General Financial Preparedness: The Six Habits Every High Performer Needs

This is the third installment in the General Life Preparedness series, where I explore the concept of General Financial Preparedness. It’s important to note upfront that this post is general and not meant to provide depth on any of the specific areas introduced here.  

As a reminder, the framework of General Life Preparedness is modeled after the concept of General Physical Preparedness (GPP), which I addressed in last month’s blog. A few months ago, while reflecting on GPP, I realized this principle could be extrapolated and applied to other areas of life, including Financial, Emotional, Social, and Spiritual. Together, these domains form the foundation of a high-performance life and are collectively referred to as General Life Preparedness. 

When it comes to General Financial Preparedness (GFP), I break it down into six areas:

1. Awareness

2. Compounding

3. Restraint

4. Planning

5. Generosity

6. Value

While you may go deeper or even become an expert in one or more of these areas, the goal here is to develop basic competence across all six. That breadth creates financial resilience and adaptability, preparing you for whatever challenge life may throw your way.

Awareness: Savers, Spenders, and the Power of Knowing

First up is Awareness. Financial awareness begins by looking inward and understanding your natural tendencies. Most people are naturally inclined to be either Savers or Spenders. 

Savers are conservative with their money. They find comfort in watching their balance grow and  prefer to hold onto funds for a rainy day. Spenders, on the other hand, are more likely to enjoy using their money—whether for themselves or others—deriving satisfaction from the act of purchasing or giving. 

Neither of these tendencies is inherently “good” or “bad.” What matters is being honest with yourself about your default setting. If you are a natural Saver, you might be well served by loosening the strings a bit and learning how to enjoy the fruits of your labor without guilt. If you’re more of a Spender, you can grow by developing the ability to think ahead and setting aside funds for the future or for emergencies. 

Both types benefit from intentional systems that help balance things out. One simple example: create separate accounts for spending and saving. This can help the Spender start saving without friction—by setting up automatic transfers into a separate savings account that they don’t touch or monitor regularly. It can also help Savers feel better about spending—by creating a “fun money” account that’s guilt-free and doesn’t interfere with core savings or life expenses.  

Awareness also includes knowing the basics of your current financial state: 

• How much you make

• Which accounts you have

• How much is in each 

It’s important to have a high-level view of how much you earn per hour, per pay period, and year. You should know generally how much of that goes to taxes, and get a general sense of how much you regularly spend on necessities. 

Some people will dive deeper with budgeting apps, or develop their own dashboards and spreadsheets to keep track of their financial resources, but for GFP, start by building baseline Awareness: know what you earn and what you spend. It doesn’t have to be any more complicated than that. 

Compounding: Interest, Investments, and Sunk Costs

The second area of GFP is Compounding. This starts with developing a basic understanding of how interest works—both in your favor (when saving) and against you (when borrowing). 

Earning interest is one way to make your money grow. Give yourself a solid base by learning the basics about compound interest. Compound interest means earning interest not just on your initial balance, but also on the interest you’ve earned during previous periods. It's like a snowball, where your money grows faster over time. 

For example, if you invest $100 at 5% interest, you'll earn $5 in the first year, making your total $105. In the second year, you'll earn 5% of $105 (which is $5.25), bringing your total to $110.25. This keeps compounding, leading to significant growth over time. 

Clearly, this principle works in your favor for saving, but it also has a dark side. Credit cards, for example, typically compound interest daily. This means that the interest charged on your outstanding balance is calculated each day and added to the principal. You then start paying interest on that new total—interest on your interest. Over time, this can significantly increase the total amount you owe, especially if you carry a balance and don't pay it off in full each month. Your debt can snowball quickly in the wrong direction. 

The point of this example is not to make a value judgment about using credit cards, but to encourage you to understand how they work, giving you the power to use them wisely, rather than reactively. 

While more behavioral than mathematical, another competence related to Compounding is avoiding the sunk cost fallacy. People commit the sunk cost fallacy when they continue a behavior or effort because of previously invested resources (time, money, or energy). Simply put, it’s doubling down on something that isn’t working—just because a past version of you made the investment—even though letting it go would serve you better.

In essence, it’s compounding bad decisions. 

The remedy? Be willing to cut your losses. Recognize when something isn’t working and walk away from it, regardless of how much effort you’ve put in to make it work. Those resources are already gone, whether you decide to pivot or not. The more honest you are with yourself, the more effectively you can redirect your time, money, and energy toward things that actually serve you. 

Here are a few real-world examples of the sunk cost fallacy that might sound familiar:

• You go into business with a partner who isn’t pulling their weight. Even after several failed attempts to realign the partnership, you continue out of loyalty and fear of wasting the initial investment in legal, branding, and planning costs.

• You enroll in an expensive executive program that turns out to be misaligned with your goals. You stick with it, rationalizing that you’ve already spent so much time and money, even if it won’t lead to the career you expected.

• You launch a boutique brand. Despite multiple pivots—new product lines, rebranding, influencers—the business consistently operates at a loss. Rather than cut losses, you double down with more capital, believing the investment “can’t be for nothing.” You’re now thousands more in debt and emotionally invested in proving you were right.

These examples reflect a common high-performer pitfall: valuing past investment over present evidence. 

Whether you're holding onto a failing investment because “you’ve already contributed so much,” or accumulating credit card debt in hopes things will turn around, the effects compound—literally. This mindset can delay smarter financial moves. In debt, it can spiral into financial quicksand. 

The lesson? Don’t let past choices dictate future ones. Cut losses when needed, because compounding works both ways—for your benefit or your burden.

Restraint: The Discipline That Builds Freedom

An important element of GFP is Restraint. This doesn’t mean deprivation or suffering; rather, restraint is having the ability to make wise decisions and exercise self-control. This starts with one basic principle: spend less than you earn. 

While there may be times when overspending is unavoidable, in general, strive to stay “in the black”. This means your income consistently exceeds your outflow. 

With Awareness as a prerequisite, you must first know how much you earn and how much you spend to ensure you are keeping things in balance. If you find yourself struggling, you might need to earn more or spend less. There are many ways to earn more, which are touched on briefly in the next section, but largely outside the scope of this article. However, nearly everyone can find ways to spend less by eliminating nonessential expenses and making more intentional choices about spending.  

Failure to practice restraint regularly can be a recipe for disaster. The obvious consequence is debt, but there’s a deeper issue at play: you miss the chance to build a crucial survival skill that you just might need someday. Much like a muscle, behavioral skills like restraint must be practiced to grow. 

A side benefit of practicing restraint is increased creativity. Imposing (and honoring) a spending limit can force you to think of alternative, innovative ways to meet your needs aside from just using the “money whip” to solve every problem.  

Another element of restraint is distinguishing between wants vs. needs. While everyone needs to eat, dining out for every meal is most certainly a want. We all need clothing, but we don’t need to buy a new outfit for every season or special event. This is not to suggest a complete abandonment of indulgence, impulse buys, or recreational shopping. It’s about knowing what category you’re operating in. 

Building GFP means giving yourself the skills you might need if your situation changes. Convince yourself that every expense is a need, and you’ll be in for unnecessary hardship if you lose your job or have an emergency that requires you to spend an unplanned large sum of money.

When it comes to restraint, get away from thinking “practice makes perfect”. This is not about perfection. Think instead: practice makes prepared. Flex your restraint muscle regularly so you’re ready to use it when it really matters. If you find yourself suddenly without income or face a financial emergency, you’ll already have developed the ability to respond, and it’ll be less of a challenge to overcome.  

Planning: Create the Blueprint Before the Storm

Perhaps the most tangible of the six components of GFP is Planning. Developing the ability to plan ahead will serve you well when life throws you a curveball and can soften the blow of emergencies. 

While it’s true that we can’t predict the future (and unexpected events are not only likely, but guaranteed), learning how to plan is a powerful skill. It’s a gift you give yourself and one that applies far beyond finances. 

If you’ve already practiced restraint and have reduced your expenses but are still exceeding your income, it’s time to start planning how you can earn more. That might mean picking up more hours at a current job, increasing your education or qualifications, changing jobs, or starting a side hustle. You could just dive into any one of these options, but you would probably have better results by pausing to think through the problem and create a plan. 

A good plan is clear but not too rigid, allowing for some flexibility so you can adapt as the situation evolves. 

Another great way to practice planning is to establish an emergency fund. It can take whatever form works for you—cash, checking or savings account, money market fund, etc. While a credit card or line of credit might be helpful in an emergency, it’s a risky backup strategy (see Compounding). 

There are many recommendations about how much to save and where to keep this money. The common thread is that it should be a sum of money that is set aside “just in case”. It offers not only peace of mind, but tangible resources to use when life demands a quick response. 

Building GFP is about resilience: setting yourself up for success so that you can handle whatever situation life throws at you. An emergency fund is a simple way to get started. If you don’t have much buffer yet, start small and build gradually, but the most important thing is to actually start. 

For example, you can automate your emergency fund to take $50 or more from your paycheck each month. It’s a small amount you won’t miss, but over time, it adds up to a significant financial cushion. Set whatever guardrails or rules you need for yourself, but take action so you can save yourself from future stress and financial strain. 

Generosity: Give Freely, Receive Fully

General Financial Preparedness is about more than knowledge and discipline, and is certainly not about deprivation. An essential component of GFP is Generosity. 

The obvious first step is to give when you’re in a position to do so. Share your blessings with others, and do so with an open heart. Not only will the other person benefit, but you will too, through a sense of joy, purpose, and deeper connection. 

When you give generously, you’re not just helping someone else—you’re also triggering a powerful hormonal cocktail that promotes happiness, connection, and long-term emotional health. It's biology’s way of rewarding kindness.

Here are some benefits of being generous with your money:

• Boosts your mood and motivation

• Strengthens relationships and trust

• Shifts you into an abundance mindset

• Reduces stress and regulates emotions

• Builds legacy and influence

How does this build GFP? It builds the capacity for generosity, which can be applied to other areas of life beyond finances. It gives you perspective and reminds you not to hold on too tightly. As the old adage goes, “There are no pockets in a coffin.” You can’t take it with you when you go, so share some of your surplus while you can.

The less obvious side of generosity is developing the ability to receive graciously. For many, this is the more difficult part of the equation. When someone buys your coffee or a meal, accept their kindness and remember to acknowledge their gift with a simple thank you or, better yet, send them a short note expressing gratitude. Thank-you notes are undervalued in our society but have a powerful emotional impact on both the giver and receiver.  

I’ve been in countless situations where I picked up the tab and the other person didn’t acknowledge or say thank you, most likely because they had not practiced the skill of gracious receiving. When you accept a gift and express appreciation, you allow someone else to practice their generosity, and you build your capacity to receive. 

One day, you may find yourself in need of help. When that moment comes, having already learned how to receive with grace, you’ll feel less discomfort—and be more able to accept support with an open heart and genuine gratitude.

Value: Time, Money, and What They’re Really Worth

The final component of GFP is Value. The first element of value is spending your money on items that provide good quality for the cost. 

A relevant saying here is, “Buy once, cry once”. It means it’s often worthwhile to spend more up front on a high-quality item rather than settling for something cheaper that doesn’t meet your exact needs. You might feel some initial discomfort as the money leaves your account, but you will avoid the future frustration (and expense) of replacing a subpar product. Often, you’ll end up buying the one you wanted later anyway, meaning you have now cumulatively spent more than if you’d just purchased it in the first place. 

Start making your spending intentional. Consider whether you are getting good value for your money by weighing the value of the item and its use over time. If you are in a position to do so, be willing to spend more for an item of higher quality that will last, or that you will truly enjoy, rather than focusing only on short-term savings.

Here are a few examples of value-over-time spending: 

• A $20 nonstick pan may need replacing every year or two. A $100 cast iron skillet, on the other hand, can last a lifetime, and even be passed down through generations of your family.

• A premium ergonomic chair can cost over $1,000 but prevents back pain, boosts focus, and increases productivity over thousands of work hours. A cheaper chair might seem smart in the moment, but can cost more in lost energy, physical strain, and injury.

• Spending more up front on a well-fitted blazer or supportive shoes means you’ll wear them often, feel confident, and avoid replacing them frequently. 

• Buying a high-quality insulated water bottle or a good coffee maker reduces waste, saves hundreds annually on takeout drinks, and supports sustainable habits. 

Another important aspect of value is learning to value your time. While this can be a more philosophical consideration, it starts with a simple math equation: think about your hourly wage and begin treating your time as a finite, valuable resource. If you earn a salary instead of an hourly wage, divide your salary by the number of hours worked to calculate your hourly rate. An excellent book about this topic is Your Money or Your Life by Vicki Robin and Joe Dominguez. 

Once you know the actual value of your time, you can start making more informed decisions about how to allocate both your dollars and your hours. 

For example, if you are trying to decide whether to hire a landscaper to do your weekly mowing, examine it through the lens of your hourly rate. If your rate is $50/hr and the landscaper charges $25, you may be better off financially by spending that hour working at your job instead of working in the yard. While this approach might seem a bit reductionist, it helps you develop the skill of assessing value and making intentional choices instead of simply reacting. 

Over time, this habit will serve to increase not only your GFP but also your overall resilience and adaptability.

Level Up Your Preparedness With a Coach

Building General Financial Preparedness is more than saving for retirement. It’s about developing a holistic understanding of how money works and how you interact with it, and it’s an element of General Life Preparedness. 

As we’ve explored, GFP is about mastering six essential habits: awareness of your financial behaviors, leveraging the power of compounding, exercising restraint, creating a solid plan, embracing generosity, and understanding the true value of your time and money. These habits empower you to not only manage your finances but also use them to build freedom and purpose.

Whether you’re just starting, refining your financial acumen, or addressing blind spots, working with a coach can accelerate your growth. At Luminology, we’ll help you develop personal habits that work for your unique situation, ensuring you deepen your preparedness, take control of your planning, and position yourself to thrive. 

Ready to build the preparedness that empowers you? Book a free discovery call with Melissa today to level up your high-performance life.