The Art of Financial Strategy

A recent podcast episode launched a great discussion on strategy. For many, myself included, the concept of “strategy” conveys complexity. Here’s my take on breaking down how strategy benefits our financial life.

Thanks to the 25k downloads so far on our podcastIf you have checked it out, we highly appreciate any and all reviews on iTunes, since that allows us to get our message across to more people.

Here’s that recent podcast episode by the way!

Okay, enough about the podcast…now for the real deal:

The Art of Financial Strategy

 

When it comes to strategy, I think of Sun Tzu’s The Art of War. To me, strategy means knowing myself, my environment, and of course, my opponent. Falling short on any of those three can easily spell doom. Understanding all three at once brings out the art.

Oddly enough, when I think of writing from a strategy perspective, I think of The War of Art by Steven Pressfield. This has been a highly constructive book in my life detailing how the, “process-is-the-product,” when it comes to working on a sustainable solution. In the book, the focus is on writing, but I believe all pursuits result in at least an appreciation of the process that takes us to the result.

The reason I bring up these two books is because the merger of them bring me to my personal topic: the art of financial strategy.

From one perspective, personal finance is a numbers game; interest, taxes, and compounding interest. These are all logical pursuits and they are equally as important.

Art is often the missing element.

The longer I pursue financial freedom, the more I believe this is an art more so than a science.

To believe we can be 100% logical in our pursuits is to ignore the countless years of biological programming we have in our bodies. Not only do we think differently based on our moods, but we can also spend more of our money depending on our environment. Of course, marketing guru’s are always working on ways to get people to spend more, or spend more often, but I digress.

The art of a financial strategy involves knowing ourselves. Not only our goals and ambitions, but also our weaknesses and shortcomings.

Understanding our environment means we need to identify what the next move will be. As my podcast co-host Grant described it, success is having a clear image of where you want to go and then building rungs on a ladder to get there.

The third step is knowing who the enemy is. For some of us, we might be our own worst enemies, so we have to be more creative with our budgets or how we spend our resources.

Automating savings is effective because we structurally miss the opportunity to be bad.

The last step is cultivating a love of the process. For me, I love to be over the iron board or over the kitchen stove. I’m tapped into a great audiobook and I’m in the zone. It feels awesome. I even get excited to do chores because I know I’ll learn some great things, save money, and of course, get my chores done. When it’s all said and done, I’m in a great mood and saved myself from spending money.

That’s my strategy and my approach to pursuing financial independence. I have a crystal clear vision of where I want to be a few years from now, and I’ve established clear milestones that get me from A to B then to C and eventually, to my final destination.

We’ve walked past the first logical steps and we’re appreciating the art more.

After all, avoiding real stupid mistakes caused by irrational judgement is one of the quickest ways to derail our path. Having a clear strategy that takes into account the emotional, as well as, the logical side of personal finance is what helps us to reach our destination sooner.

What is the art of your financial strategy?

-Matt

P.S. For our answer on the art of financial strategy, we refer back to our pursuit of transitioning from employee to investor at an earlier age. The final step is transitioning from investor to philanthropist. That pursuit embodies the art of why we are on this path to begin with.

11 comments… add one
  • The Grounded Engineer Feb 13, 2017, 6:14 am

    Having a strategy that you not only define, but that you check in on frequently is in my opinion the only way to execute goals that you are trying to accomplish.

    In today’s world of instant gratification, we all get tied up with work and what is going on in the media. We need to set aside time to review what is actually important: checking in with family, monitoring expenses, maintaining a healthy lifestyle, etc.

    • Distilled Dollar Feb 13, 2017, 11:55 am

      Checking in and monitoring is often overlooked. Luckily we live with a lot of online tools that can help keep track for us. Or you can copy my old school approach and still use paper and pencil at times! 🙂

  • Jay Feb 13, 2017, 7:13 am

    Very interesting perspective Matt, so thank you for sharing. I like your focus on the art of financial strategy. I think that’s an interesting approach and totally agree that we can’t sustainably ignore the findings of behavioural economics that indicate we are not as rational as we’d all like to pretend we are. Now I will need to reflect more on getting to know thyself and how it relates to my pursuit of financial freedom. Appreciate the food for thought!

    • Distilled Dollar Feb 13, 2017, 11:57 am

      The behavioral stuff fascinates me for plenty of reasons. It’s crazy to see from experience how it has impacted my decisions to save or invest.

  • Mrs. Picky Pincher Feb 13, 2017, 8:58 am

    Good point. Finances are largely based on logic, but they are also an art form when managed correctly. Everyone’s situation is different, so you’re the only person who’s most-qualified to plan your debt escape.

    Our financial strategy is 1) debt elimination (which is the longest and most painful part 2) wealth-building/investing 3) blessed early retirement. Ahhhhh.

  • Cody @ Dollar Habits Feb 14, 2017, 1:38 am

    Great perspective, Matt. I think you hit the nail on the head with needing to know ourselves. Like you said, we need to recognize our strengths and weakness and then craft our strategy around how we operate and what works best for us. For example, while it is most logical, from a numbers perspective, to pay off debts in order of which one has the highest interest rate, if you are someone who needs small wins to continue to be motivated, then it would be a better strategy to follow the debt snowball method and pay off the smallest debt first, regardless of the interest rate, since doing so would increase the overall chance for success.

    • Distilled Dollar Feb 14, 2017, 7:40 am

      Great point!! When I first started learning about personal finance in 2010, I couldn’t believe people were recommending the debt snowball approach. Now that I’m a bit older and hopefully wiser, I can clearly see why that approach DOES work.

      Whatever helps us stay consistent over the long term is what will win.

      • Cody @ Dollar Habits Feb 14, 2017, 12:05 pm

        I agree. I had trouble understanding why that approach was being recommended at first too. Now, I get it. It’s the same with a diet or fitness regimen. Out of all the choices and options to choose from, the best program is the one you will stick with.

  • Millennial Money Feb 16, 2017, 12:55 pm

    Thanks for the shout out! I agree that there is a lot more “art” to investing than most people realize. Sure there are the fundamentals, or the science of ideas like dollar cost averaging, or compounding interest, but the more subtle idea that the market is simply a reflection of PEOPLES attitudes/beliefs about a company, the art is in learning how to uncover and interpret people’s beliefs. The art of financial strategy also rests in true self-reflection, because to really manage your money optimally to maximize your happiness you need to ask yourself the more “art” type questions like… what do I really want? what gives me joy? and how can I maximize my happiness/enjoyment or others enjoyment with this money? Aligning your financial strategy to support your emotions, dreams, missions, and values is the “art” of financial strategy to me! Great post.

  • Rob @ Money Nomad Feb 23, 2017, 9:06 pm

    Automating my savings has been huge for my own financial growth — from a healthy 401(k) contribution to a few automated monthly deposits into Betterment and the like, automation works wonders. I also think buying a home (at a reasonable price) is a great way to grow your wealth. And it’s essentially another way to automate your wealth growth — as you’re paying rent to yourself into an valuable asset. Again, great post!

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