Question: How do you get better with money?
Answer: You get better both in your Outer Game and your Inner Game.
Outer Game is what you do.
In tennis, its the visible game that you see played on the court.
Outer game includes the racquet that you use, the shots you play, the kit you wear, the tournaments you enter etc.
Inner Game is what you think. Its the invisible game that takes place in the mind of the player and its played against obstacles such as nervousness, self-doubt and self-condemnation.
Inner Game explains why players often play better in practice than on the unforgiving stage of Centre Court when it matters most.
Now I can’t prove this, but it always seemed to me that British tennis player Tim Henman never quite had the Inner Game to win Wimbledon. On a good day, he was probably technically proficient enough to do so. But I just don’t think he ever quite had the self-belief.
In the context of money, Outer Game is the job that you have, your salary, your spending, the amount you save, the funds you choose for your portfolio, the platform you use etc etc. Its the normal stuff that financial books, websites, pundits etc focus on.
Much more over-looked is Inner Game, the thoughts and beliefs that you have about money. Most people don’t realise that you can choose your thoughts and beliefs. I recommend you choose ones that help you.
Your Inner Game can make or break your Outer Game. For example, if you are a left wing person that believes (Inner Game) that money and capitalism are evil, then you’re probably not going to end up with a lot of money (Outer Game). Its too much of a conflict with your identity. Similarly, if you are a right wing person that believes that life is a contest to see who can spend the most money, then you are probably not going to end up rich (or happy) either.
Perhaps the best way to understand Inner Game is to see what happens when it goes wrong. Some of the most vivid examples come when golfers lose their confidence and get an attack of “the yips”. Their swing, their judgement, their shot selection, honed over years of training and practice, can all fall apart.
You don’t have to be a golfster to enjoy this fascinating video illustrating what happens when your Inner Game is not up to the occasion. In 1999 Jean van de Velde had the only chance he would ever get to win a major title. Going into the last hole (a par 4) he had a clear 3 shot lead and could afford to take 6 shots…in other words, all he had to do was not fuck up…here’s what happened:
Getting back to personal finance, the best book on the Inner Game of money is Secrets of the Millionaire Mind.
Yes, I know the title is a bit cheesy. Yes, the author is one of those self help gurus with a tan that strides around a stage with a head set. Yes, he made money teaching this stuff.
But here’s the thing. He’s also happens to be Right.
I’ve never read a book that better describes the fears and misconceptions that people have around money, investing etc that can stop them from getting rich.
In the words of T Harv Eker:
Your mind is the greatest soap-opera scriptwriter in history. It makes up incredible stories, usually based in dramas and disasters, of things that never happened and probably never will. Mark Twain said it best: “I’ve had thousands of problems in my life, most of which never actually happened.”
One of the most important things you can ever understand is that you are not your mind. You are much bigger and greater than your mind alone. Your mind is a part of you just as your hand is a part of you.
Here’s a thought provoking question: What if you had a hand that was just like your mind? It was scattered all over the place, it was always beating you up and it never shut up. What would you do with it? Most people answer something like “Cut it off!” But your hand is a powerful tool, so why would you cut it off? The real answer is you’d want to control it, manage it and train it to work for you instead of against you.
Training and managing your own mind is the most important skill you could ever own, in terms of both happiness and success.
How do you train your mind? You start with observation. Notice how your mind consistently produces thoughts that are not supportive to your wealth and happiness. As you identify those thoughts, you can begin to consciously replace those nonempowering thoughts with empowering ones.
So lets look at the different ways in which Inner Game affects getting to financial independence. There are 4 elements to getting to financial independence…these are:
- Earn more
- Spend less
- Invest better
- Knowing when you have enough
Your Inner Game has a massive impact on your earning capacity. To earn big money, you have to have a certain degree of self-belief. You also have to think bigger.
Its great to be frugal but sometimes frugal people have a blind spot when it comes to thinking big. So the challenge for them is to ensure they’re not being held back by fear, caution, prudence (call it what you want). You can be too careful.
People who have strong Inner Game have a quiet confidence. They make better leaders. Newsflash: leaders get paid more than foot soldiers.
Marcus Aurelius was Emperor of Rome and leader of the free world AD 161 – 180. Aurelius wrote Meditations, the only self-help book written by an actual Roman emperor that you can read today.
Marcus Aurelius wrote about the concept of an Inner Citadel. This is the idea that whatever is going on in your life, even when you are fighting the barbarians at the gate, you can keep a calm head and continue to make rational choices.
Remember: Stoicism is for winners.
Why do people spend so much? Good question. Perhaps they are influenced by advertising? Perhaps they think on some level that they are what they own? Perhaps they are influenced by other people’s spending? Perhaps they want to show off, to impress others?
But people with strong inner Game are not overly bothered by the opinions of other people. They are resilient, they can deal with challenges without falling to pieces. They have an inner strength whereby they are OK in themselves…without the aid of expensive props.
The hard bit with investing is managing your emotions and taming the monkey mind. Staying calm when everyone else seems to be panicking and buying more shares when they go on sale.
Doing the right thing in a bear market is all about your Inner Game.
It’s no secret that its best to buy low and sell high…so why do investors often self-sabotage by doing the opposite?
Hhhmm. Inner Game perhaps?
Knowing when you have enough
There are people who, by any objective measure, have enough. And yet they still can’t bring themselves to quit a job that is sucking the life force out of them.
This syndrome is so common that it even has its own name: One More Year Syndrome. Knowing when to quit and make a change in your life requires a certain degree of self belief. It requires you to understand that you are more than just your job.
It also requires us to let go of fear. That’s pure Inner Game.