I was a nerdy kid. In school, I genuinely enjoyed pretty much every subject–except for history.
History seemed so old, unrelatable and, well, boring. I could not get into it. Then, one summer, my parents and I visited my dad’s family in Indiana. On the way, we stopped at a historical marker, and I looked down at some old, rusty loop on the ground. “That’s a hitching post,” my dad said. “Abraham Lincoln was here. He might’ve tied his horse to that.” Something clicked. I thought, “Holy crap. That old guy I read about was HERE? In this same spot?”
It seemed surreal to me that Lincoln’s boots might have touched the same dirt now on the soles of my beat-up Reeboks. Suddenly, I understood why people found history fascinating. Reading about it, I felt nothing. But taking action–visiting and experiencing history–changed my entire perspective.
I think the same thing is true with personal finance. You can read about money management until your eyes bleed. But nothing will make you care about your money quite like action–even a tiny action.
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A while back, I interviewed Laura Levine, President of the Jump$tart Coalition, an organization dedicated to teaching financial literacy in schools. She told me that one challenge they face is deciding exactly who should teach financial literacy. Is it math? Is it psychology? She said:
“There isn’t a way to identify where all the finance teachers are. If you teach algebra, there’s very little debate that’s in the Math Department. But personal finance might be social studies or consumer science or business. There are a lot more variables.”
Personal finance is tricky. Financial literacy is obviously important, but action is what ultimately leads to making better choices with your money.
When you put a little more money toward your debt and start seeing that balance go down, you start to care. You begin to see that your actions are quite literally paying off, and that makes you feel in control. When you feel in control, you become engaged and empowered. When you feel empowered, you start coming up with financial goals and researching ways to make them happen. Then, before you know it, you’re a full-fledged money nerd.
It just takes one small step. There’s a name for this: Domino Theory. Here’s how one entrepreneur put it in an interview with the University of Colorado:
“Domino theory is a framework that helps people understand that no matter how big or small their hopes and dreams, they can accomplish them by seeing the world as a set of dominos. All it takes is one small strategic action to set big things in motion and align with the actions of others.”
Here are a few examples of “one small strategic action”:
• Call your credit card company and ask for a better interest rate.
• Find a cheaper cellphone plan.
• Cut back on your impulse spending, then use that extra money toward your student loan debt.
• Sign up for auto-pay with your student debt payment and get a discount on your interest.
• Enroll in your company’s 401(k) plan.
• Take on a side gig and earn some extra cash.
• Ask your boss for feedback in preparation for your raise.
I’m not saying the basics of money management aren’t worth learning. They are! We need them. However, personal finance is so much more than those basic rules. It’s more to do with behavior and action. “Spend less than you earn” is not exciting, engaging or encouraging. But seeing your debt slowly fade into nothing? That’s personal finance in action, and it makes all the difference.
Love the way you are championing the small actions! Very few of us can take large steps but baby steps are totally doable. As a personal financial nerd, concrete goals get my engines revving because I can easily track progress and then I can celebrate the little victories! It doesn’t matter if it is paying off debt, growing an account or saving a bundle at the grocery store. Just this week I did the happy dance because we were able to up our 401K contributions by 3%!
Nicely done! Yes, I agree–anything concrete and celebratable (new word I just made up) is key. It helps you actually see and experience the progress, and that makes you want to keep going.
So true! Small steps lead to big outcomes! Start today!
Yep. Ain’t nothing to it but to do it!
It’s all about taking that first step!
I think my first step towards doing more than just dumping our money into a savings account was opening up a CD. Now looking back I know that they’re not the smartest investments, but it was something that got the ball rolling for me. We now are fully funding our Roth IRAs, have a full emergency fund, cut out our whole life insurance, and moved my old 401k to a lower cost IRA. 🙂
And that’s only the tip of the iceberg! I know there’s even more to do to get even better with our money.
Getting the ball rolling…exactly right! One small step leads to great things.
Even small actions can lead to big results. My co-worker was struggling with saving and I kept encouraging him to open a 401K. I told him that he might not even notice the reduction in his paycheck because of the tax benefits. He opened the account and was pleasantly surprised at the balance. It’s great that it’s automated and you can kind of set it and forget it. And as for the cellphone plan, I just switched my entire family and we’re saving about $80 a month!
You’re a nice coworker! I bet he’s grateful. 🙂
Love the idea of domino theory. I think that’s kind of why Dave Ramsey’s system has such success, even though it’s not necessarily the best approach. But baby steps towards financial freedom work: and being effective is more important than being efficient.
Cool post!
Thanks, DBF! Well said. And yes, the concept of baby steps is pretty much the same thing. I think that’s why his methods work so well: they’re action-focused!
Small actions are so powerful because they can become bigger actions with enough momentum and diligence. In the beginning, getting over inertia can be very difficult but if all it takes is something small, especially if it results in a big gain (like calling the cable company), people are more likely to do it. Once you get that first win, that first domino, it’s easier to motivate yourself to keep going. Love this!
Totally–small actions with big gains are the best!
I think about starting and running a blog like a bunch of tiny actions. From responding to comments, to writing the next post. But over time, you can build a passive portfolio of content and leverage it to do great things!
There’s one company out there called Digit that rounds up money that is automatically saved into your checking out for you. It seems like it’s gaining some traction. Their concept is quite similar to your topic.
S
Oddly enough, I actually JUST did a review of Digit on YouTube. Yes, it carries out this concept really well!
Hi Kristin,
Have you ever been to the FIDM Scholarship Store in downtown at 919 S. Grand Ave? They have wedding dresses and lots of designer clothing at rock bottom prices. Some of the items have minor flaws and the sizes are limited but it’s worth checking out. I purchased a scrub jacket for my wife a few months ago for only $4.00 (sticker price was $39.99). There’s also a small men’s clothing section as well as jewelry, purses, makeup and shoes.
Haven’t heard of it! Sounds great though, I’ll definitely look into it. Thanks for the tip!
Hey Kristin, You really standout in this post. Great one.
Thanks, Stanley. Hope all is well!