I have started reading 7 Habits of Highly Effective People (by Stephen R.Covey)….again. This time, slowly and intentionally, being sure to create parallels in my own life of which I can learn from. I am also taking the time to do all the exercises at the end of each chapter in order to really master the practical applications from the book. This book is of course, a habits book and although there is a lot of theory in this book, there is so much practical application that can be drawn from it. Chapter 1 alone, which focuses on the habit of being proactive takes 30 days to complete if you follow the exercises outlined in the book. I will be reading this book in piece meal for a few months as I internalize what I learned and turn them into habits.
As a way to encourage myself to re-emphasize what I am learning, implement parallels in my line for which I can apply the habit and remain accountable. I want to share how each habit affects how I view my life, especially my finances.
After the intro chapter on paradigm shift, which sets the stage for how to read this book, the first habit discussed by Covey is the habit of ‘being proactive’ or proactivity. Proactivity as outlined in the book is one’s ability to have control over their response to an environment instead of the environment dictating their response. Proactive people respond based on value-based decisions. Reactive people respond based on how their environment makes them feel.
The first three habits including proactivity are private victories. They take determination from within, a willingness to persevere and people around you may not notice any immediate changes when one implements proactivity (making them private victories).
If your goal is to increase your savings, reduce your debt or just get better at managing your finances, you’ve probably shown proactivity when you:
- Opted to pack a lunch and bring it to work when most of your colleagues go out for lunch every day
- Refused to go to the mall when you thought it might cause you to spend money
- Avoided the purchase of a major expenses (i.e. house, car etc.) without first asking yourself why do I want this? Can I afford it? Does it fit with my lifestyle and values?
These are just some examples of how proactivity can be reflected in personal finance (at least how I see it) and how these ‘small private victories’ will not win you praise in the immediate but are the building blocks of greater victories.
Over the next two weeks as I continue to practice the teachings in this chapter, I have decided to make a mental note of each time I decide to take a proactive approach on how I spend my money. In other words, anytime I spend my money in a way that aligns with my values and financial goals for this year, I can give myself a pat on the back for my mini victory
Listening to our Language
Proactive people are not only conscious of what they do in response to the environment, but also what they say to themselves both internally and how they express their situation to other people. Proactive people use life building words like “I can, I will, I control my”. They avoid life sucking words like “If only, I can’t, I/They won’t”.
We sabotage ourselves and our finances when we use the following phrases to describe our financial situation:
- I can’t seem to get out of debt
- I can’t save money, I am a natural spender. That’s just the way I am
- If only I had a higher income/less debt/more free time etc.
Okay, this is a tough one for most people including me. Some of our financial outcomes are a result of our own mistakes/successes and others occur outside of our control. However, the language we use to describe our situation (whether true or exaggerated) can greatly impact our circle of influence and our ability to solve the problem.
One of the ways my husband and I managed to remain proactive in paying off $120k of debt in 2.5 years is watching our language and the language of like-minded people, aka listening to podcasts on getting out of debt. I found it very encouraging to hear other people in my situation (or worse) get out of debt and regain control of their financial future.
My goal now is to reach $65,000 by the end of the year from our current $62,180 balance. Now you might say, saving $2,820 from September to December might be doable given our current momentum up to this point. You would be right, except 2017 was a year of both planned and unplanned expenses. With 4 months left, this amount seems a bit much right now. Some of the major expenses incurred:
- $500 in car repair. Given the age of our vehicle, that was actually not bad
- Our trip to the Bahamas. Even though we stayed with my sister, Bahamas is expensive and there currency is par with the US dollar. If you deal with exchange rates you know converting Canadian to US dollars was less than ideal at the beginning of this year
- Our trip to Ontario. City hopping between Ottawa, Toronto and Windsor in the 8 days was fun but not light on the wallet. We stayed with my sister in Toronto but in Ottawa and Windsor we lodged in hotels. With this intentional splurge in mind, we spent around $1,200 for 5 nights between Ottawa and Windsor.
- Finally, our trip to Tanzania coming up in December is what is causing my concern. All the expenses mentioned above we have already incurred so the $62k value accounts for these costs. This final international trip half way across the world in December is yet to be completed, along with our other financial goals and that makes me a bit uneasy. The average round trip flight is $1400-$1700 per person for economy, if you are lucky
I want to take a proactive approach in addressing both our year end savings goal and our trip in December. Some of the proactive words I plan on using include:
- I will have a savings of $65k by the end of the year
- I will work hard to increase my side hustle income to reach my goal
- I can cover my expenses for this trip and work towards reaching my savings goal
This will be tricky as I am well aware that some of these outcomes I cannot control. For example: increasing side hustle income enough to bridge gaps. I can try very hard, but this may not guarantee success. I also can’t determine the exact time to buy the cheapest flight to Tanzania. Of course, I have been using Google Flights to track prices and buy when I think would be affordably low, but with airlines, you never know.
Direct, Indirect and No Control
The last and final aspect of proactivity I want to discuss is the idea of control. When I read this section of the book, I couldn’t help but think of situations in my life where I might have misclassified whether my environment (or something that is happening/not happening to me) was something I had direct control, indirect control or no control over.
Stephen Covey talks about these 3 types of controls and how to address them as follows:
- Direct control: this is what we directly influence or problems involving our own behavior. These problems can be solved by working on the first 3 habits (the private victories)
- Indirect control: problems involving other people’s behavior. These problems are solved by changing our method of influence/approach which are outlined in the next 3 habits (the public victories)
- No control: problems we can do nothing about such as our past or situational realities. These problems can solved by being grateful, intentionally choosing to be happy and content (not complacent) in all circumstances
I mentioned in previous posts that I finished my first degree at the peak of the great recession aka housing crash of 2008-2009 (man I feel old just writing that). However, I am not alone, many millennial now in their early to mid-30’s had more than likely faced this same situation. That recession did change the economic landscape of much of the world including Canada and the United States. Even though we are coming out of the slump as a country re-visiting the emotions felt at the worst part of this time for many Canadians (including myself) changed the way we classified what was in and out of our control.
Yes, no one person and affect the economy, so a recession would fall under the ‘no control’ part of our thinking and behaving. How we choose to behave despite the recession (how creative and willing we are to take risk to find gainful employment) we have direct control over. We may even have indirect control by the way we engage with others, our outlook on the future and how carry we ourselves.
If you have ever said or thought these things before, you may be misclassifying what you can and cannot control:
- I can never save money (direct control misclassified as no control)
- They will never give me a raise (indirect control misclassified as no control)
Without consciously thinking about it, the lines can be blurred of what we have control over and what we don’t and even though they may not be exact responses for every situation, if we are honest with ourselves, we can spot our misclassification.
Over the next 30 days, I want to be sure to properly classify moderate to major problems in my life accurately. If I can classify them correctly, I can respond to them correctly as well. Inaccurate classification can lead to inaction or wrong action.