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Examining My Mental Representations of Money

This is going to be a bit of a weird and intangible post. But I think it will be a fun exercise for me and hopefully for all of you as well. What I am going to try to do is examine and express my mental representations of money.

But to do this, we will have to take a few steps back first…

What are mental representations?

As I write this, I just finished reading a book called, Peak: Secrets from the New Science of Expertise by Anders Ericsson and Robert Pool.

The book examines the field of expertise and how experts come to be. Here is the one line synopsis based on very high quality research: Experts are more a product of hard work and focus over a long period of time than they are a result of innate talent.

And the way that experts manifest this hard work and focus over a long time was termed by the authors as deliberate practice. Deliberate practice is a form of practice in which individuals identify areas for improvement, design exercises to improve specifically those areas, and utilize immediate feedback usually under the guidance of a coach.

mental representations money

As one implements deliberate practice, what researchers believe is happening is that to-be experts develop, refine, and perfect mental representations of the activity that they are becoming an expert in. These mental representations are, well, mental structures that help us understand and perform the task at hand. And the better our mental representations are, the better we perform.

For example, in surgery, as we operate more we develop mental representations of how the operation is supposed to go. Then we can assess how it id going as we actually operate by comparing to our mental representations. We then refine our mental representations more and so on and so on. Doing this consistently over time with immediate feedback and we become an expert.

Why do mental representations matter?

From the above, we can see how one’s own mental representations would be advantageous to any individual working to become an expert.

However, they also can serve a very important purpose in teaching others how to become experts.

Let’s use the example of surgery again. As I learned to perform complex microsurgery in training, my surgical mentors shared how they visualize the surgery, how it is supposed to go, and what makes it successful.

I didn’t realize it at the time, but these were their mental representations that they were sharing. And I used them to help shape my own.

One of the best ways to help understand how experts became experts is to examine their mental representations. This usually means having them do whatever task they are an expert at – playing an instrument, playing chess, performing surgery – and having them talk through what they are thinking while they do that activity.

It’s likely a much more effective way to learn.

Does money have mental representations?

This all got me thinking…is it possible that we carry mental representations about money?

And the more I thought about it, the more I think we do. Because, if you map out my financial comeback, what I really did was institute the principles of deliberate practice.

I wanted to become an expert in money. Because my lack of financial well-being was a major contributor to my burnout. To do this, I identified the areas that needed improvement. Things like:

  • Saving money
  • Investing money
  • Creating a written financial plan

Then, Selenid and I created exercises to specifically improve these areas of our finances. Strategies like:

  • Education through books, blogs, and courses
  • Budgeting to learn to save our money and pay ourselves first
  • Beginning to invest small amounts in index funds
  • Meeting regularly to create and refine a written financial plan

Meanwhile, we also received immediate feedback from other experts in the field, both inside and outside of medicine. This feedback came both off-line via books and podcasts and live via courses and webinars and discussions virtually and in person.

Now, flash forward 3+ years later, and we implement these same exercises today. And as a result, our mental representations around money have been formed, refined, and strengthened.

And while much of this blog can be viewed as me sharing my mental representations of money, I want to try and break them down discretely and concretely.

How this is going to work

I am going to “think about money” and describe my mental representations. When I say I am going to think about money, I guess I really mean I am going to think about how I visualize, conceptualize, and enact the process of reaching financial freedom.

I do want to preempt this by saying that I do not view myself as an expert. But I do have a real passion for financial freedom for doctors. So I spend a lot of time practicing and thinking about this stuff. So I think my mental representations are fairly well formed and generally pointing in the right direction.

My mental representations may be somewhat shorter and, frankly, simple than you expect. Remember, I am a subscriber of the Keep It Simple Stupid philosophy. Maybe that explains it. But I think they are just as, if not more powerful, this way.

My mental representations of money

When I think about money, I visualize it in my mind like a series of blocks or vertically oriented rectangles.

My first step

On the left hand side is a tall box representing my monthly income. Right off the bat, a few smaller boxes come in on the right hand side. Each of these boxes represents a fixed expense. Things like:

  • Mortgage
  • Kids’ school tuition
  • Student debt payments

Each of these blocks then, in turn, makes the “income” box smaller by their commensurate expense. For instance, if my mortgage is 1/5 of my monthly income, then that “mortgage” box shrinks my “income” box by 1/5.

Then a whole new set of smaller boxes come in from the right representing our less fixed expenses. Things like groceries, entertainment, and the like.

The remaining “income” box on the left hand side now represents our remaining savings rate to invest.

A question may come up as to why I don’t remove a “savings rate” box from the “income” box right away. To many, this may seem like a better representation of the concept of paying yourself first. I don’t disagree. However, my mental representation, I think, reflects my viewing budgeting and controlling expenses as a key component of reaching financial freedom.

The practical exercise that empowers us to enact this portion of my mental representation is our budget. You can find my free budgeting template here.

The second step

I always say that the way to build wealth is to create and grow the gap between what you make and what you spend. This leftover box represents the gap that we created. Now that I have my extra savings rate box left over after all of our expenses, it is time to invest that money.

Now, the box gets split up according to our asset allocation. 90% goes to stocks and 10% goes to bonds. This all occurs via purchasing index funds in our various investment accounts. You can see exactly how this gets split up here.

Via investing, that box will fluctuate up and down. However, the overall long term trend is for it to grow. I want to minimize risk of this box shrinking by a large margin. This is most likely to occur with stock picking and timing the market. That is why I stick to index funds, they will outgrow an active investment strategy 80% of the time with less fees and taxes.

Lastly, real estate for me is now a totally operate box that grows on its own and we invest the cash flow from it back into real estate. My blog business also represents a separate box.

The practical exercise that empowers us to enact this portion of my mental representation is our written financial plan.

The last step

Now, as these boxes are created and start to grow each month, I start stacking them on top of one another.

The result is my net worth, the scorecard of wealth. It allows us to track our progress towards our financial freedom goal.

The practical exercise that empowers us to enact this portion of my mental representation is our net worth calculations each 6 months or so. Here is our most recent breakdown of our net worth.

Did that make sense?

I hope so.

But honestly I’ve never really outwardly shared my mental representations about money. So I’ll have to rely on you to let me know!

In the meantime, if you are looking to strengthen your money mental representations, here are three actionable steps you can take today!

What do you think? Do my mental representations make sense? What are yours? Can we learn from others by sharing them? Let me know in the comments below!

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    Jordan Frey MD, a plastic surgeon in Buffalo, NY, is one of the fastest-growing physician finance bloggers in the world. See how he went from financially clueless to increasing his net worth by $1M in 1 year and how you can do the same! Feel free to send Jordan a message at [email protected].

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