From: alexhormozi
Developing the habit of daily financial review can significantly improve one’s financial situation [00:00:00]. This practice helps to build an understanding of money flow and fosters financial discipline [00:12:11].
The Importance of Daily Financial Awareness
Checking your bank account daily, ideally as the first thing you do in the morning, prioritizes your financial goals [00:13:39]. This consistent awareness is crucial for several reasons:
- Understanding Money Flow Regularly checking your bank account helps you develop a “muscle” for understanding how money moves in and out [00:12:11].
- Creating Awareness Simply drawing and putting awareness to your financial situation, like getting on a scale every day for weight loss, can lead to improvement [00:12:29]. If you track sales in a business, sales go up; the same principle applies to personal finances [00:12:34].
- Behavior Reinforcement Daily checks allow you to immediately “punish” bad spending behavior and “reward” good saving behavior, encouraging more positive actions [00:12:44]. Seeing your bank account balance go up provides a small, positive reward [00:12:50].
- Confronting Reality Many people experience anxiety about their finances and avoid looking at them [00:14:10]. However, it’s necessary to confront the reality of your financial situation to change it [00:14:13]. Money tends to “stick” to those who pay it the most attention [00:14:19].
Practical Steps for Daily Financial Tracking
The speaker suggests a simple yet effective method for daily financial tracking:
- Make it a Priority Check your bank account first thing every morning [00:13:41].
- Log Your Balance Maintain a Google Sheet on your phone where you input your daily bank account balance [00:12:56].
- Gamify Your Progress Aim to achieve “personal records” in your bank account balance [00:13:02]. Thinking of money as a game can make the process more engaging and help you maximize your earnings [00:13:08]. This gamification allows you to see long-term trends and feel progress for daily sacrifices [00:13:18].
- Analyze Inflows and Outflows Regularly look at all the “pluses” (money coming in) and “minuses” (money going out) [00:13:53].
- Set Monthly Goals For the next month, actively try to increase the “pluses” column and decrease the “minuses” column [00:13:57].
By consistently applying this cycle, you can be amazed at what happens in your bank account within just 90 days [00:14:01].
Benefits of Financial Discipline and Cost Reduction
Reducing expenses and living frugally can greatly increase one’s risk tolerance and enable significant future investments [00:10:18]. The speaker highlights personal experience of living on $1500 a month while earning significantly more to save for future opportunities [00:00:03].
- Increased Risk Tolerance When the cost of living is low, individuals become less worried about financial setbacks, making them more daring in pursuing opportunities [00:10:18].
- Investment in Growth Saving money by living on nothing allows for investment in skills and experiences that will increase earning capacity [00:03:09]. This is a key aspect of financial discipline [00:11:31].
- “Less Dangerous” Mentality As someone with “nothing to lose” financially due to low living costs, one becomes harder to stop [00:10:44].
Instead of focusing on “credit card hacks” that offer small percentage benefits, true financial discipline comes from diligently managing what you spend and maximizing what you earn [00:11:27]. The ultimate goal is to “maximize both sides” – spend as little as possible and make as much money as possible [00:11:38].
“The time to dig the well is not when you’re thirsty, but when you have enough water so that when you are thirsty it’s there. Now we can go on the offensive.” [00:09:30]