How to Make Great Financial Decisions

2025 Will Be… Interesting

I am going to teach, or perhaps remind you today, how financial lives work in simple language, using an equation.

This equation that I will share with you is something you could explain to a seven-year-old.

It’s not complicated and will help guide you as you make financial decisions this year.

And here’s why we’re starting with the basics on this fine January day.

Not a single person on planet Earth has a clue how this year will unfold.

Here are just a few synopses from my reading just yesterday.

1. The Federal Reserve is unsure of its interest rate path.
2. Elon Musk thinks we must experience “temporary economic hardship” as a country to get back on track.
3. The US economy is still strong.
4. Nobel-winning economist Paul Krugman thinks bond yields are rising because of an “insanity premium.”
5. $50 billion of LA Real Estate is destroyed, and thousands have had to evacuate.

Let me read the tea leaves for you.

Everyone’s got more uncertainty in their life than they care to admit, myself included.

You’ll hear one executive at a Wall Street firm say he is bullish on the equity markets while another smart executive at the firm across the street says the opposite.

This opposing perspective, mired in uncertainty, isn’t wrong or misguided.

It’s just a reflection of the times we’re investing in.

Yet, you have a retirement to fund, a life of financial freedom to pursue, and money to invest.

This dilemma is precisely why we need a refresher on the basics and how you can use them to make better decisions with your money.

How Your Financial Life Works

Here are the three variables in any financial life that, when added together, yield a financial outcome.

No matter who you are, this is how it works, basic as it is.

Let me break these down for you a bit.

+ You

There’s you: your experiences, your skillsets, your weaknesses, your knowledge, and risk tolerances.

You are at the center of your financial life, and what you believe about the World, the people you know, what you choose to invest in, the place you work, and your goals all add up to you.

I won’t elaborate more here because it is obvious that you matter immensely in your financial life.

+ World

I teed up this edition by regurgitating what’s being shared on the news: there’s a ton of uncertainty right now.

And much of it is far out of our control.

For example, President Biden just removed medical debt from credit score calculations with the stroke of a pen.

Just like that, something changed in how financial lives work in the US.

Always remember this when investing: the World we invest in just is.

It is up to you to manage how the World affects you and be relentless in finding opportunities within it.

Another example – you have 50k in cash in 2022 while the Feds raised interest rates.

The World, well, the Feds then your bank, presented you with higher interest rates.

Whether you agreed with this or not, you or I can’t exactly call Fed Chair Powell and say, “Jay, I’m not sure you’re right about those interest rates. Could you lower this 1.25% for you?”

No, interest rates went up, stayed up, and presented different opportunities/risks for investors.

In this example, it was up to you to ensure your cash is placed in the correct account to maximize the interest you receive versus the bank’s receiving it.

You need to manage how the World affects your cash in this example.

This leads to the final piece of the equation.

+ Actions

You make daily decisions about how to earn money, keep it, and grow more of it.

Those decisions either push you ahead, pull you back, or keep your status quo.

Every day that goes by where you have a dollar invested is a day that you made a choice to invest.

The sum of these actions is something to stay laser-focused on.

At this week’s workshop, 17 Things to Do with Your Money in 2025, I started by reminding attendees to work on the right problems in their financial lives this year.

And be relentless about it.

I gave an example of trying to save 2% more money this year vs getting a new job that yields 30% more income.

Saving 2% more is good. It won’t change your life per se, but it’s good.

Making 30% more income is epic and can change your family’s life.

That’s progress.

When it comes to money, progress requires taking the right actions with your money.

= Outcome

When you add up who you are, how you manage the World around you, and the actions you take, you get financial outcomes.

But let me share with you how using this simple framework helps cut through the noise and make progress.

A Case Study: Saving for Lucy’s college

Here’s a case study of something I did a few weeks ago to show you how this works. My wife and I were pondering saving for our kids’ college, particularly our oldest, Lucy.

The equation for college savings for Lucy

I have a daughter named Lucy, who will attend college in 13 years.

I never had student loans, but my wife did.

Paying them off was, how can I put this, annoying.

Nothing like starting your adult financial life with a large, negative worth.

However, my wife and I value education and would not be where we are without our college degrees.

We would love to have our kids go through college without student loans.

This is the “you” part of the equation.

Next, the world.

College for Lucy will cost about $250k for an in-state public school and $400k for an out-of-state private school.

It’s unreal how expensive it will be if prices continue to climb 7%+/ year.

As much as I think it’s ridiculous for a family with three kids to spend $750k-1.5m on college, it is what it is.

I can’t change what they charge.

I can only take action.

Knowing that my wife and I value education and college is expensive, the ball is in our court to take action.

1. What can we afford to save?
2. What sacrifices are we willing to make to do this?
3. What is the best strategy to accomplish this?

I did the math, upped our monthly contributions into her 529, and moved on.

We took action, hopefully leading to a favorable outcome for Lucy.

Make better decisions

This equation helped me cut through the noise as I pondered saving for my kid’s college.

It helped my wife and make a financial decision by boiling things down to the essentials.

We value education, it’s expensive, and investing is an efficient way to achieve our outcome.

When I look at this equation, knowing that is how financial lives work, here’s what I tell myself.

1. I am the most important thing in my financial life. I need to know what I excel in, where my weak spots are, and focus on my family’s goals.
2. The world just is. Great investors believe in a better day, and I want to be relentless in finding opportunities while minimizing risks to our clients, business, and my personal life in every way.
3. My actions and the problems I choose to spend my time working on are everything. If I spend 20 years working on things that don’t matter (financially speaking), the results will reflect that, and vice versa.
4. Define the correct outcome and add a zero. I need to stay focused on the goals, always think bigger.. everything else is a distraction (financially speaking).

When I think about you and your financial life in 2025, knowing all that is ahead and how many decisions you will have to make this year:

1. You matter immensely—keep reading each week to get new perspectives on how this all works. There are proven paths to more money, income, and freedom. I want to show you what those are and how to connect them together.
2. Think about managing the risks the world is presenting to you right now and finding opportunities. It’s as simple as that.
3. Commit to taking better financial action this year, simple as that.
4. Start with the end in mind, flip the equation upside down, and hunt for big outcomes that lead to Tired & Rich lives.

Keep it simple, and take action.