258 | The First Step to Building and Preserving Wealth (7 Steps to Wealth, Step 1: Decide)

[INTRODUCTION]

Hilary Hendershott: Well, hello, Money Lover! Welcome to my 7 Steps to Wealth podcast series. If you’ve already heard this introduction to the series and you don’t wish to hear it again, please just fast forward about two minutes. If you haven’t heard it yet or want to hear it again, here we go.

Hilary Hendershott: Many years ago, as I was digging myself out of financial oblivion and creating healthy money habits for myself for the first time, I realized that if I could master this thing called money, I would have something very valuable to share with the world. I mean after all, there is plenty of information about money out there in the world, yet most people still struggle with it. So obviously something is missing in the zeitgeist about money.

Hilary Hendershott: And there came a time in my financial life where I started to look more financially healthy than damaged. There came a time when my bank accounts started to contain 6- and 7-figure balances. There came a time when I could set big, really abundant goals for my business, work toward them, and reliably achieve them.

Hilary Hendershott: The way I would say that now is, I got into right relationship with money. I stepped into having power and influence with money. So as part of sharing the lessons I learned with money, I looked back on what I had accomplished–from where I was now, with a high credit score, a multi-million dollar home that my husband and I own, and a multiple 7-figure net worth–and I asked myself, “What are the exact steps I took to get here?”, “What specifically did I do differently to change my financial reality?”, and “How exactly did my money mindset and financial beliefs change?”

Hilary Hendershott: And I created a framework called the 7 Steps to Wealth. I’ve published that framework many times, in many formats. Episode 208 of this podcast contains the entire framework in one episode; it’s a great audio resource. There’s an interactive, multimedia eBook you can download if you go to the show notes for today’s episode. And I would love for you to do that. We talk about the 7 Steps in my Money Love Notes newsletter, which you can also subscribe to in the show notes.

Hilary Hendershott: But what I’m doing now is an entire episode on each of the 7 Steps. The 7 Steps in order are: Decide, Plan, Speak, Ask, Earn, Invest and Protect. I’ll publish this series with the steps in order, but not necessarily every week. So the point is to do a deep dive on each individual step because knowing the steps makes no difference. You have to actually put them to work in your life. So if you’re looking for a different step than the one I’m talking about today, and that step comes BEFORE today’s step, just look around in the recent episodes I’ve published. If you’re listening to these as they air, and you’re specifically interested in a future step, it’s coming.

Hilary Hendershott: Today’s episode is the first step of the framework, and it’s called Decide.

Hilary Hendershott: So I was walking around the mall last night; there’s a really flashy, shiny, new modern, high-end mall, about 30 minutes from me. You know, they got a Gucci store, they got all that stuff. And there’s a Porsche parked right in front of the front doors. I mean, they’re obviously advertising the Porsche, and it’s a $240,000 Porsche. And, I mean, that doesn’t even include taxes and everything.

Hilary Hendershott: And, the people I was with–my husband; his friend–start talking about how they like the car, right? It’s sort of out of reach, it’s aspirational, like that’s a crazy amount of money, but part of me would really like to spend that much money and have that car.

Hilary Hendershott: And I have to be totally honest with you, I don’t even want that car. I mean, you’re probably talking about $275,000 out the door, right? That’s more than a quarter of a million dollars.

Hilary Hendershott: And here’s what I think: I think that a lot of people in the world think that when they see someone rolling around in $300,000 worth of vehicle, that that person is really, really wealthy.

Hilary Hendershott: And I can tell you from my vantage point–and it really is a unique vantage point because I’ve been in financial planning for more than two decades, and every time I meet with a family, I ask them to see all of their financials. So I get to see the inner workings of people’s money all the time.

Hilary Hendershott: And I can tell you this: all of my clients are wealthy. They’re either at financial freedom number, or they’re getting there, right? Nobody drives a $300,000 car, not one person. Most of my clients either drive a Toyota, or a Honda. And when I say Toyota, I think Lexus is included in there, right? Because somehow they’re the same company. Toyota, Lexus, Honda. That’s it. That’s it. That’s what rich people really drive.

Hilary Hendershott: And you know why? It’s because they’ve decided to be rich, and they know that being rich isn’t about how much you get to spend, it’s about how much you get to keep. And that really is the linchpin. When I see the $300,000 worth of car, I think–from experience–that there’s probably not $300,000 in their bank account. They probably leased it or financed it, and probably too much of their money goes to having a really beautiful house, a really big showy house, and of course, this really big showy car.

Hilary Hendershott: And don’t get me wrong! There’s people worth $100 million, who can drop $300,000 on a Porsche like it’s nothing, just like, write the check… but they’re rare. So that is one of the first things I think about when I think about deciding to be rich.

Hilary Hendershott: I look back at how I was thinking about money… my thoughts about money when I was broken about money, were basically “money is to be spent”, “I never have enough money”, and “money makes me feel good when I spend it. I like the experiences; I like the things, and I can’t seem to make enough of it.” No matter kind of what I did, it seemed like I was just… never had enough.

Hilary Hendershott: And so it was always like, well, I’m going to spend it to feel good now. And then I guess I’ll just try to make more money later. But if I really was real, I wasn’t clear how I was going to accomplish that. I didn’t really see it in my future. I didn’t think I was special or educated or savvy.

Hilary Hendershott: And I mean, I really thought I was smart. That’s the funny thing. Some of these beliefs, when you really break them down, if you really, like, look at yourself in the mirror about what you really think about money, it doesn’t actually make sense. Because I have a lot of evidence- I mean, I did really well in school, and so I’m smart, but somehow that didn’t, for me, didn’t translate to having money.

Hilary Hendershott: You know, another example of this is–and it’s kind of heartbreaking for me–when I meet people who have inherited a large amount of money. And you could put lottery winners, and I do have a client who’s a lottery winner… they’re more rare, obviously people inherit money more often than they win it in the lottery.

Hilary Hendershott: But I would say, in my experience, 9 times out of 10, these folks have the best intentions but they have such broken beliefs about money, you know? They haven’t decided to be rich; even the ones who come to me, I mean, that’s the only ones I have experience with, right?

Hilary Hendershott: There are people who inherit money who don’t trust financial advisors, who never hire one; I have to imagine they all run out of money. But I would say 9 out of 10 who come to me, we end up severing the relationship because they just don’t do the things that people need to do to preserve wealth.

Hilary Hendershott: So I guess what I’m saying in a nutshell is, most people who inherit money squander it. And again, despite their best intentions, and it’s because they really haven’t decided to be rich.  When people receive a windfall, their mindset about it is, “This money is going to change my life when I spend it.” And they set about spending it, and they really haven’t built the muscle of preserving it. And you have to decide to be rich before you take the actions that preserve money.

Hilary Hendershott: Truly wealthy people have more money than they want to spend on a life that they love living. To be truly wealthy, you really do have to do what most people won’t, and that is to decide every day to be rich.

Hilary Hendershott: There is no shortage of places where your money can go other than your bank accounts. [laugh] Money is always flowing out. If you’re living in this world, money is flowing out. And there are people with good intentions and bad who will take your money from you.

Hilary Hendershott: So you have to have like this moat around your money. You have to be constantly thinking, How can I preserve this money? How can I spend less? How can I make more? How can I make sure I earn what I’m owed, right?

Hilary Hendershott: It’s active. Money responds to actions, words; words in the form of agreements with other people, but actions. You have to do the things. You have to make sure you don’t have more than the FDIC insured amounts in your bank accounts. You have to either manage your investments in your brokerage account or hire someone to do it. You have to set up the 401(k) contributions at your employer. You have to go to the insurance agent and buy the umbrella policy. You have to take these actions.

Hilary Hendershott: And that gets me to another place where I see–and I think to myself–oh, this person hasn’t yet decided to be rich… you know, you gotta handle money first.

Hilary Hendershott: So for me, I’m sitting at my desk. I mean, I have a lot of clients, I have employees who have questions, and we have meetings we have to make, or hold and- but if I see something come in that’s about my money, a letter from the IRS–oh, it’s always stressful–a letter from the IRS, an email from my bank, an email about a charge on a credit card, a… I mean, I handle money first.

Hilary Hendershott: I stop the action, I internalize, what’s the communication? And then I decide, you know, does this have to- do I need to take action on this now, or can it wait? I have an appointment on Thursdays where I handle money, like I pay bills on Thursdays, blah, blah, blah. You know, I might put it in that folder.

Hilary Hendershott: But in large part when it has to do with my money, I handle it first. And that is my experience with people who have decided to be wealthy, is they handle money first. And when we ask clients, or people who want to be clients, to do things about their money and they don’t do them–I think to myself, “Okay, this person hasn’t yet decided to be rich.”

Hilary Hendershott: Every single credit card of mine is set to auto pay the complete balance every month, and that’s just a way I manage my credit score. I mean, I don’t want to build up credit card balances. That’s because I decided to be rich. People who are rich don’t have credit card debt. Yes, I use credit cards to get points all through the month and you should too, assuming you can be trusted with a credit card. There was a point in my life I could not be trusted with a credit card.

Hilary Hendershott: Okay, so once you decide and it really is like a decision, it requires constant gardening. You have to remake it every day. You know, once you take the actions that build up a 7-digit bank balance–well, hopefully investment account balance–you still have to decide every day to use that money in a way that preserves your wealth and helps it grow.

Hilary Hendershott: It’s a huge muscle to build to save money for 20, 30, 40 years and not spend it, right? You can get there. Money used to burn a hole in my pocket in a huge and painful way. It does not anymore.

Hilary Hendershott: There’s a way in which deciding to be rich is really about deciding to follow the rules of money–the rules of money being: spend less than you make; max out your 401(k) contribution; save after that in a brokerage account; pay your taxes responsibly, whether that be by the April 15th filing deadline, or now most people are filing on extension by October, but you’re being proactive about either withholding money from your check/your bank/paycheck or you’re paying your estimated quarterlies to the IRS; you’re paying off your credit card balances, as already mentioned; you have the muscle to communicate your boundaries with money to people. “Thank you, I’m not going to go on a $60,000 vacation. I can afford a $4,000 vacation.” I just made those numbers up. They’re kind of dramatic.

Hilary Hendershott: But that’s following the rules of money. And I’m a rebel! I don’t like following rules. But I fought the rules of money and they won. Promise. I promise. [laughs] I have given in to following the rules of money. And I don’t enjoy it! I do not enjoy having my day interrupted by an email from my bank or a text because someone- they want to know if I made this credit card charge, or having to do two-factor authentication on every dang thing. I don’t like it, but I do it. And I won’t stop. Okay. And that’s about having decided to be rich.

Hilary Hendershott: And if you’re not sure what to actually do, it’s okay. You really can decide without knowing how. As a simple example, you can decide you’re going to move before looking for a new place to live. “I’m gonna move. I don’t know where to, but I’m out of here.” You can decide you’re gonna get a Master’s degree before researching which school to attend.

Hilary Hendershott: Those examples are obvious to you. Just because you haven’t mastered the know-how of being wealthy–and I really just gave you the basics–but I know that earning a high income seems elusive for some people. And I’ve done podcast episodes with people who are building real wealth on an average or ordinary income; a middle of the road income. And that’s possible. It- there’s no getting around, it’s easier to do with a high income, that’s a future episode. Remember, that’s the fifth step, is Earn. So we’ll talk about that. But it’s okay. It’s okay.

Hilary Hendershott: Because the little actions that you take, they build on each other. So deciding to be rich is really, that’s your mindset. To have a successful career or a successful marriage, you have to decide to have those things. A successful marriage is not easy! You have to do the things that happily married people do every day, and you really can’t do other things on any day. Because there are actions that can break down a marriage, just like spending $300,000 on a Porsche can break down a financial plan.

Hilary Hendershott: There are these artifacts of having made the decision to have a lucrative, opulent financial life. So are you willing to say: I’m committed to financial freedom. I’m going to do what it takes to get financial independence. Right?

Hilary Hendershott: Let me ask myself, what is it going to take? What do I need to design? What conversations do I need to have? These are the kinds of things you need to be thinking after you decide to be rich.

Hilary Hendershott: Get into like wonder like, “I just wonder, how’s this gonna happen? I decided, and I know I’m the one who gets to say, so what happens next? Like, what cool new thing am I going to do with or about money that I’ve never done before? Because obviously, this getting rich thing requires new actions for me.”

Hilary Hendershott: I tell you that I really did dig myself into financial oblivion. It was quite, quite, quite painful and embarrassing. And I specifically remember- the story I tell about not being able to put a tank of gas in my leased BMW is accurate–that actually happened. And I was actually walking home from the gas station and said to myself, “I don’t have any money. My bank accounts are empty. My credit cards are maxed out. I have got to do this differently.” I don’t know what-

Hilary Hendershott: At the time, I just didn’t, I was probably, I mean, I was awkward, right? Because I just started telling people, “Look, I’m gonna let my- I gotta let my condo go. I can’t pay for all my debt and my life today. I have to choose yesterday or today–and I have to choose today, otherwise, I’m going to be homeless. That’s not a common conversation, right? People don’t run around talking about that stuff all the time. And thank God people’s memories are short. [laughs] But I really did decide.

Hilary Hendershott: I think the biggest struggle people have with deciding to be rich, is really twofold. First, you have to give yourself the space to have cognitive dissonance because you’ve probably got a lot of broken beliefs about money right now. And so, I’ve decided to be rich, and yet for me, there’s never enough money– those don’t go together. You have to give yourself that grace. You can unravel those broken beliefs, promise. I promise. You can.

Hilary Hendershott: The other thing is that it is not commonly accepted in society to talk about wanting to be rich. Lots of religions really dismiss the desire to be rich or rich people. It’s like this assumption that rich people are shallow or greedy, immoral, right? And you have to let that cognitive dissonance be.

Hilary Hendershott: And I encourage you to do that. I promise you, there are lots of really moral, virtuous, lovely, wealthy people. There are. Money doesn’t force you to behave in immoral ways, I promise.

Hilary Hendershott: And so it’s a struggle, because you have a lot of muscle memory and neural pathways in your mind and your life about how you interact with money right now. And just like I mean, I have neural pathways about: I like to work out in the morning, I prefer breakfast to lunch. I mean, there’s like lots of neural pathways about how I do my life. So I understand.

Hilary Hendershott: But this money journey that you’re on, and you want to be on–and I know you are, because you’re listening to this podcast–is worth it. The rewards at the end of the day are worth it.

Hilary Hendershott: And that really is what I would have you take away from today’s conversation about deciding to be wealthy. I do know that it’s not easy. If it were easy, you would just think about it and it would happen. You wouldn’t need podcasts or you wouldn’t need to Google things. You wouldn’t need to take courses or, I mean, you would just do it. And it’s not easy, but it really is worth it.

Hilary Hendershott: Okay, if you’ve listened to this episode and you get it, you want to decide, you’re in, you’re like into it but you’re wondering, “Hilary, what do I do about this conceptual thing called Decide?” I do have some recommendations. These are things I’ve been teaching my clients, these are things I’ve shared on the podcast, these are things I, personally, have done. You really do have to take some action steps, put some things in place. I want you to have some conversations about this.

Hilary Hendershott: Really, thinking about deciding is not going to help.

Hilary Hendershott: Get out your journal, get out a blank piece of paper, or–I love a fresh Google Document on my computer. You definitely want to put this in writing. So it’s definite and specific, and it has legs–like it exists. Type or write down: I am financially free. So you’re standing in the future, looking back on the action steps and the ways of being that you developed and grew and cultivated over the period of time it takes you to get to this future called “I’m financially free.” So write down: I’m financially free. I have more money than I need to live a life I love.

Hilary Hendershott: Now, write down some of the things you’re gonna stop doing because they don’t work if you’re deciding to be rich!

Hilary Hendershott: Here are just a few of the things you would wanna stop doing: Carrying credit card balances and leaving savings in cash because you’re afraid of losses, spending money to impress people, giving away more than you can afford, letting fear stop you, overspending, ignoring money, not planning, not paying your taxes, not getting professional advice, spending more than you can afford on your kids because you really want them to think you’re a fun parent.

Hilary Hendershott: After all, parenting does not have to be about righting the perceived wrongs of the past. You don’t have to make up for the things you think your parents didn’t do. It is okay. By spending too much on your kids, you’re putting them in a position where they’ll feel obligated to support you later. Either way, it’s not good. You can be the parent who teaches them healthy money habits and who they get to watch create a whole new financial reality for yourself.

Hilary Hendershott: Okay. So you wrote down all the things you’re going to stop doing. Now write down the things you’re going to start doing.

Hilary Hendershott: Here’s a few ideas I have: You can ask for a raise, you can call five of your friends and tell them about your new future, your new financial future that you’re living into. If you run a business, you might want to hire a business coach so you can double your profits. You might want to go to your HR payroll provider and up your 401(k) contributions. Heck, max it out!

Hilary Hendershott: You might want to put yourself on a spending plan by automating your finances. If you don’t know how to do it, that’s coming in the next episode on the 7 Steps to Wealth framework. It’s called Plan.

Hilary Hendershott: So listen, I promise you can live the life of your dreams. You just have to first believe it’s possible, and then decide to make it happen.

Hilary Hendershott: Today, right now, just right where you are, I invite you to decide to be rich. Love it. Celebrate that, and I’ll see you in the next episode.