The 3-Step Framework for Solving Any Financial Problem

Tyler Gardner (0:00)

Hello, friends. This is Tyler Gardner welcoming you to another episode of Your Money Guide on the Side, where it is my job to simplify what seems complex, add nuance to what seems simple, and learn from and alongside some of the brightest minds in money, finance, and investing. So let's get started and get you one step closer to where you need to be. This podcast is directly inspired from my guest from last week's episode, Victoria Ferguson, who began discussing the framework that she's been working on in order to solve all financial problems. And if you haven't listened to it, I would highly encourage you to go back and listen to this episode, because it was jam-packed with guidance and wisdom from a top expert in her craft. Inspired by what she was talking about, I built upon this framework to try to make it as universal and applicable to all of us and all of our problems.

This week, we'll be talking about something that is so fundamental to both your temporary and enduring success, not just in finance, but in life. And yet something that so few of us, myself very much included, know how to do. The ability to name a problem, prioritize that problem over the noise, and then solve that problem, hopefully once and for all.

Because let's be honest, most people don't make it past step one. And, as always, I will begin each show by reminding you that you are not alone. This is a really difficult process, and there is zero shame in your and my not knowing what we don't know. If we don't know what the problem is, how the heck can we be asked to solve it? Too frequently, we find ourselves not only lost in the fog, but surrounded by vague anxieties and a growing to-do list that never seems to shrink. Not to mention, we exist in a world of marketing culture that is intentionally designed to make us feel this very angst, and as if we are always trying to solve for some lack, some emptiness that, odd, we didn't know we had until this product came on the television in the first place and can apparently solve it. Additionally, once we do acknowledge the problem, once we can break past that first barrier, we tend to add it to the pile of all the other problems we have, trying to fix a little bit here, a little bit there, but ultimately leaving every problem, not only living rent-free in our minds, but continuing to be, well, a problem. And that mode of being is not sustainable, it's not enjoyable, and it's certainly something that I believe deeply we can and will solve together. So today, we're going to break this into three straightforward topics. And the goal is to provide you with a framework for problem-solving that you can all, regardless of your demographic or current level of angst, use at your discretion, and apply to your own personal situation, as remember, all personal finance is always and will forever be personal. So the prescriptive mindset we'll go over today is a framework, not a specific answer. We will start by figuring out how best to name the problem, because that clarity in and of itself is far more important than you might imagine in finance, in business, and in life. I have spent decades arguing over problems that weren't even the right problems over which to argue. And I had a mentor two years back who, thankfully, would always cut through the debates by asking us first and foremost to consider if we were even articulating the right problem. So just know, the grand irony here already is that part, or perhaps all of the problem, is our inability to name the dang problem in the first place. Now, once we achieve this clarity, once we name this financial problem, or life problem, because they're the same thing, we need to prioritize that problem. Might seem simple, but here's where it will get interesting, because prioritizing that problem does not mean simply adding it to our to-do list. Your first priority, in fact, is to get rid of your to-do list. If you have multiple things on that list, you are not living into the art of prioritization. And we cannot, despite what our little animal minds tell us, try to solve every problem at once bit by bit. It just doesn't work like that. Finally, once we have named the problem and chosen to prioritize that problem, we need to find the right solution. And this too proves truly difficult in the face of endless noise and nonsense and marketing techniques all trying to capture our attention. All you need to do is scroll through social media these days to see hundreds of self-proclaimed money experts or life experts or coaches trying to sell you their specific solution. So how do we judge what resources are valid and what resources are vapid? So I will close the episode by offering a few ideas to add to your self-imposed information filtration system. And by the end of the show, I am to leave all of you with a prescriptive and practical framework that can be applied to anything in your lives, but particularly to your financial headaches. Step one, as mentioned, we'll be naming the problem. Before pivoting to finance, I taught high school students for about a decade. And note, the following point is not particular only to high school students. But I did notice that age group had a fun and consistent way of framing a type of problem, if you will. Every day, regardless of which day it was, Monday, Tuesday, or Friday, I would hear the following refrain from someone. Once I'm done with X, then I will be so happy. Or if only it could be next week, all of my problems would be gone. The students, without being able to necessarily articulate what was happening or why it was happening, were feeling a sense of angst, and they were attaching that angst to an external event. Perhaps it was an exam, a ten-page history paper, or a high-pressure sporting event. Only, and I am sure some of you have picked up on where I'm going with this, once said anxiety-inducing event was over, guess what? The following week, I would hear the echoes in the hallway. If only it were summer break, I'd be so happy. But wait a minute, student number 43, didn't you just tell me last week you'd be so happy this week once that exam was over? What happened to that? Obviously, I found slightly more tactful ways to hint that they were experiencing something universal, an inability on our parts to name the problem. The problem wasn't a test. The problem wasn't the quarterfinals of basketball. The problem was fear of failure, fear of being judged, and an ever-present insecurity about external validation to offer us a sense of intrinsic worth. And that problem, unfortunately, doesn't fade away as time passes. We have to name it and choose to actively address it. Beyond high school students, most people feel this stress, anxiety, or discomfort, whether it's in our jobs or in our daily lives. But so rarely do we stop to figure out what it is that's at the root of this emotional response. This is the equivalent of walking around your house with a growing headache, thinking maybe you're dehydrated, only to realize that you've been listening to the same smoke alarm chirp at you every 45 seconds, reminding you that smoke alarms might be the most annoying invention on the planet. PSA, don't smash your fire alarms at 2 a.m. with a hammer when you can't find out how to stop the dang thing from chirping or how to silence the single scariest voice you've ever heard in your life coming from the basement. That's a bad idea, although it is a temporary solution. And to my therapist who I saw when I was 12 years old about being scared of the dark, this is what I'm talking about. It's scary down there. The ability to precisely name a problem gives you an incredible amount of control over it. Vague concerns are debilitating because you can't solve what you can't define. Clarity is and always will be power. Let's apply this directly to money. I'm sure that you have either said or have heard someone say, I'm bad with money. Unfortunately, that's not a problem. That's a broad, vague claim that is largely subjective. So, refining the above, we might get closer to identifying an actual problem. I don't know where my money is going each month. I don't know how much money I need to retire. I keep making emotional investment decisions. Now we're getting somewhere. Because we've taken the broad idea of bad, and we've taken the massive concept of money, and we've identified some subtopics within this endlessly broad financial world, and pinpointed exactly what might be driving us crazy about our inability to solve for X. When you name the real problem, you create the opportunity to fix it. We haven't obviously fixed it yet, but at the very least, we're on our way. This is one of the reasons big data, as it's known today, the world of data that companies collect about how we interact with their products or services, needs to be endlessly filtered, refined, and then interpreted, as the data alone could support thousands upon thousands of hypotheses of what the problem is. So once we collect enough data points, we need to get better and better at refining what the problem actually is. Some of the greatest breakthroughs in history were really just about finally naming the real problem. Take the germ theory of disease. People finally naming, hey, maybe tiny invisible organisms are killing people. Instead of, we need more leeches. Or, emphasizing Warren Buffett's 25-5 rule. Buffett encouraged people to take time to write down 25 of their goals. I guess Buffett was a big thinker, because that seems like a daunting task to me in and of itself. But he encouraged people to write out 25 goals, and to identify the top five goals on that list, and then cross out the other 20 Even though I will push you to identify one, not five, as a priority, what I love most about the 25-5 concept is that he literally wanted you to cross out the other 20 ideas to emphasize that other goals can and often do cannibalize your main goals. Meaning that time devoted to them, even though maybe moving them forward a little, can eat away and does eat away at more important goals. So by crossing out 20 ideas, we remind ourselves that we are capable truly of doing anything really well. But we are not remotely capable of doing everything really well. There is a reason I continue to use flippers when I go swim laps at the pool each day, as I'm what's known as a sinker. And without my little floaty devices, I wouldn't be able to move horizontally. I wish I could be a better swimmer, but I'm not, so I use flippers. So if you're feeling stuck, even if you don't know why, or perhaps especially if you don't know why, take some time to ask yourself, what's the actual problem here? Not the symptom, not the emotion, but the thing that, if fixed, would actually make your life better. And don't be scared ever of asking for help with this. Some of the best people to help you identify your problems are the ones that might be able to see them from a slightly more objective standpoint, your partner, your parents, your friends. Don't be scared to ask for help naming a problem, unless your partner's the problem. Then I might not start there. Step two, once we have named something, that's not enough, we know that, it's just not. Now we need to prioritize that problem, aka the art of actually knowing what the word priority means. I can say with sincerity that if there is one thing that has helped move my life forward, it is the art of establishing one priority at a time and not extending myself or expending my energy until I believe I have truly moved the needle in a meaningful way for that one priority. I would guess that most people feel particularly stuck at this point, because we typically add a newly articulated problem to an already impossible list of priorities and try to tackle everything at once. I'll ruin the punchline early. It's not going to work. Blame the former English teacher and me, but the term priority comes from the Latin prioritas, which literally meant the first thing, not things, thing, singular. For 500 years, people used priority correctly. And then sometime in the 1900s, businesses started using the word priorities, plural, because they didn't understand that the entire point of a priority is that it's singular. And you have surely heard some framing of the idea that if you have multiple priorities, or worse, competing priorities, then you have no priority. And that's a much bigger deal than we make it out to be.