The internet is full of personal finance advice. Whether it’s TikTok, YouTube, or podcasts – everybody’s got an opinion on what you should do with your money. However, most of these gurus miss the most important rule of money.The internet is full of personal finance advice. Whether it’s TikTok, YouTube, or podcasts – everybody’s got an opinion on what you should do with your money. However, most of these gurus miss the most important rule of money.
This personal finance principle is simple, but it consistently separates the wealthy from the broke, the wise from the foolish, and the haves from the have nots. The rule is simple: personal finance is 90% behavioral. It’s not rocket science, actually it’s as simple as having the discipline to stick to a plan, but this one rule will have more impact on your financial future than anything else you could be doing.
What does it mean that personal finance is 90% behavioral, and how can you actually implement this rule? Here’s exactly what I mean: 90% of the effort and success of building wealth relies on your ability to control your own behavior. The remaining 10% is made up of your situation, knowledge, and natural abilities. You could know all the ins and outs of the stock market, retirement accounts, and how businesses work, but if you don’t have the discipline to put that knowledge into action it’s worthless.
Consider this example of Mike Tyson and Mark Cuban. Mike Tyson is undoubtedly one of the greatest boxers of all time. By the end of his extremely successful career, Tyson had made over $300 million – what most of us would consider beyond set for life. But by 2004 Mike Tyson had declared bankruptcy and was over $38 million in debt. Now think about Mark Cuban who bought the Dallas Mavericks in 2000, a struggling franchise with a poor winning record. Although he’s an intelligent guy, Cuban didn’t have a crazy business plan for turning around the Mavs. He took a desk, put it in the middle of the team’s sales office, and started calling. Mark Cuban printed a list of every former customer of the franchise and called one by one to encourage them to buy tickets. Plenty of rich people could’ve afforded to buy the Mavericks, but almost no one would’ve had the determination to call up customers one by one to get them to come back. These stories illustrate that financial success has little to do with whether or not you’re a pro athlete or have ingenious business strategy. Instead, it’s all about your behavior. It’s about using your resources the Cuban way and not the Tyson way.
What does it look like for you to focus more on the 90% and less on the 10%? One word: discipline. Discipline is the ability to consistently stick to a plan, even in adverse conditions where others would quit. Begin by developing long term goals you need financial stability to reach. Dream big and don’t limit yourself to goals that just seem ‘reasonable’. Then consider the changes you would need to make to accomplish those goals. Whether it’s spending less or finding creative ways to boost your income, behavior is the determining factor of whether you can reach these goals. I don’t think Mark Cuban enjoyed calling Mavericks fans one by one to get them to come to a game, but he understood that this disciplined behavior would result in great success in the future.
