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6 Ways Entrepreneurship Can Teach You about Personal Finance

There are certain activities that all successful entrepreneurs do very well. While writing The Creator’s Code, Susan Wilkinson uncovered six commonalities shared by founders of some of the most recognizable brands. Though interesting in this context, these traits are not limited to building a profitable business. Parallels can be drawn into your personal finances as well.


  1. Find the Gap – See opportunities that others don’t see. Finding the best investment opportunities often requires doing things a little bit differently. For example, Warren Buffett has advised that we “be greedy when others are fearful and fearful when others are greedy.”Markets move in cycles. Learn the basics for why prices go up and down. Then you will be able to find investment opportunities that others are missing. 
  2. Drive for Daylight – Top-level entrepreneurs focus on the future. Wilkinson notes that “researchers at the University of Chicago found that people who are pursuing goals focus on either what remains to be done – “to-go” thinking – or how far they’ve come already – “to-date” thinking.” They found that to-go thinking increases the likelihood of reaching a goal. When it comes to managing your finances and investments ask yourself “What’s next?” Visualize and focus on your desired result and you will gain momentum toward its realization. Don’t give yourself a hard time about past financial mistakes. As Henry David Thoreau said “never look back unless you are planning to go that way.” Spend all your energy on what you can do next. Focus on your top three priorities. When building Apple into the technology giant it is today Steve Jobs told his executive team “make a list of our top ten priorities. Now throw away the bottom seven. We can only do three things.” When it comes to your finances, focus on your top goals for this year that, if reached, could dramatically improve your life.
  3. Fly the OODA loop – OODA stands for observe, orient, decide, and act. Take inventory of your finances and update your progress regularly. “Focus on the concrete particulars that are present right now” says PayPal cofounder Peter Thiel. Move quickly from one decision to the next. Differentiate between relevant and meaningless information. Be decisive. Take action. For you this may require creating a budget, reviewing how your spending is going at the end of each month, making changes, and putting these adjustments into action.
  4. Fail wisely – A series of small failures is essential to avoiding catastrophic mistakes. Entrepreneurs use the failure ratio. That is, they place small bets to test ideas. During my time working in Wealth Management, a new client would regularly “dip its toe in the water” and give my company only a portion of their wealth. Once they felt more comfortable with the investment, more money would be deposited into their account. On the other hand, if something went wrong they would withdraw their money. Investing like an entrepreneur requires that you learn from your mistakes and determine a better way to move forward. Test out investment products before making a big commitment. There is no better way to learn about a product, like an ETF, than to actually invest some of your money in it.
  5. Network minds – Entrepreneurs bring together the brainpower of diverse individuals through on- and off-line forums. Collaborate with your significant other and friends to discuss ideas about personal finance and investing. Additionally, broaden your network by interacting with others in social media and personal finance writers. Wilkinson states “the act of networking minds prompts us to set aside traditional expectations and free ourselves to see things anew.” New perspectives will plant the seeds for growth.
  6. Gift small goods – After you reach a certain point in your financial education journey take time to help others and share information. This is my favorite point and the main reason for my desire to start this blog! I want to open up opportunities for others and listen for ways to provide help. Paying attention to others needs broadens an entrepreneur’s competitive edge.  Similarly, the growth you experience in understanding personal finance and investing will increase by offering to help others who are trying to understand what you already know.
If you take time to begin practicing each of these six guidelines you will begin to see improvement in your finances quickly. You will increase your knowledge, be more focused on your specific goals, plan better, take smarter risks, broaden your network, and even be able to help someone else in the process.


As always, if you have questions or comments, feel free to send me a message. Thanks for reading.


John
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