Money Buddies: Don’t Go It Alone with Your Wallet

Welcome everyone to the near and Far Podcast with me as always is Nick Gray, a great friend author of the two Hour Cocktail Party which if you haven't read what the heck are you doing? Get Nick's book. It is awesome. It will tell you exactly how to have the social engagement of your dreams. Nick has done such a great job with this book. Everyone needs to read this book. It is fantastic two hour cocktail party. So check that out. So Nick is here with me today as always to read through one of my blog posts on near far.com and and this one is called Money Buddies. Don't go it alone with your wallet. So Nick take it away.

I can't wait to read this article. So now more than ever, we have to be smart with our money. Consumer prices at one point increased 9.1% from June 2021 to 2022, and financial experts are wary of an economic recession. Yet, navigating our personal finances and adhering to a budget can be a daunting task. However, there's a free and fun technique that anyone can use to get back on track with their finances. Get in a Money Buddy the ancient practice of money Management Many cultures rely on their community to build wealth. South Korea's Gae Don and African and Caribbean cultures Susu both involve a community pooling its cash together and and bestowing all of it onto one person in the community. The social accountability among the community helps members commit to saving money for the pot and holds everyone to their agreement to contribute. Ideally, when the beneficiary of the money pot uses it to invest in a successful business or other venture, that person has more to add to the pot for the next person. However, you don't have to travel to Africa or even add your money into a community pot, but you can similarly take advantage of an accountability partner to manage your finances. A person is 65% likely to complete a goal if they have an accountability partner, says the association of Financial Counseling and Planning Education. That Probability increases to 95% if the pair commits to specific accountability appointments together. Why? Well, researchers are still trying to figure out why the act of pre commitment is so effective. But basically, a pre commitment pact is a time honored tactic that involves removing a future choice in order to overcome impulsivity. Chipping away at debt or accruing wealth means you have to save money consistently, but most people have trouble sticking to consistent action. That's where an accountability partner comes in. A money buddy helps us do what we say we are going to do, supporting us on the path toward a goal and ensuring we don't quit, even if it's just a pinky promise. By making an accountability pact with a money buddy, we install a firewall against us doing something we'll later regret near. Can I take a pause and just talk? Because we're going to go into the two kinds of packs that you can make with a money buddy. I just want to say I feel like I need this and this is hitting me at the right time. Can you just share why you wanted to write this article now or what you were thinking about just kind of your thinking on it now?

Sure. Actually. So you're a big inspiration for this article because you and I have this pact to record these podcast episodes. So I always wanted to have a way for people who prefer to listen to my articles to have a way to do that. Kind of like short little mini audio books. But I hate recording my podcasts. I don't like just reading the article one because I spend so much time writing the article. So to read it for another time is. Is a drag. And I happen to be dyslexic and so whenever I read out loud, I stumble and I'm very self conscious over it. So I don't, I don't like reading my articles out loud. So I hired a voice actor to do it and he was very good, but the, it wasn't really the right personality. There wasn't enough color in terms of like, you know, the, the other commentary around the articles. And so I, I asked you if you would be my buddy in terms of podcasting together, and you so graciously agreed. We've been doing these episodes now for months and months. And it's amazing how when we have that pact with each other to show up when we say we will because, you know, Nick's going to be waiting for me and there's going to be waiting for me. And so when, when we have that pact made in advance, we don't miss them. We keep doing it time and time again and it actually turned something that was really a drag right for me having to record these podcasts on my own and just read my articles, something I just really didn't want to do. And I kept procrastinating on it. Well, you know, signing up for a time with Nick now, we don't miss it because I look forward to seeing you and we've got that accountability that if I don't show up, well, that, that looks bad on me. I don't want to let you down. And so this is something that we can apply to all various areas of our life. And so I thought, you know, what's something that people struggle with in their day to day lives? Well, you know, making sure that their personal finances are in order would be a great example of how we can use money buddies to help us accomplish our goals.

I love that I'm going to continue reading on to your article because you're saying next There are two kinds of packs you can make with a money Buddy. A price pact inflicts some kind of monetary disincentive to doing something that's detrimental to your financial goals. You and your money buddy might agree, for instance, that for every dollar spent over budget, you have to pay them triple the amount. That will make you extra careful about keeping your spending in check. An effort pack involves some kind of friction between you and any actions that might take you off track of your financial plan. Perhaps before every extraneous purchase outside of an approved list, you have to create PowerPoint slides and schedule a time to give a presentation to your money buddy about why the purchase should be permitted. Only a justified purchase is going to motivate you to jump over that obstacle. You can see how powerful an accountability partner can be. But who should you choose as your Money buddy? Your ideal Money Buddy is an ideal Money buddy is someone who doesn't judge you, but holds you accountable to the financial goals you set for yourself. More often than not, your best money buddy is a family member or romantic partner who shares a stake in your financial goals. Maybe it's a friend who knows about different aspects of finance than you do, or someone with similar financial goals who can join you for budget friendly activities. No, your money buddy doesn't have to know every detail of your finances. Still, you should feel comfortable discussing your financial plan and the internal and external triggers that hold you back from financial traction. Traction is the opposite of distraction. Traction is any action that moves us closer to our goals and the life we want. We can achieve that life when our time, money and attention work toward our goals. But internal and external triggers can pull us toward distraction rather than traction. Near could you just talk for just a second about traction and distraction? Because as a new student of your methods, I've obviously heard of distraction, but just the concept of traction is new to me. Maybe you could talk about it in the context of money here.

Absolutely. So when it comes to what what is the opposite of distraction? People think it's focus, but that's not exactly true. Focus is a subset of this greater set of of actions we can take, which is actions of traction versus actions of distraction. So traction and distraction come from the same Latin root, trahare, which means to pull. And you'll notice that both words end in the same six letters. A, C, T, I, O, n. That spells action, reminding us that distraction is something that happens to. That something is an action that we take to, not something that happens to us. It is an action that we ourselves take. So traction is any action that pulls you towards what you say you're going to do, things that you do with intent, things that move you closer to your values and help you become the kind of person you want to become. The opposite of traction, of course, is distraction. Distraction is any action that pulls you further away from what you said you were going to do, further away from your goals, further away from becoming the kind of person you want to become. So we can talk about this in terms of all kinds of distraction. If distraction is simply something that you did not intend to do, something that pulled you away from your values, well, that can be, you know, checking email when you plan to work on a big project. It could be, you know, watching television when you want to be with your family. It could be hanging out on the couch as opposed to going to the gym. It could be spending your money one way when you said you were going to save it or do something else with that money in another way. So the idea here is not that we're going to try and moralize or medicalize certain decisions in terms of how you spend your time, your attention, or your money. The idea is that anything that you decide to do with intent, anything that is premeditated, that you say well in advance, this is how I will spend my time, my money, my attention is fine. It's traction. Enjoy it. There's no guilt about how you spend your time, attention, and money. It's fine as long as you decide in advance how you will do that according to your values and your schedule and your budget, not someone else's. So that's what turns distraction into traction, is being thoughtful is about. Is about making sure that you decide in advance how you will spend that resource.

Internal triggers, then, are uncomfortable emotional states. Feeling bored, lonesome, stressed, anxious, or uncertain that we try to escape by seeking relief in distraction. Sometimes that relief is a financial decision will later regret, like making an impulse buy or abandoning an investment in the market. When you feel fearful by taking out your internal triggers with an accountability partner, you're much more likely to explore them with curiosity rather than contempt, because a friend will make sure you're not overly hard on yourself or acting emotionally instead of rationally. Their acceptance invites honesty and self exploration, which will help you to better understand and control the internal triggers that lead to distractions with financial repercussions. Money buddies also help you handle the external triggers and that distract you from your financial goals. Perhaps you're swamped with daily emails about shopping deals, highly attentive to your phone's notifications about the ups and downs of the stock market, or working in a profession in which your peers expect you to spend money lavishly. A money buddy can help you find ways to mitigate those external triggers, but only if you feel comfortable talking about them. Do you want to talk about this for a second? You mentioned above, when you pick a money buddy near, you don't have to tell them everything about how much you own or make or things like that, right?

Absolutely not. It's really about how, how you can have this external accountability buddy to not only hold you accountable, but also to help hold them accountable. We know that one of the best things you could do that when you have an identity as a certain type of person, someone who is saving towards one of their goals, someone who has the values of around a certain objective, having someone that, that you hold accountable as well can be extremely helpful for your self image, right? If you're preaching a certain way of living and then you're being a hypocrite and living differently, well that, that creates cognitive dissonance, right? So we become much more likely to do what we say we're going to do when we actually help someone else accomplish their goals as well. That account for the the same type of philosophy. So yeah, you, you can share as much as you're comfortable with as long as there's some type of of concrete a goal that you're looking to achieve that that buddy can help you stay on track.

Well, let's talk about the most effective way establish a plan with built in accountability. By the way, if you're just tuning in or you're listening now, welcome to near and Far. This is Near Al's podcast. This is a little sponsor message for Near's newsletter. If you're not subscribed yet to get business tips productivity advice, you got to sign up for his free newsletter on LinkedIn. Just click that subscribe button. Or if you're on the website go to near and far.com that's n I r and far f a r dot com check out the free newsletter. It's got actionable tips that you can use today. Next section of the article Establish a plan with built in accountability the most effective way to use a money buddy is to build a financial plan that includes them. Once you establish a plan and make an accountability pact, follow through by setting up regular check ins. To create a financial plan that works for you, base it on your values and intentions. Values are attributes of the person you want to become. It's not up to anyone else to tell you how to manage your money. Instead, ask yourself, how do I spend my money in a way that's consistent with my values? Break down this question by categorizing your life and values into three domains you, your relationships and your work. Making a plan for traction in these life domains can keep you committed on your path toward financial freedom. You you can't take care of others if you don't take care of yourself. Making a budget for your well being is critical, whether that involves a gym membership, proper nutrition, proper healthcare or a robust retirement account. Your relationships Budget not only the time but also the money to invest in your most important relationships through date nights, fun activities with your kids, evenings out with friends, or donations to your community. Your work Work is our source of income, but it can also be an area to invest for future returns. Do you want to put money into learning a new skill, getting a performance coach, or refreshing your resume? There's a diagram on Near's website that says Life domains and it has three circles about work relationships and you Next use time boxing to schedule when you and your money buddy will meet. During those meetings, review your progress toward your goals. Discuss obstacles like internal and external triggers and research and collaborate on what you could be doing to financially fulfill your values. Having a money buddy will remove some of the discomfort you might feel in trying to navigate your personal finance. Just make sure you heed those packs. For more information on how to build an indistractable financial life, check out nir's Financial Habits course at Stashaway Academy. You can sign up for that or check it out at StashAway SG forward slash academy. Near what else about this article? Anything else we should know?

Well, I'm actually super curious. You said that this was very timely for you. I'm super curious what you're struggling with and how we might be able to put this to work for you.

Oh my Lord. All right, I'm gonna. I'm gonna lay it out there. I am a very risky investor. I have a high risk threshold and I primarily invest in stocks in the US High tech stock market and as interest rates have been adjusted, the valuations of businesses have Greatly come down the. This is a long, complicated way to say near that I am just bleeding money and all my investments and I find myself buying stocks, whether it's specific stocks mostly, or an index fund and the market tanks and it's. I'm just burning money. I'm just burning money, it feels like. And so that is why I feel like maybe I need a money buddy right now more than ever. Like you said, during this time of potential recession, financial uncertainty, market turmoil. Maybe now is when I need a peer group and investor group like this to just help be a second guess.

Yeah, absolutely. I think it's you, you bring up a really good point. Because I, I think some people would look at that and say, that's wrong. You shouldn't invest that way. Just like some people say, oh, you shouldn't buy this or that, that's frivolity. Or you shouldn't spend your time and attention doing this or that, because that's, that's a silly thing to do. You should spend your money the way I spend my money. But that's, of course, that's very egotistical because then that supposes that the way you spend your money, your time, your attention is somehow the right way. And that can't be the right measure. The right measure needs to be, are you spending your way, your time, money and attention in a way that you will not regret? In a way that you look back and say, look, this is what I did based on the best information I had, according to my values, here's what I want to do. And of course, you know, the future is uncertain. You may be a genius and investing in absolutely the right way or, you know, there might be bumps in the road that, that, that have a downside risk. Now that's, that's what investing is all about, right? It always involves risk in order to get reward. You can't control that. There's. You have no control over what the markets will do. The only thing you can control is what you, what decision you want to execute. So if we sit down together and you say, hey, I want to invest in X, Y, Z, I know there could be financial risk. How do I make sure that I follow through with this plan, right? Whatever that plan might be, as long as it's done with intent, your money buddy should be there to maybe bounce ideas off of before you implement the plan. But the real purpose of the money buddy is to help you stick with whatever it is you say you want to do, right? So that you want to have those conditions in place that says, hey, look, I'm not going to bail on these companies because I think they're great companies, and even if they fall 50%, fine. But if they fall 75%, well, then maybe I'll do something. That's the kind of thing that a money buddy could really help you with. It's not, you know, not necessarily to give you genius advice. The quite the opposite. It's to help you stick with whatever plan you want to put in place.

I like that idea. And that idea of saying one thing I've been thinking of is at what price would I sell? What would have to happen for me to admit defeat? And that is a hard part. That's a hard thing, I think, to think about sometime. But the volatility is certainly something. Oh, my gosh. I remember my neighbors during COVID when markets were just tanking. My neighbors were near their retirement age, and they're just saying, we gotta get out, we gotta get out. Acting very emotionally. And I remember that that sometimes can be the purpose of a financial advisor or in this case, a money buddy who can help be somebody to ward you or help you think through those emotional triggers. Is that the phrase you use? Emotional triggers?

Exactly. Internal triggers. Right. Because that's exactly it. The idea here is not that any particular decision is good, bad, or ugly. The idea here is that you don't want to make those decisions emotionally. You don't want to do them because you've lost, you know, that you've lost your head. You're not acting rationally, that you're acting emotionally. That's when it's a problem, when you can cool down and say, okay, let me give this a bit of space. Let me talk this out with somebody so that I can make sure I'm being consistent with whatever it is I said I was going to do in advance. So you're exactly right. Like, you know, the problem with selling out of the markets is that you also have to make another decision about when you're going to sell back in or buy back into the markets. So you have to have that decided in advance. Some kind of system that you're going to follow. And I think, you know, this isn't, you know, I'm not an expert in financial planning, but I think we do find that people who make a plan and stick to it, even if it's not a perfect plan, do much better than the people who just act emotionally. Right. And when the market's high, what do they tend to do? They buy more. Right. When the stocks are going up, they buy more. But of course that's when stocks are expensive. And then of course when, when stocks crash, that's when they sell. Most people sell, sell, sell, get me out of the market. But of course that's when stocks are cheapest. That's when you should be buying. So most people do the exact opposite of what you should do from a, from a a net worth growth strategy because they're bound to their emotions as opposed to planning in advance and saying here's what I'm going to do. I know markets go up, I know markets go down. Here's what I'm going to do in advance.

Here's exactly right. And I have to look as my job to reading I was just thinking, by the way, near, that I love reading these articles because I get to sound smart. But I'm just reading what you write. I'm just reading what you're writing. And so like I get to talk and it's all your words. So it's really nice. I do have to be the legal person to say this is not financial advice. Near and I do not represent financial accountability. And near is helping you think through your own psychology. Please don't take this for financial advice. Make your own investing decisions. But I got to give a plug. Near Al is the best selling author of Hooked how to build habit forming Products. He's also the author of Indistractable how to control your attention and choose your Life and He blogs@nearandfar.com with this weekly newsletter that I mentioned that's filled with science backed strategies for designing healthy habits that your customers will love. Now look, there are one of two things that we need you to do and it's in exchange for listening this podcast. Number one, if you didn't subscribe to the newsletter, please subscribe to the newsletter. Number two, if you already subscribed, submit a question to us for the upcoming Ask Me Anything episode where near will answer any of your questions. From late night snacking to ill investment decisions to these are two things that hit close to home for us and we will talk to you about it. Near will answer your questions.

So yeah, so we've got a few questions around. How do you pick a money buddy? David is asking this video. Vivian is asking this and thank you all for for being here and asking these great questions. So I'll go back to the article and maybe kind of reread some of this. An ideal money buddy is someone who doesn't judge you but holds you accountable to the financial goals you set for yourself. More often than not, your money buddy can be a family member or romantic partner who shares a stake in your financial goals. Maybe it's a friend who knows about different aspects of finances than you do or someone with similar financial goals who you can join for a budget friend. You can join for budget friendly activities. So, you know, the ideal money buddy doesn't have to be somebody who's, you know, a financial professor, professional. You don't have to pay them. You know, that's not a bad strategy per se. But if maybe it's somebody who's just going through similar circumstances as you are even. You know what? I think one of the best first steps you can take with your money buddy is to educate yourselves together, right? We all have all these books on our shelves and we say, oh, yeah, I'll get to that at some point. But if you. The first step you can take with your money buddy is to pick a financial book. There's so many great personal finance books. I remember reading a book called Get a Financial Life. Get a Financial Life. It's a wonderful book. It's specifically written for people in their 20s and 30s. Another great book for our mutual friend, Ramit Sethi. I will teach you to be rich. Another great book. If you find that money buddy who's in a similar life situation as you are, and you say, hey, look, you know what? Let's take a month and both read this together. We're going to meet once a week and discuss what we read. That's a wonderful first step because now you're kind of setting the stage. You have the same vocabulary that you can use when discussing these topics. And then ask yourself, how can we hold each other accountable? Whether it's your spending and you want to hold each other accountable for budgeting, whether it's around before you make a big impulse purchase, you're always going to run it by your money buddy so that you can make sure that you stay on track. Whether it's about investing in the markets and you want to make sure that you do so in a disciplined fashion as opposed to an emotional fashion. These are all things that your money buddy can help you with. So it's not as much about who that that money buddy is. Of course, it's someone you trust. It's someone that you enjoy spending time with and that you can get a bit vulnerable with. But you don't have to tell them everything about your personal finances. You might just say, hey, here's what I need help with. Here's what I'm struggling with. Where I get distracted from my money decisions and where I might need your help to hold me accountable and vice versa.

Oh, I like that. Near. Somebody else had a question. Ayushi Bendari. She said, how do we make sure our money buddy is not making decisions emotionally or rather just to make us feel good?

Well, I'm not, I'm not exactly sure what that question means in terms of their acting emotionally, in terms of their decisions or making what is making us feel good, you think mean?

My guess is that the money buddy, they're wondering how do I know I've picked the right money buddy who is not affirming my, my emotional internal triggers when I'm saying oh, I need to sell. And the money by says, yeah, you do need to sell, in fact, as one example.

So I would say that the, the. Okay, so there's a bit of a psychological trick here that we think that the, the purpose of the money buddy is to tell us what to do. And that's not exactly right that it almost doesn't matter what your money buddy says. The real trick here, the real reason that an accountability partner is so effective is that it forces you to articulate in advance what you want. And that's 80% of the benefit. 80% of the benefit is just an exercise to get you to say out loud what it is you want in all aspects of life, right? I was sitting with a buddy of mine yesterday who's having a lot of romance troubles, right? His he just broke up with his long term girlfriend and he's very depressed and he's having a lot of trouble finding his a partner and he really wants to build a family someday. And I asked him, you know, did you ever sit down and write down what you want in a relationship? I'll tell you a quick anecdote. I have a buddy in New York who did this amazing thing. So he was single up until fairly recently. And one day he decides, you know what? I'm going to write down what I want in a relationship. And he sits down, he opens up Apple notes and he types out what he wants, right? I want to have a family of at least three children. Here's what I enjoy. I want to have dinner parties. I don't really like watching sports, but I like doing this, I like theater, I like this, I like that. I, I want a partner who values these things. And he writes, you know, maybe 500 words on the kind of partner that he would like to find. And then he starts dating like crazy. He starts going on dates as much as Possible. You know, he uses all the. The usual suspect apps to find potential partners to. To go on dates with. And he sits down with them as soon as he sits, you know, for, for a date, and he hands them their phone and says, look, before we start our date, do you mind just taking a quick second to read this, this document around what I'm looking for? They read through it, and he said about 50% of the time, the. The woman across the table would say, you know what? I don't think this is a match. No problem. Great to meet you, Have a great night. Date's over. But about 50% of the time you say, oh, yeah, that actually sounds pretty good. Within one month, he found his future wife. They're now married, right? Because he was very clear about what he was looking for. Now check out how he found his wife. One day he goes on this date and he does his regular, you know, procedure of here's, here's what I'm looking for. Can you take a quick minute to read this? And she says, absolutely. And while I'm doing that, could you read this? And she hands him a similar document that she had prepared around what she was looking for in a partner. So that's really the idea here is in. In aspects of our life, you know, so much of what we like, of what we want in life, we just expect to happen, right? We just dream it and expect one day it's going to appear. But the power of sitting down and asking yourself, what do I really want when it comes to personal finance? What do I really want when it comes to my career? What do I really want in terms of my relationships? What do I really want in terms of how I spend my time? That's what time boxing is all about. As I describe it, indistractable. That's an incredible practice. So really, the benefit of having a money buddy is not that you're going to have a drill sergeant that says you need to do this, that, and the other. It's about, what do you want? Articulating that, putting that down on paper, and just that process of regularly reviewing it and having that accountability partner to help you review what you yourself want. That's where the magic happens.

What an inspiring story of aligning with your goals. And I think you talk about this a lot, your values, and knowing what your values are and getting them to show up, whether it's through time, boxing, finding a money buddy, or even a dating buddy to hold yourself accountable.

Exactly. That's right. You know, they say that if you want to know what someone's values are. You don't listen to the words coming out of their mouth. You look at two things. You look at how they spend their money and how they spend their time. That is truly how we express our values, how we spend our time, how we spend our money.

So I also liked what you said, that finding a money buddy 80% of the value comes in writing it down for yourself, in thinking through your own values. And so what a great choice and opportunity. I'd encourage anybody listening to make this real. Put it in your timebox calendar to think about having a money buddy. This has been reading one of Near's latest articles. You can find all of his articles at near and far.com that's spelled n I r and far f a r dot com where near broadcast these great thinkings that really can help you benefit from understanding the research that he does on user experience, design, behavioral economics, and neuroscience. And hey, if you're listening on a podcast app, every single review means the world to us. We're just two guys reading Near's articles here and it means a lot to us. We read every single one of them. So thank you so much and thanks for tuning in to another episode of near and Far, Business Behavior and the Brain.