They say that money is far more about what happens in-between your ears than what happens inside your wallet. The psychology of personal finance is VERY fascinating, and probably the most important part of getting a handle on your money. There are tons of different psychological traps we can fall in to that cause us to veer off course with our financial plan and make dumb money decisions.
Today, I want to dive into the psychology of one of the biggest reasons for the mis-handling of your precious dollars, and what we can do to combat this financial temptation.
Getting on a budget is pretty simple. Honestly, it’s as simple as looking at your past spending, and then building a plan for future spending. You put it on paper (or in a program), track your progress, and hit your goals.
But anyone who has EVER gone from NO BUDGET to getting on one knows that, while the concept of budgeting may be simple, putting it into practice is NOT EASY! It’s simple enough to write down some numbers, but making the everyday decisions to stick to that plan can prove frustrating and sometimes feel impossible. We get mentally stuck, or blow the budget, or just can’t seem to stick to the plan and end up wanting to throw the budget away.
One thing that can creep into the psyche of a newly minted budgeteer (or heck, anyone on a budget) is that nagging little voice telling you that “you just need a break.” You know the voice. It usually is accompanied by an advertisement for something that would seemingly help you relax and stop working so hard. Or something that would make you feel good about yourself (for a short while). It’s the voice that says:
“Go Ahead, You Deserve It”
The moment that voice creeps in is usually a moment of weakness or frustration. It pops in when you’re tired, or stressed, and lets you know that you can ease the pain or anxiety of hard work by just spending some money on something. I mean, “why not, you deserve it. You work hard, you earn the money, and this budget thing isn’t getting any easier. Might as well enjoy life, right?”
I Am Hearing This Voice Right Now
I’ll admit, I’m actually in the middle of this dilemma right now. For those that don’t know our financial situation, we’re VERY CLOSE to being debt free (except the mortgage). We’ve got about $7,000 in lower-interest student loan debt hanging around (started with about $45k total debt), and I’m on a mission to kill it this year. I’m pretty pumped about this goal, and am excited to get rid of it. Though it’s not some crazy interest rate, the amount of freedom gained from being debt free to pursue savings, projects, and building our net worth is going to be AWESOME!
But my car is old.
I’ve written about this car before. I’ve even recorded a video mocking it 🙂 And though I love getting tons of miles out of old, efficient beater cars, this car is probably on its last legs (well, can probably get another year out of it). With just over 311,000 miles on it, there are a few issues that need some attention. And the issues are annoying (like, my car revs up and down anytime it’s in neutral). It’s also got a few leaks that I know how to fix, but will just take a while. And that’s annoying too.
And I’m starting to hear the voice.
“Jake, you’ve kicked butt the last few years. Your net worth has climbed like crazy, you’re almost debt free, and you just got a killer promotion. Why not just ditch the junker and drop some cash on that one car. Yeah, you know the car. And hey, it’s still only $6,000. You can get a great deal, and then you’ll love driving again! Why not? Go ahead, you deserve it.”
Even as I type this, I’m still hesitant to post this because I know what the right thing to do is, I just don’t want to do it! 😉
The Way Out
When you start feeling this way, it’s pretty easy to convince yourself that you NEED whatever it is. Whether it’s eating out, or a new outfit, or even a NEW CAR (oh the horror!), you can convince yourself to blow money almost anywhere when you’re in a weak moment.
Luckily, there’s a simple way out.
Remember the goals you wrote down when you were going to the first steps in the Budget Basics Series? You know, those big, awesome goals that you based your entire budget around, giving your money a purpose and a passion?! Well, those are the key to getting out of your financial funk.
Write those goals in BIG lettering on a piece of paper. Heck, snap a photo and make them your computer and phone background!
When you write them down, remember the reason you created them. Things like “get out of debt, save for college, buy a house, give to the needy” all had a grand vision when you wrote them down. Do you remember that vision?
Just sit for a moment and put your future self in that place. You have just hit your next goal. You avoided all the temptations to spend and you got yourself out of debt. You paid off your car. You are sitting on a beach on a FULLY PAID FOR VACATION! You just deposited thousands into a college savings account for your kids. You just PAID OFF THE MORTGAGE!! Or maybe you just RETIRED 10 YEARS EARLY!
Remember that feeling.
Now think again about that financial temptation that you were just about to give in to. Is it really all that appealing? Do you “deserve” that thing that’s going to set you back to make you work more than you have to? Or do you want to hit that next goal?
I know what I want.
Let’s Think About It Another Way
Ok, now that you know the excuses we can make to spend money on dumb purchases, let’s take this scenario and flip it on its head. I’ll use my car voice as an example:
“Jake, you’ve kicked butt the last few years. Your net worth has climbed like crazy, you’re almost debt free, and you just got a killer promotion. Why would you ditch the junker and drop some cash on that one car? Hey, it’s $6,000 that would take you a while to save for. All the while, you’re working even harder to pay off your debt by paying more interest on it than you have to. Why waste the awesome momentum you’ve built for the past few years on a car that you can wait for? You can get a great deal later, and then you’ll love driving again! But how about taking every extra dollar, throwing it at this debt, and celebrating your freedom with a friggin’ epic BBQ at the start of summer?! Sure, it’s an aggressive goal, but you’ll work hard for it, remember?
Go ahead, you deserve it.”
Comments: Has this ever happened to you? How do you get over this temptation? Also, is anyone selling a Blue ’02-’03 Subaru WRX Wagon for less than $5000? Hit me up when I’m debt free 😉