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My Number 1 Reason People Fail Financially

May 1, 2013 · 19 comments

in Personal Finance

I could make you read through this whole post before you got to my exciting conclusion as to why people often struggle financially.

I will end your suspense though and say it here:  Mindset.

How Mindset Affects Your Financial Life

So often, people will complain about not having enough money.  In some cases, it is totally true.  Some people do live under the poverty line.  I am not addressing that subset of the population.

I am speaking of those that have decent jobs, but still never seem to have enough money.

On the surface, it may seem people don’t have enough money accumulated because they don’t budget properly, or the housing market turned south.  Some of that may be true.  But there also may be an underlying cause beneath the circumstances…

How many times have you seen someone that has a beautiful home, nice cars, a few kids and thought “How do they afford all that?”.  Quite often, unless they were born into or inherited money, they aren’t affording it.  They are just willing to take on a boatload of debt.  To many, that may seem financially irresponsible, but the amount of debt anyone is willing to take on is an individual decision.  (That hopefully does not spill out to the rest of us in the form of foreclosure and such.)

I think that many people find themselves in high debt or low savings is because what they have just ‘is not enough’.  We all channel our thoughts or behaviors in a certain manner, and for some, happiness is derived from accumulating more.  Thing is, many do not even realize the pattern.

Think about it, if people stayed in their first or even second homes and were satisfied with what they had, would we have even come close to being in the housing mess we were in?  Of course, it didn’t help that prospective homeowners were approved for ridiculous loans that resulted in foreclosures.  However, banks did not make people take a look around at their friends and see that they too should be buying a huge house.

Does Expensive Make It Worth It?

Even take vacations for instance.  I have never traveled overseas, nor gone to Hawaii.  (I have been to Tijuana though, and unlike my brother, I was smart enough to not eat a burrito.)  I do hear from a lot of people how great many far-off destinations are, and I will say it sounds fun.  However, I just can’t afford to spend that amount of money on something discretionary like a vacation right now.  (I am too busy spending money on siding for my house that is being attacked by woodpeckers.)   That is OK though as I don’t mind going on inexpensive trips.  As a matter of fact, one of my favorite vacations ever was a camping trip my husband and I took to the Smokey Mountains when we were first married.  Excluding gas, I think that trip cost us less than a couple hundred dollars, and I still look so fondly back on that trip 20+ years later.  Of course, I am sure I would look fondly back on a trip taken to the Greek Isles too…

Regardless though, I have seen people take trips I could only imagine, even though they already were saddled with a ridiculous amount of credit card debt.  Could they have had just as good of a time renting a cottage for a week as they did on their excursion?  I don’t know, but I would think the pain of seeing the resulting credit card bill would have greatly affected my overall view of the trip.  Much like how someone has a bad day and decides to go shopping to ease their pain. Sure that new  wardrobe might feel great when you first wear it, but that feeling always wears off and the reality of actually paying for it all eventually sets in.

Take A Deep Breath, and Think About Why…

Many people say they are ‘impulse buyers’ or can’t stick to a budget, but don’t really think past that assessment of themselves.  Maybe they can’t stick to a budget because in their mind, they can truly justify buying the Ipad 2 right when it comes out on the market when they already own a fully functioning Ipad.  Not having the ability to adhere to a budget may just be a symptom and not the overall problem.  (Assuming this is about more discretionary items.  I am not suggesting people freeze to death during an unusually cold winter just so they don’t exceed their budgeted heating bill.)  As stated earlier, quite often the underlying cause is that people get dissatisfied with what they have over time, so they have to get more.  One day a 1600 square foot house may be just fine, but the next week, it is suddenly too small.  Why?  What suddenly changed?  Did mom just give birth to triplets, or did a house just come on the market that seems too good a deal to pass up?

My point is, people strive and strive for that next thing, when what they already have is good enough.  It may just be people get caught up in what society as a whole is doing, which we saw during the housing boom.  Overall, the people that are content with what they have seem to have the easiest time managing their money.  Traditional methods to control spending such as budgeting may not even be necessary for this subset of people.   They don’t need to set up a strict budget and cut up their credit cards.   They just don’t have the need to spend or accumulate.

So, before you head out the door to shop or are sitting there bored on the computer scrolling through Amazon sales, stop yourself.  Think about what you already have and if you truly need anything else.  When someone tells you about their great new house/car/trip/purse/etc, try NOT to think about how you too would enjoy something like that.  Think instead of how you have gotten by this long without whatever the item is, and just move on.  Changing a mindset isn’t something that happens overnight, it is a process, and in the case of spending, you have the opportunity to work on it almost every single day.  If you can just change the way you think about spending, you may just find yourself in a much better position financially over time, and you will probably be a whole lot happier overall, even though you may have ‘less’.






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