As many of you know, I had a bit of a financial epiphany in April 2006. I came home from work one day, picked up the mail, and sat down to pay our bills, only to realize that we didn’t have enough in our checking account to pay all of those bills. Because neither of us would get paid for at least a week, at least a few of those bills were going to be late, and it was going to be a tricky balancing act to get out of it.
For some reason, that moment just set me off. I felt really ashamed of myself. Sarah and I both made a good income – why couldn’t we make this work? We had an infant son who relied deeply on us – shouldn’t we be doing better for his sake?
That very night, I resolved to make some changes. I grabbed a bunch of personal finance books from the library – two of them, Your Money or Your Life and The Total Money Makeover, had particular impact – and started taking a lot of difficult financial actions. I sold off a lot of stuff from our closet, including a ton of DVD sets, some trading cards, some vintage baseball cards, and some video games. We started preparing almost all of our meals at home. I basically went cold turkey from the bookstore, which I visited two or three times a week, and the coffee shop, which I visited almost every day.
I was caught up in a wave of optimism with regards to positively changing my life.
Yet, by late summer, I started to become rather pessimistic about things. All along, I had this sense that if I made all of these changes, I would somehow change – but that wasn’t really true. Although we were clearly in better financial shape than we were even a few months before (we had paid off multiple credit cards, our one remaining car loan was vanishing, and we were hammering away at student loans), it still didn’t feel like this big change that I was expecting.
I began to doubt that things could really change after all.
It was writing that saved me, if I’m being honest with myself. I started The Simple Dollar in September 2006 (out of the ashes of another blog that wasn’t particularly successful). Mostly, I just tried to write down the details of everything that worked, for two reasons. One, I hoped to share that info with some of my friends who were struggling with the same financial issues. Two, I hoped it would help me recapture a bit of that initial magic.
Writing about things made me think more deeply about the details of what I was doing and how it was actually the journey itself that was really important. I was looking for this big miraculous change in my life, but I couldn’t see the forest for the trees. My life had changed.
Sarah and I had previously argued about money quite a bit and that had entirely vanished. We spent many of our evenings either at home or walking around town with our child, whereas before we saw a lot of movies at the theater (even awful ones). I didn’t stop at coffee shops before work or bookstores after work. Instead, I’d leave early and have some water cooler talk with my coworkers, and I’d get home a bit earlier and take care of projects at home. I wasn’t as stressed out as before, which just made everything seem a lot better.
My life had changed. I just hadn’t seen it until I started looking at the details and realized how much those changes had rippled through my life.
After that, it was mostly pretty easy to keep our new financial discipline. There would be a mis-step here or there, but once I really saw how much my life had changed – and almost entirely for the better – it was much easier to stick to those changes.
This cycle of newfound fervor followed by extreme doubt followed by realization and continuation of a change isn’t exactly a new thing. Almost everyone who has tried change has experienced the first two elements, and many people who have managed to stick with it has experienced the third piece.
Psychologists Don Kelley and Daryl Conner actually mapped this phenomenon out very well in a sequence that they call “The Emotional Cycle of Change.” In it, they identify five distinct phases that people go through as they implement major changes in their life:
Stage 1: Uninformed optimism.
Stage 2: Informed pessimism.
Stage 3: Hopeful realism.
Stage 4: Informed optimism.
Stage 5: Completion.
These stages almost perfectly describe my own transition from a reckless spender to someone working toward financial independence. They also echo my experiences in making other personal changes and match up well with what friends and family have described to me about their own changes.
Let’s look at these a bit more closely.
Stage 1: Uninformed Optimism
Whenever you embark upon a change in your life, it’s really exciting at first.
You have visions of great success in the future. Your mind shows you the big changes that are possible and you want these changes. At the same time, you’re taking actions that will lead to those changes and those actions seem new and fresh and often fun. You feel really good about the successes of the day.
Here’s the catch, though. You often don’t know – except in an abstract way – how challenging this will actually be. You’re in the “honeymoon” phase and, for now, it’s great.
The Addition of Experience
As you continue to take positive actions, however, you’re actually adding to your own experience. For example, while you might be discovering the endorphin rush and short term weight loss that comes from exercising, you might also be discovering sore feet and maybe a bruise or two or a blister.
Nothing we do in life is all “good.” It’s a mix of good and bad, but in the early stages of uninformed optimism, we don’t see the “bad” very much at all. As we begin to experience that change, we start noticing the bad side of the new things we’re choosing… and that starts us down the road to the second stage.
My Uninformed Optimism
At first, I was reveling in all of the financial changes I was making. I enjoyed the process of selling a bunch of my unused stuff and turning that into a big payment toward our credit card debt. I loved making dinner in the kitchen with Sarah. I loved going to the library and walking around the neighborhood.
The experiences themselves were good, but it was the newness and freshness and optimism that made them seem great. It was easy to overlook some of the drawbacks.
After a while, though, I began to notice flaws. Some of my friendships were beginning to falter – the people I would sometimes drink with after work weren’t calling as much. After the first big burst of debt repayment, the process started becoming much slower. I started to notice that I was missing some of the things I had stopped doing.
Stage 2: Informed Pessimism
After a while, the “bad” elements start to build up and, usually, the rate of noticeable change slows down. Your honeymoon period probably showed you a large impact from your initial changes, but as they continue, the impact of each action seems smaller and smaller.
In other words, at the same time the “bad” elements seem to be rising and building up, the “good” elements seem to be shrinking and slowing down.
The Danger Zone – This Is Where People Fail
That mix of a growing “bad” and a shrinking “good” is a difficult one. This is the period in which people tend to usually give up on change. The challenge of changing no longer seems to be “worth it,” so you drop it.
How do you survive it? The best strategy I’ve found is twofold.
First, focus just on today. Don’t worry about the changes down the road. Keep your eye on what you need to change today, nothing more. Let tomorrow be tomorrow.
Second, catalogue all of your positive changes. Spend some time looking at everything that’s changed. If you’re trying to lose weight, don’t just focus on the number on the scale. Take an intense look at how you feel with a better diet and more exercise. How are your clothes fitting? How is your sleep?
My Informed Pessimism
During my period of “informed pessimism,” I almost gave up on the whole prospect of financial change. I just wasn’t seeing rapid forward progress any more and I missed so many things that I had given up.
I had seen it firsthand – these changes were each contributing very little, keeping the big change I wanted far off in the distance. Plus, I wasn’t fully happy with some of the changes – I had not yet figured out a good balance, but I knew enough to know the balance wasn’t right.
It was nearly enough to make me quit. This point has actually caused me to quit many changes in my life.
Turning This Key Corner
So, how do you get past stage two and move on to stage three? For me, I’ve only discovered a few tricks, two of which are hinted at when I discuss surviving stage two: cataloguing positive changes and focusing on today.
Beyond that, however, I’ve found that the transition to the next step happens most readily when I really begin to understand the balance of positives and negatives in my life and I see that the positives, even without reaching the big goal I want, add up to a lot next to the negatives.
My approach is to spend some time making a “pros” and “cons” list of all of the differences in my life. I let myself really “vent” when I make the “cons” list, but then I draw upon all of the positives I’ve noticed when I make the “pros” list.
Those lists are long. I usually add to them both over the course of several days and I usually spend some time looking at them each day.
What happens is that I eventually step back from the details, both positive and negative, and a big picture forms. I don’t know how else to explain it other than that, but it becomes clear that I used to be on a path that had some pros and cons and now I’m on a new path with different pros and cons – and, frankly, the new path is a better one.
The trick is persisting until you’re not blinded by the onslaught of negatives. That’s hard. It’s very hard. You just have to take it one day at a time. Keep up with your changes and keep adding to those lists of pros and cons.
Stage 3: Hopeful Realism
Once that key corner is turned, hopeful realism sets in. What does that mean? For me, it means a realization that my current path is at least somewhat comparable to my old path (sometimes, it’s better) and that if I continue on this current path, I will make it to that goal. Maybe not tomorrow or next week or next month, but I’m progressing there.
The changes start to seem normal in this phase. Usually, the goal still seems really distant, but the changes you’ve made in your daily life are starting to become the norm and you understand that the daily outcome is better than your old path.
The Good Joins the Bad
I like to think of “hopeful realism” as what happens when the good joins the bad.
Stage two, informed pessimism, is loaded with the “bad.” You can’t help but feel as though the entire change is doomed to fail and it’s making for misery in your life. You want the old ways back!
Of course, you wouldn’t have attempted change if it wasn’t bringing positives into your life. Eventually, those positives – and many unexpected offshoots of those positives that you didn’t see before, like lower stress and better relationships – begin to appear.
It’s when you begin to notice and appreciate that whole body of positive change that you really enter the “hopeful realism” part of the game. Things are better, even though the goal is far off. You are on the right path.
My Hopeful Realism
My stage of “hopeful realism” really started when I began to really get into the groove of The Simple Dollar. Writing about personal finance each day forced me to think about the positives that it was bringing into my life, even though many days were a struggle. I knew, intellectually, that I was in better shape financially, but I still wanted to “revert” some of my changes.
Many of the earliest posts on the site sought not only to share ideas with the reader, but also to convince myself of their overall goodness. With almost every post, I was assessing the breadth of change that had come into my life that spring and summer. I was assessing it and realizing that, on the whole, it was pretty good.
I wasn’t just saving money. I was lowering my stress and building a stronger marriage. I was discovering new hobbies and forging new friendships. I was rediscovering my passion for reading as opposed to merely collecting books. I was enjoying fatherhood and growing past being afraid of my child (I had a persistent fear that I was going to somehow deeply harm my child).
The big changes I dreamed of, with Sarah and I having plenty in the bank and owning a big house in the country, were still far off. Even now, the “house in the country” part is still far off. But I began to understand that my life really was better on a day-to-day basis and I began to see that if I stuck with this path, change really would come.
Stage 4: Informed Optimism
You have a new “normal” and you’re heading toward the change that you want. Everything is great!
It’s during this phase that people tend to have a “second honeymoon” of sorts. They get excited again. They’ll try new techniques and try to push their limits. They know that their fallback is a path that still leads to their big goal and it also has made their life better, so they want more. They push forward, but it’s with this clearer knowledge of the big picture.
The Path Forward Is Clear and Good
The key sign of informed optimism is that you’ve completely adopted the new routines you’ve chosen. They are your true “normal,” and now your experiments push beyond those boundaries. Walking three miles a day is now normal, so you experiment with four miles. Why? Because you enjoy it and see the benefits and drawbacks clearly.
Your new activities can usually be evaluated up front and you have a good idea of what will click and what won’t, but the desire is there to keep refining your new path because you clearly see how much good it has brought into your life.
Often, you’ll enjoy some acceleration toward your big goal during this phase, too.
My Informed Optimism
Eventually, I began to see that I could continue to take further action and actually bring those big goals closer and closer to me. I started to really experiment with frugality, doing things like making my own laundry detergent and practicing money free weekends.
During 2007 and 2008 in particular, Sarah and I were very “hardcore” about saving for the future. We tried out countless tricks for saving more money, had our second child, and bought a house. I became a full-time writer, too.
Some experiments worked, some didn’t. I didn’t mind the failures, either, because I always learned something and I knew that I was always on a path that was leading to my big goals.
Stage 5: Completion
Eventually, you start actually getting close to your big goal, whatever it might be. That whole change has really paid off.
In some ways, this can be a new crossroads. Now that you’ve achieved your goal…. now what? What’s next? Having a goal and a challenge is a powerful motivator.
Most people move on to a new goal in life. Maybe it’s a continuation of the old one, or maybe it’s something new. Usually, they stay on the new path that they’ve found, though they may slack off on some elements of it. It really depends on the person and the new challenges they’re facing.
A Good Goal Is Never Truly Complete
My belief is that a good goal is never truly finished. There is always room to grow and improve. I view accomplishing a big goal as being like reaching the peak of a large hill. As you look out on the horizon with your sense of achievement, you spy a bigger hill… and you’re drawn to climb that one.
This type of thinking ties heavily into things like the meaning of one’s life and connecting it with daily activity. A good defining purpose in life is never complete, though you may complete a very big project that’s in line with that purpose. A good purpose always shows you another way forward.
In 2011, Sarah and I reached complete debt freedom. We no longer owe any debts to anyone. Since 2012, we have lived entirely on Sarah’s salary, banking my post-tax income for our future.
What’s our new “big goal”? Financial independence. Sarah and I want to reach a point where our daily work no longer has to earn an income for us, giving us the freedom to choose our daily activities solely based on what else they mean for us. What are we driven to do?
Whenever you’re taking on a big change, whether it’s a financial one or another type of change in your life, you’ll likely go through some version of this cycle. You’ll experience a “honeymoon phase,” struggle mightily with the next step, and, if you stick with it, grow into a new normal and the eventual completion of your goals.
Change is never easy. If it were easy, everyone who tried something new to improve themselves would always pick it up and stick with it. Few people would be in debt or be struggling with controllable health issues.
Understanding the cycle of change and how your mind processes it and motivates you to do things can help quite a bit. You can see that you’re in a state of informed pessimism and you can use techniques to get past it. You can thrive on informed optimism and recognize that you’ve found a great new baseline for you to reach for the stars every day.
All you need is a big change you want to make in your life and the desire to get started.