The recipe for finding financial success is an easy one. Spend less than you earn, and do something sensible with the difference. If you do that over and over, you will see financial success. The challenge is actually making that happen. It’s not easy, and most of us eventually hit a bump or two along the way.
Many people respond to those bumps in the road by finding an excuse. And that excuse usually still works for the next mistake – and the one after that. Soon, the excuse is a “rule” by which they live their life. Unfortunately, it’s a “rule” that ensures their continued financial misery.
There are as many excuses as there are grains of sand on the beach, but here are seven common ones.
“You only live once!” The “you only live once” (or YOLO) excuse is often used with impulsive behavior. The worst part of this excuse is that most of the impulses a person defends are quickly forgotten.
You don’t have to live a boring life to be financially responsible. You just have to be willing to look at how you’re spending money and choose to not spend it on the things you won’t remember in a few days. You might only live once, but that’s not a reason to simply watch money vanish. Choose your expenses wisely, and you’ll have a great life now and later.
“It’s impossible to get ahead! The game is rigged!” Your financial situation is the result of thousands of your own choices. No one is making you spend money on your hobbies or interests. No one is forcing you to make impulse buys. No one is requiring you to make risky career choices or to not give your full effort in your professional life. We choose to do those things – and when we make those choices, we face the consequences.
If you’re finding that you’re not getting the results you want, the first place to look is at yourself. Blaming others or shouting about a “rigged” game simply lets you shake your fist in anger so you don’t have to take a look at yourself.
“Every time I get a little ahead, something comes up!” Life is filled with emergencies. If you find that those emergencies are constantly undoing your plans, then you need to make different plans – ones that include some breathing room for the unexpected.
The single most important thing people can do for their first financial move is to build an emergency fund. Everyone should strive to have at least $1,000 sitting in a savings account at all times, and most experts recommend saving at least six months of your living expenses. That should be your No. 1 goal.
“I have plenty of time to take care of it!” The problem with this excuse is that there is no better time than right now to save for your financial goals, no matter what those goals are. The second you start believing your future self will fix your problems, the harder you make every single goal in your life.
The reason is simple: Compound interest allows you to build up money for any goal, and the more years you give compound interest to grow, the more powerful it will be. If you start saving for retirement at age 25, you might only have to save 5 percent of your take-home pay. Wait until age 45, and you’ll have to save 25 percent or more to make up that ground. The same phenomenon is true with debts – a little extra payment right now adds up to a lot by the end of your loan.
“I have to spend in order to keep up and look good!” This is the spotlight effect in action. Unless you do something truly exceptional (in either a positive or negative way), you’re not going to stand out from the crowd. Spending money to keep up with the Joneses won’t get you lauded and won’t earn you extra attention. If everyone on the block drives basically the same car, no one is going to notice if your car is two years older or two years newer than everyone else’s car.
Instead of spending a mint to “keep up appearances,” look instead for the best bang for the buck for your needs. Buy functional cars that don’t stand out in a negative way but last for a long time and provide good gas mileage. No one will notice, and your wallet will breathe a sigh of relief.
“I’ll never get out from under this huge mountain of debt!” When you make poor financial choices with this as your excuse, all you’re doing is guaranteeing the truth of your statement. If you keep adding to your debt mountain, you never give yourself a chance to shrink it.
Each month, focus on making your minimum payment on every debt and making an extra payment on your smallest debt. Before long, that smallest debt will vanish, and that debt mountain will look a lot more fragile.
“Investing is too risky! I’ll just lose my money!” Most investments outside of a savings account carry at least some risk. Here’s the catch, though: If you’re investing in anything outside of a savings account, you’re probably not touching that money tomorrow or next week or even next year.
That’s because most investments outside of savings accounts are meant for the long term. Unless you’re a professional day trader, you’re not going to be buying and selling investments on a day-to-day basis. You’re going to buy them and sit on them until you either need that money, or you want to make an investment change. That often takes years and sometimes decades. You can’t judge the riskiness based on just what happened yesterday in the stock market – or even what happened last year.
The bottom line: Don’t let these excuses rule you. Everyone can find financial success by putting excuses aside and making new choices. It might mean letting go of some familiar routines, but once you break free, you’ll have a new life ahead of you.