We all want to do the right thing. We all want to save appropriately, spend less, have money for important or emergency expenses, but we don’t. We have all the right intentions, many of us know what the right strategy is and yet we get tripped up.
Sometimes the world trips you up with a recession, a job loss or an injury, but many times we trip ourselves up. Here are my top 5 ways we trip ourselves up. Any of this sound familiar?
- Our life style expands just a little more than our income expands-
- What Happens: we know a raise is coming and we start enhancing our lifestyle first with house renovations, or new cars. We deserve it, right? We worked hard.
- What SHOULD Happen: live on the same amount and save the increase if you are not in already in a stable savings position.
- Feel you are failing as parents if you do not give junior a certain life –
- What Happens: Junior expects sleep away camp and ballet. She’s always had them before.
- What SHOULD Happen: It’s your job as parents to set appropriate limits that allow you to save. The greatest life skill you can teach junior is to spend less than she earns and she has no chance of doing that if you do not. She is watching you.
- You feel entitled to keep up with the Jones’ –
- What Happens: Entitlement is a financial killer. You are not entitled to live beyond your means just because someone else lives a certain way, your upbringing was challenging, or your self-esteem needs it.
- What SHOULD Happen: Screw the Jones’. Relieve financial stress by having enough savings, and living within your means. Buy things you love when you are financial able to afford them. You will enjoy them more and see that living within your means is living richly.
- We succumb to the idea that we are all too busy and have to throw money at solutions to the challenges that result.
- What Happens: We love being ‘busy.’ If you do not respond to the question of “how are you?” with “busy” you feel uncool. Busy, is shockingly expensive.
- What SHOULD Happen: Slow down, take time to plan for big expense like braces, vacations and college. Have cash on hand for car and home repairs. Save consistently and habitually. Busy is financially uncool.
- We earmark funds for more than one purpose –
- What Happens: Everyone does it. You know a tax refund is coming, or a bonus and you say, “I’ll make that my Rainy Day Fund,” but you also know you need to pay for camp and you think, “well, I have that bonus coming, I’ll make it work.”
- What SHOULD Happen: Money can only serve one purpose at a time. Plan for each expense and save deliberately each month for upcoming expenses.
Each of the five deserves an entire post (and I will do that at some point), but the bottom line is each type of sabotage is related to not knowing what your financial situation really is and not knowing what it should look like. When most people see their actual financial situation, they can change their behavior. When they just have a feeling things might be wrong, nothing ever changes. You have to know.
Know what your financial situation is and be honest with yourself about your needs. The peace of mind that comes with it is worth far more than anything (and I do mean ANYTHING) listed above. Knowing is better than not knowing when it comes to your finances.