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Taking Your Finances From Good to Great

“Few people attain great lives, in large part because it’s just so easy to settle for a good life.”       – Jim Collins, “Good to Great”

On the first page in the first chapter of his book, “Good to Great,” Jim Collins makes the intriguing statement above. While it’s a business book, focusing on how some companies manage to break from their pack of competitors to achieve remarkable and sustained success, Collins believes the lessons are applicable on a personal level as well.

Let’s take a closer look at how they apply to our use of money.

Something bigger than you

Lots of business leaders revel in the prestige and perks of the corner office. I once worked for a company that had a past CEO who was over the top in his love of power. During a leadership retreat, he walked out on the balcony of his hotel room, looked up, and was dismayed to see one of his direct reports standing on a balcony higher than his. The CEO demanded to be moved to a higher floor.

By contrast, Collins’ first finding is that companies that make the leap from good to great do so with what he calls a Level 5 Leader at the helm.

Level 5 Leaders exhibit a rare mix of extreme personal humility and intense professional will. Whereas leaders at lesser companies (what Collins refers to as “comparison companies”) tend to put themselves first, Level 5 Leaders “channel their ego needs away from themselves and into the larger goal of building a great company.”

“Level 5 leaders are a study in duality: modest and willful, humble and fearless.”

I know a guy who came home with a new motorcycle one day. No discussion with his wife. No thought as to whether they’re saving enough for their kids’ education.

By contrast, I’ve written before about a friend who married into $50,000 of non-mortgage debt. Every time his wife mentioned “my debt,” he corrected her: “It’s our debt.” That comment has “Level 5 Leader” written all over it.

There’s a certain selflessness required from anyone who wants to achieve not just success but meaningful success.

As University of Pennsylvania psychologist Martin Seligman, author of “Authentic Happiness,” writes, “A meaningful life is one that joins with something larger than we are,” and “the larger the entity to which you can attach yourself, the more meaning in your life.”

Level 5 Money Managers arrange their finances around goals that are bigger than themselves, such as their faith, their family, and their contribution to the world.

The window and the mirror

Another fascinating finding about Level 5 Leaders has to do with giving credit and taking responsibility.

At comparison companies, when something goes wrong, the leaders typically blame other people or circumstances beyond their control. When something goes right, it’s all because of them.

Level 5 Leaders take the opposite approach. When something goes wrong, they take responsibility. When something goes right, they credit their team, the economy, and even luck.

Collins calls this “the window and the mirror.” Comparison company leaders look out the window when something goes wrong and look in the mirror when something goes right. Level 5 Leaders look out the window when something goes right and look in the mirror when something goes wrong.

Think about your finances. Are you struggling under the weight of too much debt? How did that happen?

I’ve met many people with heavy debt loads who have been through some horrendous circumstances such as divorce, unemployment, or medical issues. Understandably, some blame those circumstances for their financial problems. But some also accept responsibility for not saving enough or not using a budget to guide their spending. It’s been my experience that those are the ones most likely to get and stay out of debt.

Level 5 Money Managers own their financial challenges and are quick to share the credit for their financial successes.

Taking the long view

One last characteristic of Level 5 leaders is that they are in it for the long run, wanting “to see the company even more successful in the next generation, comfortable with the idea that most people won’t even know that the roots of that success trace back to their efforts.”

“We found that for leaders to make something great, their ambition has to be for the greatness of the work and the company, rather than for themselves.”

If you’re married, what are you doing to make sure your spouse will be just fine financially if something happened to you? Does he or she know the passwords to your household’s online accounts? Have you involved him or her in investment decisions? Do you have enough insurance so that your family wouldn’t face a financial hardship without you?

If you have kids, what are you doing to set them up for greater success than you have achieved? Are you teaching them about hard work and delayed gratification? When they’re on their own, will they be able to navigate life successfully? Or have you made things too easy for them?

Level 5 Money Managers are all about the long-term success of their families.

Can you learn to be a Level 5 Leader?

Collins believes there are some people who probably never will become Level 5 Leaders. They’re simply too focused on what they can get from other people and from life.

But he suspects that a larger group of people could become Level 5 Leaders. For some, it might take a catalytic event – an illness, for example – to prompt the sort of introspection that often leads to more other-centered behaviors. Another route is putting into practice the key behaviors of all “Good to Great” companies. Change your behavior and it’ll change the way you think. That’ll prompt more Level 5 behavior, which will further enhance the way you think, and around it goes in a very positive cycle.

How are you applying Level 5 Leadership to your finances? How could you do a better job?

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Trackbacks/Pingbacks

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