The most often missed topic in most financial education programs is the psychology behind money. While it is important to understand the math and principles of money, behavior tends to have a larger impact on people’s success with their finances. You could devote a whole program to psychology and behavior alone. In my course I devote a whole module to psychology to ensure that people are setup for success when they apply all the principles of the program. One of the most important topics I touch on pertains to grit and resilience.
Grit and resilience may sound similar but they are different, albeit subtle. Grit is the passion and drive to see something through over the long term. When you set long term financial goals like retirement or home ownership, you need to find a way to maintain that plan over the years. Many of the people I work with run out of steam at some point and revert back to old spending habits, jeopardizing their goals they worked so hard to achieve. Building grit means finding ways to remember what your long goals will mean to you when you reach them. This helps sustain you when you are tempted to splurge on wants over needs.
Resilience is your ability to bounce back from a setback. I highly recommend having an emergency fund to handle those unexpected expenses that always seem to come up at the worst time. Many people struggle with saving enough for an emergency fund, and it can be completely deflating when an emergency pops up and drains what they saved. The common response is to give up thinking it is futile and that they will never get past saving their emergency fund. In these instances I try and remind them that the emergency fund did exactly what it was designed to do. Instead of taking on credit card debt, they were able to pay in full. While it is tough to see that money go, it helps reinforce all the hard work that went into building that emergency fund.
The book Grit by Angela Lee Duckworth does an amazing job outlining the importance of grit and longterm success, as well as strategies to improve your grit and resilience. The biggest fallacy I hear from people regarding grit and resilience is that people are worth with it. In reality it is more like a muscle that must be trained, and when it is ignored it will atrophy and become difficult. So if you find that your grit and resilience is not where you would like it to be, try intentionally putting yourself in situations where you can safely practice. Try setting a goal for the next few months, say walking for 30 minutes each day. By sticking to this walking program and overcoming the occasional hiccup, you will build this habit. The parts of your brain responsible for grit and resilience all process the same information. Sticking to a walking program will also increase your ability to stick to a financial plan.
