The Psychology of Financial Freedom

hey it's jay i don't know what your day's been like but i was just thinking about you for a minute and i hope you're being a little patient with yourself because you deserve it and yeah i'll talk to you soon hey everyone welcome back to on purpose i want to start this episode by saying just two small little words and when i do i want you to notice in your mind and in your body what feelings come up for you here we go the words are financial literacy look i know for many of us even just hearing the word finances can cause a lot of anxiety maybe you feel overwhelmed maybe you feel behind maybe you want to just keep pushing off learning about financial literacy for a little while longer wherever you are i get it but here's my take financial literacy isn't about learning how money works it's about learning how you work around money think about this if i asked you what your relationship with money is like how would you honestly answer most of us have never even thought about that question before we talk about relationships with our partners our family our friends and even ourselves but very few of us stop to consider that we also have a relationship with money and whether that relationship feels healthy anxious avoidant or secure often shapes our lives far more than the actual number sitting in our bank account when most people think about financial literacy they think it's just about learning how money works they think it's only about budgets investing debt taxes retirement accounts or compound interest but what often gets ignored is the more human emotional side of financial literacy because at the end of the day you're not just a number and you can understand every investing strategy in the world but if you don't understand the psychology behind your financial decisions you're not truly successful you're not truly successful you're not truly successful the interesting thing is that most of us were never taught how to build a healthy relationship with money maybe we were taught how to earn it but not how to grow it or taught how to spend it but not how to manage it and long before we ever received our first paycheck opened our first bank account or paid our first bill we were already learning lessons about money without anyone ever sitting us down to teach us so much content about money that we don't even know how to use we learned how money works we learned what money feels like we learned how money feels like psychologists call these money scripts the unconscious beliefs we develop in childhood that quietly shape the way we save spend invest avoid and worry about money for the rest of our lives what's fascinating is that many of us are still living by financial rules we never consciously chose we simply inherited them and until we become aware of them they'll continue making decisions on our behalf so today i don't just want to talk about money but i want to talk about money i want to talk about the psychology behind it i'm going to walk you through the five things i've learned that have completely changed the way i think about earning saving spending and building wealth because i don't believe financial freedom begins when you make more money i think it begins when you understand your emotional attachments connected to money and once you understand that relationship almost every financial decision starts becoming a reality this episode of on purpose is presented by ultra running we all benefit from having a little more space so do our feet that's why ultra running shoes feature ultra fit design giving toes more room for comfort balance and strength they're perfect for running walking or hiking any pace any level they feel right from the first step go to ultra running.com forward slash on purpose and use code purpose 10 for 10 off that's a l t r a running.com forward slash on purpose stay out there here's the first thing i want to explain your very first financial advisor ever was simply your childhood i want you to think back to your childhood for a moment not to your first paycheck or your first credit card but much earlier than that think about the house you grew up in what did money sound like what did it feel like was it something people talked about openly or was it only mentioned when there wasn't enough of it was money associated with possibility or was it associated with stress your earliest financial education probably had very little to do with numbers it wasn't someone explaining compound interest or teaching you how to invest it was watching your parents react when the bills arrived it was hearing the conversations that happened around the dinner table it was noticing whether spending money created excitement and excitement and excitement and excitement and excitement and excitement and excitement and excitement guilt fear or arguments those moments taught you far more than you probably realize psychologist brad klontz has spent years researching these money scripts he's found that our money scripts are built on unconscious beliefs that develop early in life and continue influencing our behavior as adults they become the stories running quietly in the background of our minds stories like money is hard to make rich people are greedy if i have money i'll lose it or talking about money is rude the hard thing about these beliefs is that once we accept them as true we stop questioning them we don't wake up every morning and consciously think money is stressful instead we simply feel anxious every time we open our banking app we don't consciously decide to avoid investing we just keep telling ourselves it's too risky right now the script slowly becomes the behavior of money it's not just about money it's not just about money it's about money it's about money it's about money it's about money it's about money it's about money it's about money it's about money it's about money it's about money this happens because our brains love familiarity familiar patterns often feel safer than unfamiliar ones even when those patterns aren't serving us that's one of the reasons people can continue repeating financial habits they know aren't working it isn't because they're lazy or irresponsible it's because the brain often prefers what's familiar over what's beneficial i personally had to work through that myself i grew up believing that people were not going to be with money were selfish or somehow inherently bad as my career grew and i started to have more financial freedom i felt uncomfortable with it because the identity i had for myself began to conflict with the identity i'd attributed to successful people everyone has their own version of this i had a friend who watched his parents spend every dollar as soon as it came in as my friend started to make more money he had an incredibly hard time saving it no paycheck ever because he was always keeping himself in a position where he perpetually had to be earning more saving felt unnatural because he never saw that behavior modeled on the other hand maybe he grew up watching your parents save consistently talk openly about finances and make thoughtful decisions that doesn't mean you automatically became financially literate but it probably gave you something incredibly valuable a sense that money was something you could understand of something you had to fear no matter what your story was the behaviors we witness repeatedly become the behaviors we unconsciously normalize one of the biggest mistakes we make is assuming our financial habits are fixed traits we tell ourselves i'm just bad with money or i've never been good at saving how many of you have said that but what if that's not you at all what if it's simply programming you can now rewrite that's not you at all you can now rewrite that's not you that's why i think one of the most powerful financial exercises has nothing to do with spreadsheets or investment accounts it's much simpler take a piece of paper and write down three messages you heard about money growing up they might have come from your parents your grandparents maybe it came from the culture you grew up in the tradition your community or even your own experiences then ask yourself one question do i still actually believe this or have i simply never challenged it you might discover that you've spent years trying to build wealth while carrying beliefs that ultimately push wealth away you might realize you've been avoiding your bank account because that's what everyone around you did or maybe you've been chasing money so relentlessly because somewhere along the way you learned that your value depended on how much you earned awareness doesn't solve every financial problem overnight but it's where every lasting change begins before you learn how to budget invest negotiate your salary or build wealth you have to understand the person making those decisions because every financial decision you make passes through the beliefs you already have And if you never examine those beliefs, you'll keep creating the same financial results no matter how much your income changes. That takes us to the second thing that I want to hit on. I want to explore the idea that every purchase is actually buying you two things. Listen, why do smart, capable people still make financial decisions they later regret? Why do we buy things we don't need, ignore our savings accounts, put off investing, or tell ourselves, I'll start next month, over and over again? Think about how many times you've done that. The answer usually isn't we lack information. More often than not is that our brains are wired to prioritize what feels good today over what benefits us tomorrow. Behavioral economists have spent decades studying this. One of the most powerful concepts is something called present bias, which is our tendency to value immediate rewards more highly than future ones. Your future self wants to save for retirement, build an emergency fund, and invest consistently. Your present self sees a vacation, a sale, or a new item and thinks, this will make me happy now. Neither version of you is irrational. You're simply optimizing for different timelines. Think about how often this shows up outside of money. We know exercising today benefits us months from now, but the couch feels more appealing in the moment. We know getting to bed earlier will make tomorrow better, but another episode sounds more enjoyable tonight. Money works exactly the same way. The challenge isn't intelligence. It's that our brains naturally discount future rewards in favor of immediate gratification. That's why I think one of the biggest myths about financial success is that it's built through willpower. We picture financially responsible people waking up every day full of money. discipline, effortlessly resisting every temptation. But the research tells a different story. The people who consistently make good financial decisions usually aren't relying on stronger willpower. They've just built better systems that actually make the right decision easier than the wrong one. Before we get there though, I want to expand on the idea that every purchase is actually buying two things. You're buying the object itself, but you're also buying the life or the feeling that comes with it. For example, when you buy a designer bag, you're not just buying the bag. You're buying the social capital and the assumed lifestyle that comes along with being perceived with the bag. I think a lot of us understand that our purchases come with potential societal benefits. But here's the part we forget. When you buy a house, you're not just buying a house. You're buying property taxes, maintenance, repairs, insurance, furniture, weekends spent fixing and years of ongoing responsibility. When you buy a luxury car, you're not just buying the car. You're buying higher insurance premiums, more expensive repairs, more expensive tires, and the expectation that you'll continue maintaining that lifestyle. This is called the planning fallacy. We're remarkably good at imagining the excitement of a purchase, but surprisingly poor at estimating the ongoing costs that come with it. We picture the vacation, credit card bill. We picture the dream kitchen, not replacing the appliances five years later. This doesn't mean you should never buy nice things. That's not the point. Money is meant to be enjoyed as well as managed. The point is to become conscious of what you're actually saying yes to. Every purchase creates a future version of your life. Sometimes that future brings freedom and sometimes it brings obligations. The more aware you become of those obligations, the better your financial future will be. The more you're aware of those obligations, the better your financial decisions become. I think one of the simplest questions you can ask before making a major purchase is this. Am I excited about owning this? Or am I excited about the idea of owning this? Those aren't always the same thing. Sometimes we're chasing a feeling of status, belonging, or accomplishment that has very little to do with the object itself. We imagine the purchase will change how we feel about ourselves, when in reality, it often just changes what's on our credit card statement. The truth is most financial mistakes aren't made because people can't do math. They're made because we're human. We spend emotionally and explain it logically. We tell ourselves we deserved it because we worked hard. We convince ourselves it's an investment because it sounds more responsible. We remind ourselves it's on sale, even if we never needed it in the first place. The purchase feels rational because our emotions wrote the script before our logic, stepped into justice, and then we're able to do what we want to do. We're able to do what we want to do. We're able to justify it. That's why financial literacy isn't just learning how to budget. It's learning how to pause. It's creating enough space between the impulse and the decision that you can ask yourself, what am I really buying here? Because sometimes you're buying a tool. Sometimes you're buying an experience. But sometimes you're buying approval, identity, or the hope that one more purchase will finally make you feel like you've made it. And those are needs no object can ever fulfill. That takes me to the third thing I want to make sure we hit on today. Money cannot buy you peace. But here's the twist. It can buy you options. Listen, one of the most common phrases you'll hear is money can't buy happiness. And while there's truth in that, I don't actually think it's the most helpful way to think about money. Because the truth is money absolutely can solve real problems. And we'd be ignorant to avoid that reality. It can provide safety, stability, healthcare, education, housing, and opportunities that genuinely improve our quality of life. Pretending otherwise isn't realistic. But I also think many of us expect money to solve problems it was never designed to solve. This episode is brought to you by Wayfair. Home should be a place that feels like a sanctuary, a space that truly reflects who you are. But it can be challenging to balance style, budget, and endless options. I'm always looking for a place where I can be myself, looking for ways to improve the harmony of space at home. But it isn't easy. I want pieces that can ground me and still hold up to the test of time. I went on Wayfair and found a stunning solid wood nightstand and credenza I love. Now my bedroom is the perfect place to wind down. Both pieces are incredibly sturdy, grounding, and completely transformed the energy of my space. Plus, you can shop with Wayfair Verified, where product specialists carefully vet items for quality and functionality. 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The dream salary becomes your baseline. We naturally adjust to our circumstances, which means that if we're relying on money alone to create lasting peace, we'll often find ourselves chasing a finish line that keeps moving. That's why I think people are often chasing the wrong thing. We tell ourselves we're chasing money, but what we're really chasing is what we believe money will give us. We think we're pursuing a bigger paycheck when what we actually want is to feel secure. We think we want more possessions when what we really want is freedom. We think we want luxury when what we often are searching for is self-worth. What money does give you is options. It gives you the option to leave a job that's hurting your mental health. It gives you the option to take time off when someone you love needs you. It gives you the option to move closer to family, start a business, care for your parents, or weather an unexpected emergency without your entire life falling apart. Those options are incredibly valuable because they create something that money itself can't create. The ability to have a choice. I think that's one of the biggest differences between income and wealth. Imagine two people. One earns $300,000 a year but has built a lifestyle so expensive that missing two paychecks would create a crisis. Another earns $80,000 a year, lives below their means, has an emergency fund, and has consistently invested over time. On paper, the first person earns more, but which person actually has more freedom? One of my favorite ways to think about wealth is to ask a different question altogether. Instead of asking how much money do I have, ask yourself, how much time have my financial decisions bought me? If your income stopped tomorrow, how many months of freedom would your savings provide? One week? Six months? Two years? Suddenly wealth stops being about comparison and starts becoming more and more important. This is why lifestyle inflation can be deceptive. As our income grows, it's natural for our spending to grow with it. We move into a bigger home, upgrade the car, take more expensive vacations, and slowly adjust to a higher standard of living. None of those things are inherently wrong. But if every raise is immediately absorbed by a more expensive lifestyle, our sense of freedom never actually grows. Our paycheck gets bigger, but so do the obligations attached to it. I don't think the goal of financial literacy is simply to help you accumulate more money. I think it's to help you create more options. Because the wealthiest person in the room isn't always the one with the highest income. Sometimes it's the person with the greatest ability to choose. The ability to say yes when something meaningful comes along. The ability to say no when something doesn't align with their values. The ability to make decisions from purpose instead of panic. At the end of the day, money is a tool. Like any tool, its value comes from how you use it. A hammer can build a home or break a window. Money can create freedom or create pressure. It can become something you constantly chase or something that supports the life you're trying to build. The question isn't whether money is good or bad. The question is whether you're asking it to do a job it was never meant to do. Now for the fourth point I want to hit on. I need us to circle back to something I mentioned earlier. The wealthiest person doesn't rely on willpower. They rely on systems. If you've ever told yourself, I'm just bad with money, I want to challenge that belief. Because I don't think most people struggle financially because they lack intelligence. I think they struggle because they're relying on motivation to do a job that belongs to systems. Motivation is wonderful when it's there, but it's also unpredictable. Some months you feel excited to save. Other months life gets busy, unexpected expenses show up, and your best intentions quietly disappear. Behavioral scientists have found that. We like to imagine we're making deliberate, rational decisions all day long. But the reality is that much of our behavior runs on autopilot. We develop routines, habits, and defaults that require very little conscious thought. That's incredibly useful when those habits are helping us, but incredibly expensive when they aren't. Financially successful people aren't making hundreds of perfect decisions every month. More often they've simply built lives. But the right decision happens automatically. Think about brushing your teeth. You probably don't wake up every morning and have an internal debate about whether it's worth doing. You've repeated it so many times that it requires almost no mental energy. Imagine if saving money worked the same way. Instead of deciding every month whether you'll transfer money into savings, what if it happened automatically the day you got paid? Suddenly you remove the daily negotiation with yourself because the decision is automatic. This is one of the reasons automatic savings are so powerful. They work with your psychology instead of against it. Every decision we make creates a little bit of decision fatigue. By the end of the day, our ability to make thoughtful choices is lower than it was in the morning. If your financial future depends on making dozens of disciplined decisions every month, you're putting yourself in a constant battle against your brain. Systems remove that battle. One of my favorite ideas in behavioral economics is something called choice architecture. It's the idea that the way our choices are designed influences the decision we make. Grocery stores don't accidentally put candy by the checkout. Streaming services don't accidentally autoplay the next episode. Our environments are constantly nudging our behavior. The question is whether you've intentionally designed your financial environment to nudge yourself toward the life and the future. You actually won. Maybe that means creating a separate savings account that's harder to access so you're less tempted to spend it impulsively. Maybe it means deleting shopping apps from your phone if you know late-night scrolling usually ends with unnecessary purchases. Maybe it means setting a rule that any purchase over a certain amount waits 24 hours before you buy it. That pause gives your emotional brain time to settle and allows your rational brain to catch up. There's another reason why I think this is important. There's another reason systems matter so much. Every time you successfully follow through on one of them, you're reinforcing a new identity. You're no longer someone who's trying to get better with money. You're becoming someone who consistently makes thoughtful financial decisions. Identity is incredibly powerful because once you begin seeing yourself differently, your behavior naturally starts aligning with that new story. I also think it's important to remember that good financial systems don't have to be complicated. Sometimes we assume wealth requires sophisticated investing, strategies or complicated spreadsheets. But in reality, some of the most impactful habits are surprisingly ordinary. Common sense money habits that we often ignore. Spending less than you earn. Saving consistently. Investing regularly. Paying yourself first. Reviewing your finances every month instead of avoiding them. None of those habits are exciting, but that's exactly why they work. So instead of asking yourself this week, how can I be more motivated? Ask yourself this. What system could make my future easier? Because motivation fades, systems remain. And over time, those small systems start to become the bridge between the financial life you have today and the financial life you want tomorrow. Today's 7-Day Challenge is brought to you by Amazon Health. Forget filling out 37 forms every time you need healthcare. The new Amazon Health AI is different. It can connect your symptoms with your medical history to offer personalized care 24-7. Amazon Health AI is here. Healthcare just got less painful. Here's your challenge this week. For the next 7 days, stop saying, I should be. No more, I should be married by now. I should have figured it out by now. I should be further along. Every time you catch yourself saying, I should be, stop. Because that one phrase is keeping you attached to a version of life that may no longer be meant for you. For one week, let go of the timeline. See how much lighter you feel. Today's 7-Day Challenge was brought to you by Amazon Health. There's a fifth and final thing I want to hit on before we wrap today. We've spent this entire episode talking about your relationship with earning money. Spend it. And saving money. But I think there's one thing that's even more important than all of those. It's remembering that money isn't the goal. The goal is the life your relationship with money allows you to live. The healthiest financial lives aren't built by people who think about money every minute of every day. They're built by people who have a healthy relationship with the way money benefits them. A healthy relationship with money isn't one where you never spend it. It's one where spending aligns with your values. It's not one where your self-worth rises and falls with your bank balance. It's one where money becomes a tool that supports your life rather than something that defines it. One of the biggest mistakes we make is expecting money to fix emotional insecurities. We think once I earn this amount, I'll finally feel successful. Once I buy this house, I'll finally feel secure. Once I reach this milestone, people will finally respect me. But notice what we're really asking money to provide. We're asking it to give us confidence, significance, safety, and belonging. Those are deeply human needs. But they're needs that money can never fully satisfy. I think that's why some people become trapped in a cycle of always needing more. Every financial milestone feels incredible for a little while, but eventually it becomes normal. Then the target moves again. Another raise, another investment, another purchase, another milestone. The problem isn't ambition. Ambition can be a beautiful thing. The problem is believing that peace exists just beyond the next number. There's a phrase that's always stayed with me. Money is a wonderful servant, but a terrible master. When money serves your values, it can help you care for your family, support causes you believe in, create meaningful experiences, and build a life with more freedom. But when money becomes your master, every decision starts revolving around fear, comparison, and never feeling like you have enough. Maybe counterintuitively, I very much believe that generosity has a profound effect on our relationship with money. Not because giving somehow magically makes us wealthier, but because it reminds us what money is actually for. Money was never meant to sit in an account simply so we could look at it. It's meant to create impact. Sometimes that impact is providing stability for your family. Sometimes it's helping a friend through a difficult season. Sometimes it's supporting a cause that's bigger than yourself. Generosity shifts money from being something we cling to into something we intentionally direct. So maybe the real measure of financial literacy isn't how much you know about money. Maybe it's how little money controls your emotions. Can you celebrate someone else's success without feeling behind? Can you spend intentionally without feeling guilty? Can you save without living in constant fear? Can you earn more? without believing your worth has increased? Those questions have much less to do with mathematics than they do with psychology. At the end of the day, financial literacy isn't just learning how money works. It's learning how you work around money. It's understanding the beliefs you inherited, the habits you've built, the emotions that influence your decisions, and the values you want your money to reflect. When you can do that, something remarkable happens. Money stops being something you constantly chase, fear, or avoid. It simply becomes one of the many tools you use to build a meaningful life. So as we leave today, I want you to remember this. One thoughtful decision doesn't completely change your financial future, but repeated over months and years, those decisions begin to compound. Every time you spend intentionally, save consistently, invest patiently, or choose long-term freedom over short-term impulse, you're becoming a slightly different person. Little by little, your financial habits begin compounding into your financial character. The goal is to build a relationship with money that gives you more freedom, more peace, and more alignment with the life you want to live. A relationship where money becomes a tool instead of a source of stress. You get to rewrite that story. You get to decide what enough looks like. You get to decide what wealth means to you. And when you start measuring success by freedom, generosity, and peace, you're creating a better world. you're creating in your own life. I think you'll discover something far more valuable than just a bigger bank account. Thank you for listening to me. I'll see you on the next one. Remember, I'm forever in your corner, and I'm always rooting for you.