Striking at the Root of Your Money Problems
I never have enough money. No matter what I do, I just can’t save. I swear I don’t overspend, don’t know why I’m always in debt. I guess I just don’t have much luck with money.
There you go. The old stock excuse of not being in ‘luck’ has popped up again. It’s a bit like saying I have no luck with losing weight.
One wonders what on earth has luck got to do with losing or gaining weight.
This is not a psychoanalytical session. Instead we are just going to dish it out straight to you — the kind of money advice that people really need to hear, rather than yet another “you don’t need that smartphone” nugget of wisdom. We don’t paper over problems in this post; we look at the real problem and offer you helpful solutions to turn your “money luck” around.
So what is the real problem? To begin with:
Not Living in Reality
Why do people get into debt in the first place? Because they live beyond their means. Why do people live beyond their means? Because they have trouble accepting their boundaries.
It’s easier to splurge on an Omega watch that you saw strapped on your boss’s wrist than to accept that it is way beyond your means.
If you earn $3,000 a month, you know very well what you can afford and how much you need to save each year to be able to build yourself a good retirement fund.
But this knowledge doesn’t do much for many of us. Maybe because the reality is a tad unsavory?
The reality is that you earn a lot less than those who promote shiny brands all over the media, and cannot afford 90% of the “cool” stuff out there.
The reality is that you are already 28 years old and that as we get older each decade goes by faster than the previous one.
The reality is that you are not going to win the lottery.
The reality is that no one is going to sort you out financially.
The reality is that you are going to have to work long, spend less, and save loads to have a stable financial future.
If you embrace all of the above, you may find yourself battling short-term blues but you will be considerably better off in the long run (which will be here sooner than you realize).
Ignorance about the Power of Saving
What good are a couple of hundred dollars saved anyway, we think. Why not buy another (useless) toy with it which we won’t even look at in a few weeks’ time?
Well, we’ve got news for you. For someone earning the average salary in this country, $200 is a lot. Don’t think about the big stuff that $200 can buy; think about all the little things important for life sustenance that you can buy with that money. It may not look attractive right now, but there will come a time, usually when you’ve stopped earning, when it will.
Let’s do some math. If you save just $200 each month, you are looking at a saving of $2,400 each year. If you put that amount in a financial instrument that gives you an interest rate of 12% per year, you will have a fund of almost $43,000 in 10 years. All you had to do was set aside $200 per month and the magic of compound interest did the rest for you.
I cited $200 per month just as an example. If you are able to save considerably more, like half of your monthly salary, you are looking at huge savings in a few years’ time.
So plug the leak of your dollars now and think long-term. The smarter you are today, the better off you will be tomorrow.
Living on Credit
This has to be the single biggest thing keeping people financially crippled and wrapped up in a false sense of security. Credit is what gives us the illusion of having more money than we do. And honestly, illusions are the last thing we need right now.
Unfortunately, the way our economy is set up, and given the importance of a credit score, one cannot entirely do away with credit cards, credit accounts, and taking credit on for a number of things.
But if you can help it, keep your credit spending low.
Don’t fool yourself with your credit card company’s “line of credit,” as they so charmingly put it. Don’t be fooled by “only make the minimum payment now” assurances either. Time is a fast flier; that monthly payment will be due a lot sooner than you think. You will still have to pay every dollar back, and if you are even a tiny bit late, they will slap you with considerable interest charges.
We spend more when we have our credit cards on us. Credit card companies know this; in fact, they count on you doing it. That is what keeps them alive, and you in debt.
Unhelpful Subconscious Beliefs about Money
Figures are dry, boring, and a pain in the backside, but everybody loves the thought of receiving a fat check punctuated by a string of zeroes in the end.
Except that some people expect that to happen while others doubt their own ability to create magic.
Note that I used the word magic, not money. Scarcity of any kind is an indicator of poverty of mind. This is not to say that some people aren’t born poor or find themselves in poverty for not fault of theirs, but to remain in poverty year after year, decade after decade, does take your own collusion with your circumstances.
If you firmly believe that better times are around the corner and that in the meantime you do all it takes to maximize your income, you will face fewer financial problems as you get older. On the other hand, if you keep expecting to lose your source of income, regardless of how good you are at your job, it might just end up becoming a self-fulfilling prophecy for you. Our subconscious is the driver of our reality. Do whatever it takes to cultivate helpful thought patterns for everything in your life (while firmly holding on to your job and saving regularly). You’ll be surprised at the results.
Author Bio:
Tracy Vides is currently associated with CarInQuotes.com, a realtime online platform for reviews of auto insurance companies who aims to help get the best and cheapest auto insurance quotes from the leading providers. Catch Tracy on Twitter @TracyVides.
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Category: Financial Education, Financial Planning
