Here’s the problem with personal finance.
90% of the time people know what they need to be doing with their money and they either do it or they don’t.
People generally have enough knowledge to manage their money on their own.
What they are looking for is the motivation to change their habits and for someone to tell them what to do.
How people handle their money is not based purely on what the “right” decision to be made is. If this were the case people would never:
- go out to eat because it would be cheaper to eat at home.
- buy something they couldn’t afford on credit.
- sign a mortgage for more house than they can afford.
- not have enough money to retire because they didn’t plan for it.
The problem with constantly reading about money and what you should do with it is that it gets repetitive. You already know what you should be doing with your money most of the time.
Yes, there are three specific situations where guidance is helpful and needed:
- Debt (Bankruptcy, Repayment Plans, etc.)
- Savings (Retirement/Estate Planning)
- Taxes (Because they are way too complicated)
Beyond the few situations where you may need to have a relative expert help you determine what you need to do with your money, every other financial decision that you make is strictly psychological.
So, what is it, in your mind, that is keeping you from achieving what you want to financially?
(image via Flickr)
{ 8 comments… read them below or add one }
You’re right - most of us know what we need to do, it’s just that the instant gratification of quick decisions often outweighs long-term goals that will require consistent effort to produce results. Basically, I know that I shouldn’t go out to eat, but if I’m having a bad day, it’s a lot easier to justify grabbing a cheeseburger than going home and cooking - even if doing so puts me further away from reaching my long-term goals.
In a way, it’s a lot like weight loss. It’s just easier to trade short-term happiness on a small scale for something that would be much more rewarding a long ways off.
Great point Sarah. The instant gratification is a big issue that keeps us from reaching our financial goals.
Deferred gratification needs to be built into how someone uses their money.
For me it is that I seemto hold a belief that I am no good with money and will never have any, I will always be poorly paid and skint etc (iPhone autocorrect wanting to change skint to slimy!). I think that this belief was installed when I was really young an my parents taught me about money, having little at te time and so on. At school I was never good at maths and with a lot of stupid impulse buying when I was younger, buying the thing to simply impress others mainly (not consciously thinking that though) I have built up the belief that I am bad with money and will never be able to have a lot of it. I find that I can’t think creatively either when trying to create ideas for secondary sources of income etc. This belief also affects me spending on food an a social life. I talk myself out of doing things because I don’t think I have the money and then go and waste it in other areas. That’s what is holding me back.
Thanks for sharing Ian. It is easy to be overly frugal in one area and then let the self-control slide in another. Putting checks and balances in place to make sure you have the same limits in each area of your life is key.
Caleb you really nailed this one! The majority of us indeed know what we should be doing with our money. The key here is DISCIPLINE. We have to have goals and plans for our money and be strong enough to say no to the things that may hinder our progress.
Thanks Aaron.
No matter what types of books people read on “how to get out of debt”, they simply don’t execute on what they need to do.
Excellent post - very true! I am the type who cannot keep cash in my purse - the energy has to flow!! Then I kick myself because I could have used the money I squandered on coffee for things I complain I can’t afford. It is a mindset we need to break - the thermostat of our subconscious pulls us back into where we ‘belong’ which is the world according to our experience, beliefs and comfort zones. We have to shift these beliefs about who we are and what we deserve to have if we truly want to have more. It is harder work than you can imagine - but the proof is all around us in the stories of success - people who overcome obstacles, achievers, money magnets…. We do know what to do - the next thing is to crack the psychological barrier!
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