Today’s piece is contributed by Robyn of A Dime Saved.
At first glance, it appears financial problems are primarily about money. But in my experience, most financial mistakes often point to other obstacles. It is usually not about the money.
We all have our experiences and frameworks that have gotten us to where we are. Sometimes our choices are from ignorance. Other times, the reasons behind our behavior may not be as apparent.
How we spend and interact with money is often a symptom of more significant issues. These problems can either lead us to make sound financial decisions or lead us to make terrible choices with our money.
For example, maybe we struggle with talking about money with our partner, or we find that when we get stressed, we eat out more, or, conversely, we struggle with spending money on anything.
To tackle our money problems, we have to get behind the behavior to see what is going on. Creating a budget and living frugally can only get you so far: you must get to the root of the issues.
Most people can change their money habits temporarily, but the focus should not be on only doing what we think we should be doing. Soon things settle down, and when the original motivation wains, we will revert to what comes more naturally to us.
True change can only come when we understand the reasons for our behavior. Merely changing our actions will not lead to lasting change.
This is why figuring out the reasons behind our behavior can help us change our actions permanently.
There might be areas where we lack knowledge, and we should pursue educating ourselves on what we don’t know. However, most core money issues are not caused by what we don’t know.
- Most of us know we should not spend more than we make, and yet on average most of us have large credit card balances, whether because of behavior or necessity.
- We know that to retire, we need to start saving. However, few people are investing in their 401k’s.
How do people make healthy financial choices over the long term?
Maybe the best place to start is to “fake it until you make it.” But this will not last long-term if we don’t realize our actions result from other feelings/ideas/problems that we need to focus on to change our trajectory.
But to change our behavior permanently, we have to eventually move from the “fake it until you make it” mentality to a place where good money decisions result from a lasting change in our lives.
What Matters Most
There is always a reason behind our choices. We don’t live life doing random things for no reason.
One way to tackle money problems is to take a look at what we want. When we are old and wrinkled, what kind of choices will we be happy to have made?
Things that will matter the most:
- Our relationships: How connected we are to the closest people in our lives.
- What we accomplished: Have we worked as hard as possible to accomplish what we wanted to accomplish?
- Enjoying life: Did our experiences cause us to enjoy life?
- Memories: Having tons of great memories will help us have a positive perspective on our past.
Things that won’t matter as much:
- Stuff we purchased: Material possessions we want and don’t “need” can only give us a certain amount of value.
- The house we lived in: We often get used to the house we live in and learn to enjoy wherever we end up living.
- How much we earned: How we use our money is more important than how much money we earned. Obviously, earning more money can give us more options, but only if we choose to exercise those options. Likewise, how you spend is more important than how much you spend.
Looking at what we want to accomplish can help us determine what choices are not leading us down the right path and which choices lead us to what we truly want.
When I think purchasing an expensive TV that I can’t afford will make me happy, it becomes easier to justify spending more than I make and going into credit card debt.
But when I realize this item is not going to add much value to my life and limit my options, it can provide the power I need to make smarter financial decisions.
When I realize that spending money on certain aspects of my life- such as health, education, memories, and things that bring me joy — I can budget for those things appropriately and truly feel at peace with my spending.
Financial problems ultimately come down to us being confused about what we want in our lives and what is worth pursuing.
Weigh the Pros vs. Cons of Our Financial Choices
Asking ourselves this question will help us determine whether this financial decision is worth it:
Will I regret making this decision in the future?
We can’t 100% know for sure how our future self will feel about our present financial choices. But previous decisions can help us determine how repeating those choices will make us feel in the future.
So, in my opinion, this is the best option to figure out how we should move forward right now.
Another way to look at this is to make a document with two columns. In the first column, put the questionable things you want to buy right now.
Then, in the second column, describe things you could do with that money that push you towards your goals instead of purchasing the items in the first column.
By comparing and contrasting the choices directly, we encourage ourselves to think about these decisions from a more logical perspective.
Get Emotional About Your Dreams
Emotion often drives us to make decisions. And this isn’t necessarily a bad thing, as having emotions is human.
The trick is to understand the emotions that we experience and how they push us to make certain decisions, and harness those emotions to help us achieve our goals.
We can tap into the power of emotion to push us towards what we really want by getting emotional about our dreams.
Often this is a matter of focusing our energy and time on what we want to achieve and where we want to go in the future.
But you have to know what those dreams are and envision yourself experiencing the emotion of achieving those dreams to tap into this power. This process does the following:
- Focuses our time and energy on what we want.
- It helps us make choices that we will not regret in the future.
- Refills our “energy bar” in pursuing what matters most to us.
Once you truly understand WHY you are acting the way you are, you can change HOW you act. By understanding the emotions and feelings behind our money decisions and using them to make better money choices, we can truly feel happy with the financial decisions we are making.
What methods have you used to tackle your financial problems, and what you want to achieve?