The Financial Freedom Mindset: What I’ve Learned from Stoics

Tatiana Hart/ July 29, 2018/ MINDSET/ 7 comments

Emotional Intelligence, Financial Freedom, and Wealth

Financial freedom and wealth stem from emotional intelligence and from our ability to understand the difference between categories that add value to our life  and those that limit our financial safety net. 

First of all, let us invert the famous saying “Money doesn’t buy happiness”.

Happiness brings money. How so?

Well, when we are happy we tend not to waste our energy and money on things that do not add value and ruin our financial peace. 

There is a huge difference between buying expensive things when you can afford it and buying expensive things to prove your self-worth.

Notice that self-worth is a perception and does not equal net-worth, a tangible number that denotes the value of all assets that belong to a person.

You cannot make  your shoe collection produce cash flow unless you rent it out.  Don’t try the latter.

I will not “invest” in eighty pairs of shoes in the first place because that bring negative returns similar to those of cars. Shoes and clothes are not the only categories that can syphon your money. You can overspend on a car collection.

If you have enough cash, of course, it is not a problem. But setting having a car collection a lifetime goal, will not make you wealthy.

Besides, a fleet of vehicles with vertically rotating doors do not theoretically make you better, if it is all you have. 

A lot of times things we think would make us happy do not, at least not long enough for us to notice the state of happiness. Spending money on things expecting to gauge self-worth does not make us wealthier.

Any time you say “I deserve it” but you do not have cash for it, your net worth is departing farther from your self-worth.

Next, you get into debt to prove your self-worth. And then, you lose your freedom because of the perpetual need to artificially sustain your self-worth by way of borrowing more money.

Overtime, debt becomes more expensive and your net worth tests negative levels.

How to Reconcile Self-Worth and Net-Worth

How do we ensure our self-worth does not interfere with our net worth?  How do we prevent our ego from robbing us from financial freedom  and wealth?

By being present and understanding how you feel and what truly makes you happy. The first condition of happiness is health: you feel good, you look good (sorry, not vice versa, the inverse is outrageously clever marketing).

Good health requires discipline and daily practice because it does not depend on some crazy diet.

Good health factors in many aspects such as a good environment, sleep, mindfulness, low stress, strong relationships with loved ones and friends and so forth.

Good health, and consequently happiness, depends on self-care which does not require a lot of money.

Self-care, as the term implies,  only requires time spent on you. It can be a walk in nature, meditation on the beach, yoga, mindful breathing, or just cooking from scratch.

None of the above self-care and happiness strategies affect your net worth negatively and cost you anything.

A Lesson from Stoics

The wealthiest man in Rome practiced stoicism. Marcus Aurelius, a roman emperor, knew that he could only succeed and overcome obstacles through being honest about his limitations and willing to break outside his comfort zone.

The philosophy of stoicism enabled him to do it and to remain the wealthiest man in Rome.

Stoics, including Marcus Aurelius, practiced mental toughness in order to overcome obstacles and attain goals.

They intentionally put themselves in atypical states or situations.

For instance, they would lead a life of a homeless for a week, or of a disabled person, to experience the worst case scenario.

Put a blindfold around the eyes and walk around with it. For that you have to activate your other senses to compensate for the temporary inability to see.

When the blindfold comes off, you get to appreciate your sight because it simplifies movement and other tasks.

You also gain an ability to overcome a lot of “obstacles” that fail in comparison to the inability to see.

How to Apply Stoicism to Achieve Financial Freedom  and Wealth

But how can stoicism help us become wealthy?

Remember the simple formula to wealth: Spend less than you earn and invest the difference. Well, it is easier said than done to many because it requires discipline, focus and massive determination.

You have to experience a degree of pain to get a burning desire to change things in your life.

Also, you have to figure out to be truly happy so you do not have to compensate your self-worth with buying stuff you cannot afford.

You cannot afford when you:

  1. Do not have cash to buy it;
  2. You cannot have cash to buy five of the items. It is a rule of thumb, not a law, but you must understand that you should not spend your last $100 on  an item even if you have the hundred dollars in cash.

Rental real estate may be the only exception when you should leverage debt at least in the beginning.

You can pay off the acquired rental units overtime and cashflow the new ones as you grow you real estate portfolio.

The two cash rules apply to the acquisition of liabilities, items or entities that do not generate cash flow such as shoes, cars, residences, boats.

When you contemplate next time about buying a new boat, ask yourself whether it would add value to your life and whether it would not infringe your financial freedom.

A lot of times the old boat can be restored to a like-new condition and you will be still financially free.

Financial Freedom

The Shawshank Redemption

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