Today’s post is one of a network of posts throughout the personal finance blogosphere taking part in the Financial Literacy Awareness Carnival. The Carnival is being hosted by Shannon at The Heavy Purse honoring April as Financial Literacy Month. Once you finish this post, head over there to check out other great articles linked to by the carnival. Enjoy!
Are you lying to yourself about your finances? Don’t be so quick to answer that question, maybe you should think about it a little harder. You will never reach your full financial potential if you’re lying to yourself about your finances, so you’d better be sure. How about we examine the different ways you may be lying to yourself, then we can revisit the question.
Setting Unrealistic Spending Expectations
Just because you have a budget doesn’t mean you’re being real about your spending. At one point I had $100 a week budgeted for groceries, and we exceeded it almost every week. We just weren’t being truthful about how much we could reduce our grocery spending. This resulted in having to make frequent budget adjustments to make up for the grocery overages. Eventually we raised our grocery budget to an amount that was more reasonable, and found another item we were able to cut to make our budget whole.
You can cut costs, but you also have to be real about the basic costs of things.
I Can’t Cut My Spending
You can’t, or you won’t? When Vonnie and I enrolled in our debt management program, it was an iterative process over the course of months before we really came to grips with how much we had to change our lifestyle to fit within our means. It also amazed us at just how little we could get by with if we really had to.
If you’ve fallen on hard times, you have to have a very honest discussion with yourself about what spending is really necessary.
I Can’t Increase My Income
We all wish we made more money. Some people stop right there, hoping their boss calls them into their office and gives them a pay raise. Other people go find a better paying job, or a side hustle to kick their income up another notch. For example, you could make sure you get some online trading education.
You can increase your income, if you’re willing to put in the effort.
I Can Save For Retirement Later
Retirement always seems like something that is far off on the horizon. It seems like an eternity away, so what’s the harm in waiting a few years to start saving? You can certainly do so, if you want to push retirement off as well. Time is a huge factor in determining how much you will have stashed away for your golden years.
If you put off saving for retirement, you may actually be putting off retirement.
I’m Comfortable With My Credit Card Debt
You’re paying all your bills each month, including your credit card bills, and still have money left over. You’re proud of yourself, thinking you have everything under control. You know you have credit card debt, but since you’re making your payments each month you’re OK with it. Let’s do a little exercise. Add up how much you’re paying each month in credit card payments. Now think about what you could do with that money in your pocket instead.
Are you still comfortable with your credit card debt?
It’s sometimes hard for us to see things in our life how they really are because we become desensitized to them. We need to hold them up to the mirror and look at their reflection. So what do you think after reading the symptoms of lying to yourself about your finances?
Are you being real about the state of your finances?
“You can increase your income, if you’re willing to put in the effort.” That last part of the statement is really where the rubber meets the road. I think a lot of people know in their hearts they need to increase their income but are simply unwilling to put in the effort. Believe me I know how tough it is to go back to school for a degree or hold down that second job for a time. But that hard effort is worth it. I just wish more people would see that. Nice post!
I just saw a video today that said much the same thing a recent post I wrote (Want Success? Make the choice?) in which the narrator said, “Success is not an action, it’s a choice.” If someone wants to make more income, you can……just make that choice! Thanks for your comment, Brian!
My real moment came when I opened up my foreclosure notice on my home. I paid off almost 80K in under three years and never looked back. Every time I write an article I write with this in mind – how best to communicate how real you’ll need to get if you’re serious about getting out of debt. Getting out of debt and fixing your finances requires effort and lots of it. That’s why people struggle. Thanks for the great post.
Wow, that notice had to be a real eye opener, Maureen! I’m glad to hear that you’ve found your way back! Thanks for reading!
You have to be honest with yourself about your money if you ever want to get ahead financially. Too many people complain (I was one of them) about how they can never get ahead. But they never take the time to see where they are spending their money or even try to save anything. Once you dive in and learn about your finances, you can take control and start moving ahead.
Great comment, Jon! If we want to change our financial path, all we have to do is make that choice, and run with it. We are not an effect of the things that happen to us….we can be the force of change!
Great post, Travis, and some really important things for people to think about when it comes to their finances. I think one thing a lot of 20- and 30-somethings miss out on is the reflection piece. Everyone is busy so it’s easy to put off thinking about your finances. I also think millennials tend to think they will have some huge salary “down the road” or will think of some great businesss “someday,” so they end up rationalizing NOT being real about their current financial situation.
Amazingly, that’s exactly what I did, DC. We racked up debt thinking that the next pay increase would be the one that causes our income to outpace our spending. It never happens. 🙂
I had the worst habit of accepting my credit card debt because I always knew that I would receive a large bonus at the beginning of the year that would pay it all down at once. When I got financially real, though, I realized that all of that credit card spending could have gone to wealth building and I lost out on the opportunity to build my wealth over those years. Fortunately, I have changed my ways and while I regret my past lies, they have helped me focus on my present and future goals.
Ah yes, the promise of a bonus or tax return to pay off that debt. Then when it comes, you find it doesn’t cover all of your debt OR you decide to buy something else instead. I’ve been there too….. Thanks for stopping by, Shannon!
I always love your honesty, Travis. You are a real benefit to the personal finance community. Thank you. 🙂
Awwww, thanks Laurie, I appreciate your kinds words. I hope my honesty, and the story of my success helps others keep moving along their own journey!
It frustrates me when people say “can’t,” You mean you “won’t” right? And yes I’m even talking about myself here! 🙂 I think my toughest area is still food but I’m working on it! I WILL!
I think we’ve all been there….we say “can’t,” but we really mean “won’t.” Sometimes decisions are hard, even if we know the right answer! 🙂
This is great, Travis. So man of us (myself included) lie to ourselves about finances. It’s an easy trap to fall into because we are so good at justifying our actions. These are are great and I particularly like the setting unrealistic spending goals. I see this happen all the time. People cut to unrealistic amounts and then don’t meet their budget/goals which frustrates and discourages them. Sometimes to the point of quitting. I think when you’re getting financially real the first thing you need to do is be honest. Otherwise you’re going to be working against yourself. Thanks again for participating in the carnival, Travis. I appreciate it!
We can talk ourselves into anything, right Shannon? Even quitting! We’ve just got to “get real” with ourselves and realize that what we’re doing will benefit us in the long run. Thanks for thinking of me to participate in the carnival!
Dishonesty is a huge reason why budgets fail, so important to stay honest!
True, True, Catherine! If we aren’t REAL with our spending how in the world can we live within our means, or save at all?
Ugh, I told myself for years that we were comfortable with our credit card debt. I don’t think you can ever be comfortable with any amount of credit card debt because you can talk yourself into more and more and more. We always told ourselves we weren’t as bad as lots of people. You shouldn’t worry about lots of people other than yourselves and how much of your freedom debt does take away.
That’s right, Kim – once you’re comfortable credit card debt, no matter how small, you start to become comfortable with ANY level of credit card debt!
Very, very honest post Travis. It’s hard to be “real” with ourselves.
Sometimes we don’t look in the mirror because we’re scared of what we’re going to see. When we become comfortable with looking at ourselves in the financial mirror…..then we’ll be successful!
I think it’s easy to live in denial about a lot of this for a long time. Some people don’t want to face the truth while others don’t want to put in the work to change anything. I guess that’s what getting financially “real” is all about. It’s about facing reality and taking back your own power!
You have to not only want to change, Holly…..you have to believe change is necessary. Some people want a different outcome, but they’re not willing to make the behavioral changes to get there. We have the power to affect our own destiny…..but we have to take ACTION! Great to hear from you!
Excellent points all Travis, I especially appreciate your point about the credit card payments. Sending in those minimum payments every month is the treadmill to nowheres-ville, financially. Minimum payments are designed to keep us in debt. I like to note the time required to repay my balance at the minimum payment that my card issuer is required to print on my statement. It’s something like 20 or 30 years for a couple thousand dollar balance! Getting high-interest debt paid off is usually job #1 to get on financial track, I think.
Thanks!
Anyone who says they’re comfortable with spending their hard earned cash on credit card payments than having it in their pockets are either delusional, or they’re lying to themselves. A treadmill is a great analogy…..people with credit card debt work and work and work……but they get NOWHERE. Great comment!
I’m happy to say we’re good on all of the things on this list. I can’t really earn much more income, thanks to health problems. But if I want it, my boss can usually find me some OT. It’s nice to have the option, even if most of the time I’m not up for it. Meanwhile, my husband’s disability keeps him from working.
Similarly, we’ve found a balance between what we’re willing to cut and what we can cut. We’re doing our best to trim expenses, but there are certain things we have decided are worth it. Granted, we don’t have credit card debt; so we can better afford to set boundaries. Although even those are being questioned in the face of the $25,000 we’re spending on my husband’s oral surgery this year. (Blech.)
As for the rest, we’re never comfortable with debt. (Once this horrid year is over, I want to focus on retirement and upping our mortgage payments.) And I’ve finally come to terms with what I would like us to spend and what we actually spend. It took years and a lot of arguing with my control-freak self. But life is much easier when you finally start budgeting realistically.
Sounds like you’ve got things under control, Abigail! I would bet that your current state may have been a result of a lesson or two learned along the way. Thanks for sharing!
That first one is so, so important. My mantra is to budget liberally and spend conservatively. You don’t run into too many problems that way, unless you aren’t earning enough to cover basic living expenses. In which case you’ve got to work, like you said, to increase that income.
Exactly, femmefrugality – if money is really tight…or worst case scenario your budget is under water, it’s time to look at both ends – how can I cut, and how can I increase income. Doing both in parallel will help get that budget shaped up, and the finances moving again in a positive direction.
“Budget liberally, and spend conservatively” <<---- LOVE IT!