Mentoring in the Financial Independence CommunityFebruary 17, 2021 May 5, 2021 /
If we focus on mentoring in the Financial Independence (Fi) Community, we can establish stronger relationships, be even more successful, and attract more members to join the Financial Independence Retire Early (FIRE) movement.
We can all use a financial mentor, no matter where we are on our Financial Independence journey.
I’ve been in the Fi Community for more than five years and I don’t think a day has passed where I haven’t thought about how to effectively promote Financial Independence.
It should be easy, right? I mean, Financial Independence is very straight forward, supported by logic and math and, as a bonus, generally results in people living happier and healthier lives.
But, for whatever reason, the concept of Financial Independence hasn’t taken the world by storm. Until it does, I will continue to take every opportunity to introduce it to anyone willing to listen.
Spreading the message of Financial Independence
A few weeks ago, I was at a park in San Diego with my son. A young man was out playing with his dog. Kids gathered around them and my son wanted to join in the fun. We made sure our masks were snug and walked up. Light conversation ensued and it turned out the young man had served five years in the military and was now a personal trainer.
When he asked what I did, I said I was on terminal leave. I was only a few months from being retired from the Navy and was planning on spending some time in Hawaii.
He asked what kind of job I was going to get in Hawaii. I said I wasn’t planning to work.
There was a pause. And then I asked, “Have you heard of Financial Independence or the FIRE movement?”
I’m fairly social so these types of interactions are common. Unfortunately what isn’t common are interactions like this leading to the indoctrination of the next Fi Community member.
But, when a person does show genuine interest, I get excited. The thought of someone making positive intentional financial decisions to live a happier life motivates me.
I want to become their financial mentor, the one to help them get started on their Financial Independence journey. I want to provide the support and guidance the best way I know how.
Why is mentoring important?
Members of the Financial Independence Community have developed more than a basic knowledge of finance and, in many cases, a well-rounded perspective on the concepts of Financial Independence. If we accept and carry out our financial mentor roles as intentionally as we do our own finances and life design, we can be more effective at attracting people to the Financial Independence Community.
Mentoring is a brain to pick, an ear to listen, and a push in the right direction. – John C. Crosby
The purpose of this article is to share “a way” to think about the mentoring process specifically as it relates to the Financial Independence journey.
First, I’ll identify what I believe to be the three stages of the Financial Independence journey.
Then we’ll discuss the responsibilities of mentoring.
And finally we’ll explore how we can carry out our mentoring responsibilities as it pertains to each of the three stages of the Financial Independence journey.
The first step of my Financial Independence journey
My Fi journey officially began when Stephen, my identical twin brother and eventual founder of CampFI, invited me to Camp Mustache in May of 2016. Prior to that event, I had no idea how expansive the Fiosphere was. Stephen sent me a few Mr. Money Mustache articles and I read those but really didn’t reach beyond that before attending this event.
I didn’t know any of the speakers or attendees before walking into the retreat center. But it didn’t take long for me to feel comfortable and start getting excited for this thing called Financial Independence. There was something about being around real people, sharing similar perspectives as mine regarding money management. This is something rarely experienced with coworkers, friends, family, and neighbors.
It was interesting and exciting and it helped motivate me to focus on my own Financial Independence.
Since then, I transitioned through what I consider the three stages of the Financial Independence journey.
The three stages of the Financial Independence journey
The three stages of the Financial Independence journey are:
- Gotta Have It
Stage 1. Hype
Do you remember when you first discovered Financial Independence? You didn’t know all there was to know or exactly how you were going to achieve your Financial Independence. Maybe you were thinking Financial Independence sounded too good to be true. But, you were curious, you were excited, and you wanted to learn more.
Stage 2. Habit
At some point, we transition through the pure excitement stage and start doing the actual work of making progress. This is the habit stage. In the habit stage we become proficient in money management. This is where we really begin to understand our complete financial picture and take routine actions we believe will get us to where we want to be.
Stage 3. Gotta Have It
In the Gotta Have It stage you’ve got the mechanics of financial management down and are prepared to start making the more complex life decisions. You’ve already established the confidence and competence. You know that if you stick to your plan, you have a good chance of living a life of your design. In addition to continuing to manage your finances responsibly, you explore and execute life design choices based on what you believe will lead to a more fulfilled life.
You are ready to be a mentor
Something happens as we progress through these stages. We gain experience and develop a unique but very valuable skill set. And whether or not you intended for it to happen, you become known as the go-to person for any money questions.
If you’ve been in the Fi Community for a few years, you likely find yourself firmly in the Gotta Have It stage and are ready and willing to support others on their Fi journey.
The remainder of this discussion is going to focus on the primary responsibilities of mentoring and how we can be more effective.
The responsibilities of mentoring
The primary responsibilities of mentoring are:
- Follow Up
We must first try to understand the perspective of the individual. This includes numbers, facts, conditions, influences, circumstances, context, desires, and what they see as their challenges, strengths, etc.
If we spend most of our effort trying to truly understand, it will put us in a better position to provide good advice.
You are experienced, you’ve lived this. You know the practical linkages between taking action and future success. Use what you know from your own journey and from what you’ve learned about the mentee, and provide the best advice you can.
At its core, mentoring is a relationship between two people. This relationship is based on trust. You build trust over time by showing that you care, and they help build trust when they take action executing the plans that you developed together.
The relationship falls apart if we don’t follow up. As the mentor you are their go-to. They rely on you and if you agree to be their mentor then you owe it to them to prioritize following up.
Following up helps maintain positive momentum, both in the mentoring relationship and in the Fi journey.
Now let’s see what Understanding, Advising, and Following Up actually looks like when mentoring someone in each of the Hype, Habit, and Gotta Have It stages.
Mentoring in the Hype stage
Remember that the Hype stage is the discovery and excitement stage. A person in this phase may have stumbled upon the concept of Financial Independence through a friend, a recommended blog post, or through desperation.
The thought that they may be able to shape a future without a 9-5 grind into their sixties is exciting. They don’t know exactly how they are going to reach Financial Independence but they are intrigued.
Understanding in the Hype stage
In the Hype stage, help your mentee understand what Financial Independence is. Focus on what they believe Financial Independence means to them and why they want to pursue it.
Work with them to identify facts, figures, and understand their personal and financial environment. As you hear them tell their stories, don’t be too quick to jump in and offer advice at every opportunity. Giving them a list of 100 things to accomplish before your next conversation won’t work.
Listen for understanding. Take notes. We should make this step the easiest step. And it is the most important step. Why? Because if we get some major facts wrong, or we jump in and become too passionate and too assertive, they will be turned off.
Reinforce what they already know, commend them on their decision to pursue Financial Independence. While it may be easy for us who have years of talking about this stuff behind us, it can be very challenging for someone to open up and share financial and personal circumstances. If they feel comfortable enough to do that with you in the first few conversations, take that as a win.
The objective for this stage is for the mentee to become more comfortable with the concept of Financial Independence and to begin building confidence and competence. Repeat this process until you feel their passion for pursuing Financial Independence will carry them forward.
Advising in the Hype stage
After you’ve established a comfortable rapport and a thorough understanding of your mentee’s financial environment, it is time to provide some guidance. Keep it simple. Focus on one or two immediate tasks that can be carried out without investing too much time or inducing (potentially) too much anxiety.
What are some first steps a person can take to begin their Financial Independence journey?
- Finding the login information to their 401k plan and determining just how much they are contributing and into what funds. Don’t be surprised if they need a bit of hand-holding. This may be completely foreign to them.
- If there is a subscription service they no longer find valuable, they can cancel that service and set up an autopayment in the same monthly amount towards paying off a credit card or contributing to an emergency fund, retirement account, etc.
- Begin tracking their spending by writing down the amount spent for routine purchases like groceries, gas, monthly bills, etc. This will provide real data that can be reviewed later to help inform and shape spending habits that are more in alignment with their goals.
Following Up in the Hype stage
Once you both have agreed on just a few steps for the mentee to take, schedule a follow up call. In this stage, excitement and motivation are high. Take advantage of it. Choose a day no longer than a week from now and agree on a time that you will call them to check on progress and answer any questions they may have.
At the end of the conversation, based on progress up to this point, agree on a few more tasks you both feel will continue progress.
Remember, the most important thing in this stage is to establish an understanding, determine a few tasks that can be easily executed, and repeat. This builds even more confidence and motivation to continue.
Understand that while every person understands the importance of finances, not everyone will mirror your passion. Actually, it is very likely you will appear more motivated than your mentee. It may be challenging, but try to match your mentee’s enthusiasm. Don’t oversell or undersell.
You want your mentee to accumulate many small wins in this stage. It is their actions, not your enthusiasm that will ultimately lead to their motivation. Small wins build motivation, confidence, and the likelihood they will look forward to the next conversation.
Mentoring in the Habit stage
A person enters the Habit stage when they have firmly committed to their Financial Independence journey. They have developed some competence and confidence by completing some of the first steps towards Financial Independence.
The Habit stage can be characterized by executing the routine financial management skills that will lead to Financial Independence.
These skills can include tracking spending, budgeting, automating retirement account contributions to max out, determining and taking steps as to what strategy will be used to reach Financial Independence. Successful strategies to achieve Financial Independence can range from simply maxing retirement accounts to rental real estate to entrepreneurship to any combination of the above.
The Habit stage is ongoing. Continuous reflection of strategy, execution, and skills is required to ensure efforts continue to remain focused and in alignment with current desired outcomes.
Understanding in the Habit stage
In this stage, your mentee will be working through projections, learning about different strategies and taking action. As a mentor with experience, directly or indirectly, in many of the more common strategies, you will know what questions to ask to help ensure your mentee is thinking about the most important aspects.
Advising in the Habit stage
Many in the Financial Independence Community have their favorite online calculators, spreadsheets, and trackers. These programs will help compare scenarios, help determine the likelihood of success of a particular course of action, and let you know if you are on track to meet your goals.
At this point in the mentoring relationship, you have a solid understanding of your mentee’s goals and level of commitment.
If you have personal net worth trackers, spreadsheets, or apps, or anything that you have found useful that you also think your mentee will find beneficial. Now is the time to help them learn to incorporate these tools into their planning and execution.
Recommended Net Worth Trackers, Budgeting Tools, and Calculators to help in your mentoring:
- You Need A Budget (YNAB) – Helps you give each dollar a job. There is a YNAB Audiobook that I have listened to and recommend. Listen to it to determine if you think YNAB would work for you. There are also Facebook groups that offer guidance and support.
- On Trajectory – If you ever wondered how one potential investment or financial decision can impact your financial future or chances of meeting your goals, this is the program for you. There is a slight learning curve but the founder Tyson Koska has plenty of YouTube videos to help you out.
- Personal Capital – Many in the Financial Independence Community use this. It is free (I believe) but you may receive a “courtesy” phone call once your net worth hits $100K to discuss management options. Most decline but use the phone call as a worthwhile Financial Independence Milestone worth celebrating.
- Spreadsheets – Create your own or join the Fiology Community Facebook Group and ask others to share theirs. The overwhelming majority of Fi Community members are willing to share.
- Compound Interest Calculator – Simply save this to your favorites as a bookmark. You’ll come back to this often.
Note: none of the links in this post are affiliate links. Fiology receives no payment for these included recommendations.
Following Up in the Habit stage
As compared to the Hype stage, you won’t need to follow up as often. Perhaps a monthly phone call will be appropriate.
Definitely let your mentee know they can reach out to you with any questions or concerns they have.
Mentoring in the Gotta Have It stage
A person in the Gotta Have It stage doesn’t need to be motivated and they know how to effectively manage their finances. They are confident that they are executing a plan that will get them to Financial Independence. Financial Independence is inevitable.
The overarching concept of focused management continues. However in addition to the financial focus, other aspects of life design are considered.
Maybe your mentee has questions about life transitions. Their focus has shifted from “Am I going to have enough money to retire?” to “Should I leave my job early to focus more on family?”
Once the money is figured out, we are able to focus on other aspects of life with the intent of fulfilling purpose and experiencing happiness. To be clear, you can achieve Financial Independence and be miserable, so it is worthwhile to focus on happiness, whatever that means to you.
Understanding in the Gotta Have It stage
At this stage, you’ve developed a deep rapport with your mentee. Speak frankly and don’t be afraid to tactfully play devil’s advocate if you feel it is warranted. You’ve shown you care and that they matter to you. They respect and want you to challenge their thinking. They know your intentions are good and you have guided them well so far.
Perhaps you are friends now. Great. Remember that you have lived your experiences and they have lived theirs. In this stage, the decisions being considered are on a spectrum of all good choices.
Advising in the Gotta Have It stage
One way I like to think about playing out different scenarios is how I think I will feel given probable outcomes of various choices. Imagine your mentee is considering selling a rental property, paying the taxes due, and taking the proceeds and investing in a low-cost broad market index fund.
Of course we are using practical assumptions and the actual numbers do matter. But, ask how they will feel if their rental portfolio continues to perform well or suffers over the next few years. Ask how they will feel if their index fund investment performs well or suffers over the same time period. How might each choice impact future options?
Help evaluate the tradeoffs. Provide alternative scenarios they may not be thinking of. Be supportive all the way. It is likely that the money-focused decisions made in this stage are not make-or-break, only more or less objectively optimized.
The best decisions for a person once wealth accumulation is no longer the primary guiding factor may have nothing to do with the money. And isn’t that the ultimate goal of pursuing Financial Independence – to no longer have to make life decisions based on money?
Following Up in the Gotta Have It stage
The money mentor/mentee relationship is much less formal at this point. A few times a year may be appropriate. Most likely your mentee will reach out to you whenever they are considering a big decision.
When mentoring goes bad
No person sets out to be a financial mentor with poor intentions. But, things do happen. Relationships change over time. It is completely natural. If you determine that your money mentor or mentee is no longer a good fit. Cut ties respectfully and move on.
Five mentoring guidelines to help maintain sanity.
- The mentor can’t want results more than the mentee
- If you do, you both will experience frustration. One or both of you will move on. If your mentee shows a great amount of passion, match it. If time passes and they aren’t motivated to move forward, that’s fine. Make yourself available but don’t push.
- The ball is always in their court
- You can lead a person to the Financial Independence kool-aid, but you can’t make him/her drink. The mentor/mentee relationship is a two way street. It’s their Financial Independence journey, not yours. If their heart isn’t in it, let it be.
- Focus on progress not perfection
- The Financial Independence journey can be long. Failures along the way will happen. Lessons will be learned. Progress will occur. If the knowledge and net worth trendline is up and to the right, that is worth celebrating.
- Planting a seed is a win
- Remain patient. We each have our own starting line and run at our own pace. Be confident the information and guidance you are sharing is being considered and will likely be put into action when ready.
- Consistently good leads to great
- Long-term focus is the key. Seemingly small steps over time will have an enormous positive impact. Don’t expect too much (or too little) in the way of progress in the short-term. As long as the decision-making process remains solid over time, the results are inevitable.
Not all mentoring is equal
You may find that someone wants you to be a subject-specific mentor. Perhaps a person wants to explore investing in real estate and you are a real estate guru. You can provide your experiences with the hopes that your mentee can leapfrog over the tougher challenges you went through.
No single person is an expert at all the ways to become Financially Independent.
If your mentee wants to start a business and you have never started your own business, recommend someone you feel confident can help guide your mentee in a positive direction. Likewise, if someone wants to learn about dividend-investing or how to make money using side hustles, and you don’t have personal experience, refer them.
Admitting your limitations and refering to someone who may provide additional value demonstrates transparency and honest communication.
Who needs mentoring?
We all do.
As the founder of Fiology, a free Financial Independence Course that helps thousands on their Financial Independence journey, I am well-versed in most concepts. However, I am still on my own journey – in life and in money.
I need a mentor.
And you do too.
Being both a mentor and a mentee makes you better at both.
What is the difference between mentoring and coaching?
For the context of this article, being a financial mentor is an informal agreement. A financial mentor has more experience in a particular topic (or in life) than the mentee and is willing to share what they know. Ideally this relationship results in the mentee achieving their goals. A mentor generally does not accept payment. The reward of knowing their efforts led to the success of others is more than enough.
Financial coaching or financial advising is different. When you seek out a financial coach or financial advisor, there is usually a formal agreement. The arrangement likely includes payment in exchange for services. In many cases, but not all, there is an expectation that the person providing the coaching or advice has completed some type of professional education or certification. If you are looking for a very specific skillset to shoulder the requirements of your money management and planning, this may be an option worth considering.
Where can I find a mentor?
There are services you can find online that offer services for a fee. However, this article is not about those. I don’t recomend going that route. There are plenty of awesome people in the Financial Independence Community that will gladly offer their guidance at no charge.
Because Financial Independence mentors are not mentoring for a paycheck, a Google search isn’t likely going to reveal what you’re looking for.
The best places to find a financial mentor are:
- CampFI or other finance events like the EconoMe Conference, Camp Mustache, and/or FINCON.
- Financial Independence Facebook Groups. Simply look for one and join. After a while of reading posts, the notables will stand out. Reach out and see if they will take you on as a mentee.
A good mentor can change your life
I was lucky enough shortly after discovering Financial Independence to have found an amazing mentor.
On the second day of Camp Mustache in 2016, I walked up to a retired submariner and asked him directly if he would be my mentor. He said yes. I had no idea just how much he would impact my life. Since then, his mentoring has provided me guidance on my military career, on real estate purchases, on generational wealth, and how to teach my kids about money.
Our families have grown fond of each other. Doug and his wife have hosted us on the island of Oahu where my wife and daughter fell in love with surfing.
I’m not unique. Doug extends his mentorship to many. I’m forever grateful he took us under his wing.
If you feel well-versed on Financial Independence concepts and want to help others, please consider becoming a financial mentor.
By David Q. Baughier of www.fiology.com