work on one rule at a time, placing the others in abeyance, things will fall out of balance. You could be setting yourself up for frustration.
A much better option, in my opinion, is to begin applying all of the rules to your life now.
Here are some examples for 7 Rules goals that fit the criteria that a goal needs to be written, reasonable, and measurable.
Rule 1: Spend Less Than You Earn
In the coming 30 days, I will widen the gap between my income and spending by cooking at home and limiting restaurant meals to once a month.
Rule 2: Save for the Future
I will set up an automatic deposit to move $200 from each of my two monthly paychecks into my online savings account, and will continue this until the account reaches $25,000.
Rule 3: Give Some Away
I will take $50 from each of my two monthly paychecks and place it in my Giving Account. I will give this money to meet others’ needs as I see those needs in my daily course of life. My intention is to bring this account down to $0 at least once every 60 days.
Rule 4: Anticipate Irregular Expenses
I will create a list of irregular expenses, then direct one-twelfth of the total into my special reserve account each month. I will continue to do this until I have accumulated enough to pay these expenses one year in advance.
Rule 5: Tell Your Money Where to Go
I will take control of where my money goes by creating a written Spending Plan that incorporates Rule 2 Saving, Rule 3 Giving, Rule 4 Reserves plus all of my regular expenses. Then I will track my spending throughout the month to measure it against my Spending Plan.
Rule 6: Manage Your Credit Rating
I will order at least one of my credit reports from AnnualCreditReport.com within the next 30 days, review it thoroughly, disputing any errors I find and following up to make sure my credit report contains only factual information.
Rule 7: Borrow Only What You Know You Can Repay
I will cease all use of credit cards while aggressively paying down my toxic credit card debt using (shameless plug alert) Mary Hunt’s Rapid Debt-Repayment Calculator and Manager at DebtProofLiving.com, a place I am going to learn more about in chapter 15.