Written by Kyle J Christensen, CFP, Oct. 25, 2022

One of the treasured few memories I have with my maternal grandfather is of he and me sitting together, watching the stars at night. Because he lived in a small rural town in northern Utah, the stars were nice and bright. We especially valued the moments when we saw a “shooting star”, which was likely a satellite in most cases. One thing he always challenged me to do first, however, was to find “the Northern Star”. Since then, I have always loved looking up into the heavens at night and looking for the Northern Star. It has always given me a calm assurance of where I am and where I want to go.

Polaris, or the North Star, as it’s more commonly known, is the brightest star in the constellation Ursa Minor. Because of it’s seeming fixed position almost directly in line with the earth’s rotational axis above the North Pole, Polaris has been used for millennia as a guide for navigation for people on land or on sea (https://en.wikipedia.org/wiki/Polaris). 

Principles are like the North Star in our lives. They give us something fixed in our lives that we rely on when making choices. They are used in our personal and professional lives. They guide us. They give us something to compare against. They give us assurance and peace, knowing that if we follow them, they will lead us to the outcome we desire.

Ray Dalio said it this way in his book Principles: Life & Work: 

Principles are fundamental truths that serve as the foundations for behavior that gets you what you want out of life. They can be applied again and again in similar situations to help you achieve your goals.

Every day, each of us ifs faced with a blizzard of situations we must respond to. Without principles we would be forced to react to all things life throws at us individually, as if we were experiencing each of them for the first time. If instead we classify these situations into types and have good principles for dealing with them, we will make better decisions more quickly and have better lives as a result.  

People have all sorts of principles they use in their everyday lives. Principles such as work and knowledge. Principles such as honesty and integrity. Every professional in every profession has principles that they’ve been taught to follow. Those principles help them avoid getting sued, help them do their jobs correctly, and keep people safe. Principles help people succeed.

Principles really do help us make choices easier and quicker. They are something we commit to and become engrained in us. They become part of our identity. 

Research suggests that a person makes about 35,000 choices per day. That’s an incredible amount of choices in a single day! How does a person have time to do that? Many choices are made simply out of instinct and habit. Others are made easier and quicker because we’ve already committed to and believe in certain principles in our lives. 

Do principles apply to money? 100%. Yes! Unfortunately, we’ve been conditioned by the financial services world to make financial decisions the wrong way. They’ve conditioned us to make decisions based on mathematical calculations and predictions of the future. That’s like building a bridge based on forecasts of the weather instead of basing the construction on sound principles and codes. The only thing that’s right about predictions of the future and financial projections regarding people’s money, is that they are all wrong. 

So, if we aren’t supposed to base financial decisions in predictions and calculations, what should they be based on? Principles. For example, the principle of saving, or paying yourself first. This also happens to be Principle #1 in our planning process. Saving is not something you do sometimes and other times you don’t, based on needs or predictions of needs. It should be something you do every time you get paid. It should be a percentage of your income, set aside, off the top, before anyone or anything else gets paid (only exception being charities or religious contributions – those should come even before paying yourself). Saving money is something you should do throughout your life, regardless of the stage of life you are in. You do it precisely BECAUSE you can’t predict the future or your future needs and wants. You also do it because “cash is king”. If you want to be in a position to take advantage of the best opportunities in your life, you will need cash to do it. Cash gives you opportunity. Without following the principle of saving, you won’t have cash for opportunities. You save out of principle, not out of prediction.

Other principles that we teach include the Three Rules for Investing. 1) Invest in yourself, 2) Invest in what you can control, and 3) Don’t chase returns. Following these rules helps you know what true investing is, and what it is not. It helps you recognize the difference between real investing and simply gambling (which is what most people are doing). Without these Rules (or principles), people are more likely to become victims of slick and deceptive marketing, as well as scams. Being dedicated to these principles requires time and effort, which is why most people violate them. Most people are constantly looking for the easy path, and in so doing, they avoid the very things that would lead them to financial freedom. It’s always surprising to me how many people, who know the essentiality of work, effort, and knowledge, will so easily give those things up and buy into the easy path that Wall Street and other “opportunities” propose. The easy path has never worked long-term in any other area of your life. Why discount your principles and the things you know when it comes to your money?  

I love how Booker T. Washington described the importance of the principle of work: 

Nothing ever comes to one, that is worth having, except as the result of hard work. (Up From Slavery)

If a person wants to become financially free, he/she must follow the principles that have always and will always govern money. I encourage you to read books from highly successful people, and be reminded of the principles that they followed to create their success. 

Decabillionaire Ray Dalio states in the very first paragraph of his book, Principles: Life & Work, “The most important thing I learned is an approach to life based on principles that helps me find out what’s true and what to do about it.” Principles truly are like the North Star, which can be used to guide us on a sure path over the sea of financial choices we face in our lifetimes.