David Bach (@AuthorDavidBach) joined James Altucher to talk about money, values, and which of those should lead the other. Bach is the author of a twelve books including; The Automatic Millionaire, Start Late Finish Rich, and Smart Couples Finish Rich. He joins James to talk about his current tour and his website is Finish Rich
Bach begins the interview with a story about a woman he met at an airport. “Your book helped free me,” she told Bach, “I felt trapped…everywhere I turned I felt trapped.” He opens with this story because it gets to the heart of the money issue – as he sees it. Your problems aren’t about your money. Your problems are about your values. Figure those out first and then figure out your money.
Bach advices values based financial planning. “I wasn’t living my values,” said a client, Bach recounts, “but when I started fixing my financials I started living my values.”
Here he touches on a counterintuitive point that some other podcast guests have mentioned too. Sometimes it’s easier to start with changes to our actions rather than our thoughts. Both A.J. Jacobs (episode #94) and Gretchen Rubin (episode #97) said that our thoughts can be hard to change. Our actions though, they are a bit more malleable and like the tail follows the dog, they will come along too.
This all works because our thoughts don’t like to be out of line. They are like the fringe member of a cliche. They just need to fit in. Rather than you’re wearing that, really?
The leader of his mental cliche is cognitive dissonance. This is the voice in our minds that keeps thoughts and actions in step. When we act like A but believe in B we have mental unease (cognitive dissonance). Either our thoughts or actions aren’t quite right. Because we can’t change what we did, so we have to change what we think.
A great historical example is when Benjamin Franklin wanted to borrow a book from an unfriendly peer. Franklin approached the man, told him how he admired the book and implied that anyone who would own such a book must have good taste. The man, slightly flattered, lent Franklin the book and the two became friends.
The psychological reasoning goes:
I don’t like him (thought) -> I lent my book to him (action) -> Why would I lend a book to someone I don’t like, maybe I like him (thought)
For our financial choices the reasoning might go like this:
I don’t like my financial life (thought) -> I change my finances to reflect my values (action) -> I must like the things I’m investing in and will pursue those (thought)
Remember, it’s not about the money, it’s what you do with the money that matters. Tim Ferriss (episode #109) says that “money is wampum.” It is the bridge that takes you from one place to the other. Sometimes you don’t need the bridge. Sometimes you take the long way, and sometimes that long way is even more fun.
That’s what Wayne Dyer (episode #6) did when he was selling his first book. After multiple rejections from the national television shows (who said that if he called one more time they would never put him on again) he had to figure out something else. He could buy advertising, but that would cost a lot of money. Or:
“There’s a second way, and it’s a lot more fun. You go to everyone in American.”
So, Dyer loaded his car up with books and began a cross country trip.
Kevin Kelly (episode #96) would applaud Dyer’s choice. For Kelly it goes beyond just not needing money, but seeing the value that the constraints of not having money. If you have money, Kelly reasons, you can often buy a solution. If you don’t have money, Kelly goes on, you have to create one yourself.
All of these ideas are fall under the advice umbrella to choose yourself. In his book that shares these ideas James writes:
“That’s when it clicked. When everything changed. When I realized that nobody else was going to do it for me. If I was going to thrive, to survive, I had to choose myself. In every way. The stakes have risen too high not to.”
It’s being selfish in the right way. Scott Adams echoes these thoughts:
“The most important form of selfishness involves spending time on your fitness, eating right, pursuing your career, and still spending quality time with your family and friends. If you neglect your health or your career, you slip into the second category— stupid— which is a short slide to becoming a burden on society.”
Find your values, and pursue them. That’s the essence.
But it’s hard to find your values, choose yourself, or be selfish in the right way because there are so many voices telling you otherwise. In the interview Bach guesses that we see “thousands” of advertisements a day. James guesses “50K.” According to CBS News it was 500 in 1970 and is up to 5,000 today. That’s about five a minute.
In addition to the advertisements, another problem is how you view money and how your spouse views money. Some of us are natural savers and some are natural spenders Bach says. Despite the differences they can – and must – work together. If you don’t work together, he says, you’ll face the number one cause of divorce, disagreements over money. There are two things to figure out:
- Don’t have a different view on what “small purchases” means. Make sure that you and your partner have the same expectations for what purchases you should talk about and what you don’t.
- Don’t let someone become disengaged. Often one person will handle the money and the other won’t know much of what’s going on. Have monthly (or bi-annual at the least) meetings to go over where you are financially.
If you can make it past the advertisement barrage and marriage money spats you are nearly home free. The final hurdle is when you retire. Bach says that your chances of death are highest the year you are born and the year you retire. “I saw multiple men die within six months of retiring,” Bach tells James. Part of it is their health goes on them, but I think there was something else. A job is part of an identity.
Both Seth Godin (episode #27) and Jason Calacanis (episode #77) bring up the emotional weight when they lost (Godin sold, Calacanis folded) their companies. It was the thing that they identified with most of all, and like a horcrux, it was painful to see it go.
On the health side, look no further than what Gretchen Rubin told James in her interview. “Start the way you want to continue,” advises Rubin. For her it meant getting up early on her first day at a new job, no matter what. If Rubin can do it before clerking for a supreme court justice, you can too.
Bach goes on to tell James that for some people the recession had positive outcomes. “The good thing about the recession,” Bach says, “was that it forced people to reboot their lives.” Being able to change and be flexible is like a superpower, and my guess is that people who were most flexible handled the situation best.
Sam Shank (episode #78) is a good example of flexibility. Shank arrived in Hollywood ready to “pay his dues” and then get a chance to show his creative skills. There was one small hurdle – he could “pay his dues” his entire career.
“I looked around,” Shank told James, “and there were people decades older than me at my level or one higher.” He saw the harsh landscape of Hollywood. It’s a pyramid of roles. There were precious few director, producer, and creative positions.
Shank left Hollywood films for technology websites. After building up a set of skills, he started a travel website that he sold. Then he ran another company. Now he runs Hotels Tonight. He reinvented.
Sam attached his work to an idea, not a position. Have a job that allows me to be in charge of something creative is more flexible than be a Hollywood director. Jack Canfield (episode #90) gave the same career advice. Don’t be attached to one thing, but find an general area to aim for with your career.
Bach has the same idea, but calls it values. “Find your values,” Bach tells James, “ and align with them.” You don’t have to be a near retiree to do this either. In his book ,The Secrets of Happy Families, Bruce Feiler writes about creating a family mission statement; “a central tenet of the family strengths movement, going back to the 1960s, has been a focus on what families should do and less on what they shouldn’t do.” Bring focus, whether it’s to your finances, family, or faith.
Another piece of advice Bach has is to cut out your daily latte. The daily latte. It’s the scapegoat of regular purchases. Bach mentions it, but says that when he goes into people’s homes for makeover he sees so much more. Cable, subscriptions, lots of stuff.
Wait, wait, wait. What’s that sound. Oh my. It’s Ramit Sethi storming in.
When Bach mentioned the financial foolery of a Latte, I knew that would lead to Ramit Sethi (episode #36). For Sethi (and I think for James based on his comments) it’s not about cutting out the latte. It’s about increasing the money you get from it. As James mentioned in the interview, you can only cut so much. Stop buying lattes and you save $4 a day. Instead, think about making more, which has an unbounded upside.
Gretchen Rubin might chime in to echo Sethi’s advice, don’t strip everything away. Rubin saw this when she was studying why people wanted to get in the habit of going to bed earlier, but couldn’t. As one interviewee told her, “if I go to bed earlier then I have no time for myself and feel like the firm owns me.”
This opposition, no latte but more money vs. one latte but less money, is something you need to figure out on your own. Don’t take any advice here as gospel. Everything must be tested. Self experimentation is how you figure things out in life. A.J. Jacobs and Jim Norton (episode #31) are two good examples.
That said, if you want a starting point for testing something, the Big Ideas are a good place to start.
The middle of the interview is mostly about becoming an “intrapreneur” and beyond what James and Bach say, Mark Ford (episode #102) encouraged this too.
The pair also touch on what it takes to reinvent yourself. Bach said that a decade ago there used to be many publishing jobs in NYC that paid 350K. Now there are none, and all of those employees are fighting to work for 175K. This seems bad, but maybe not as much as we think. Bach says that he’s seen people who are forced to reinvent their lives and face some of the most exciting work they’ve ever experienced.
There’s actually an entire book of these stories – The Up Side of Down – where Megan Mcardle shares many stories about good outcomes that come from bad events. What did the the Hawaiian prison system do when they had too many inmates? What did a married woman do when her husband left her? Why do companies, behind closed doors, admit that 2009 was helpful? These bad events all end positively because – in Wayne Dyer’s words – they’re all “enlightenment through suffering.”
The interview ends with three valuable points.
- If you don’t know what your values are, try writing in a journal. Meditation is also good.
- The most effective way to get rich says Bach, “is to pay yourself first.” Here’s a Quora question with other answers.
- Don’t forget to give back. Bach says that he’s seen people give back well before they were financially wealthy because it brought them a spiritual and emotional wealth. Giving is good, just see what Adam Grant (episode #73) had to say how.
Thanks for reading. I’m @MikeDariano if you want to connect on Twitter.
One of the big ways to improve – “to reinvent” as Bach might say – is to read. It’s listed over and over on the podcast and if you want to do it together, you sign up here. In July we are reading Influence by Robert Cialdini. It’s a book both James Altucher and Ramit Sethi highly recommend.
Unlike the first book club we did, there will be no regularly scheduled emails from me, just big ideas for us to talk about. The first round was like a classroom where I was the teacher. This round is more like meeting over coffee to talk. These by the way, are always free.
One final favor. I’m writing a book that ties up the ideas on this blog into a nice bow. If you could help me give it a title (2 survey questions here) I’ll send you the e-book for free.