I choose to “dress for success” by buying this expensive suit.
I also choose to have large credit card bills.
I choose to eat out for dinner every night.
I also choose to be stuck in a high-paying job that I hate with every fiber of my being.
I choose to have a beautiful house.
I also choose to have a back-breaking mortgage payment that eats half of my monthly take-home.
I choose to lease a shiny new car.
I also choose to squeeze out $300 a month and wind up with no asset in a few years.
In short, when you choose to buy, you eventually have to deal with the consequences of it. When you whip out the plastic or fill out an application for a loan, you might get the item you want right away, but eventually the bill is going to come due. Even worse, that bill is going to come due with some interest tacked onto it.
The reason many people wind up in financial trouble is that they adopt a series of choices that can be summarized as “get it now, pay for it later.” Many people choose to use credit to pass along those consequences to the future – a “deal with it later” attitude. This ends up putting a lot of financial requirements on your future self, locking you into a sequence of large bills and makes a strong-paying job a requirement. You choose to buy now in exchange for restricting your choices later.
Of course, it’s also possible to go completely in the opposite direction.
I choose to only buy the minimal clothes I need for work and to shop carefully for them.
I also choose to put that saved money away into an emergency fund.
I choose to never eat out for dinner and instead prepare all my meals at home.
I also choose to take that saved money and invest it in my startup business.
I choose to live in a small fixer-upper that’s just the right size for me and my family.
I also choose to work at a low-paying job that fulfills me, brings me happiness, and doesn’t stress me out.
I choose to drive an old car.
I also choose to invest those saved car payments right into the stock market.
This set of choices can be summarized as “never get it, never pay for it.” One simply chooses not to buy much unnecessary stuff – a “cheapskate” attitude. You don’t have the joy of having that desired item now or later, but instead you focus on other things that bring you joy. This attitude might keep you from some material items that would bring you happiness, but brings happiness in the form of freedom: you’re not chained to your job, for example, and you don’t have a pile of bills. You’re also setting a strong path towards complete financial independence, where you can simply walk away from work at an early age.
Let’s look at another set of choices.
I choose to buy one suit now, then build my work wardrobe later.
I also choose to start socking away money for that wardrobe every week, starting today.
I choose to eat out for dinner when I can pay for it in cash.
I also choose to put some cash away for those nice dinners in the back part of my wallet.
I choose to have an amazing house someday.
I also choose to live in a smaller house now and start socking away money for that dream house.
I choose to drive a shiny new car.
I also choose to drive my old car for a while longer as I save up for that shiny new car.
This set of choices is somewhere in the middle – it can be summarized as “pay for it now, get it later.” You’re choosing to sacrifice a bit of fun in the present (by socking away money) for quite a bit of fun in the future. You’re restricting your choices now in exchange for greater freedom later on. And, since you’re socking away that money right now, you aren’t met with disaster and an avalanche of bills you can’t pay if you lose your job or something else happens.
I spent much of my life making the first set of choices – and I’m still paying the price for it. I have a huge mortgage sitting in front of me along with the remaining bits of a hefty student loan. If I had subscribed to either of the other two philosophies, I would be in substantially better financial shape.
It took me a long time to come around to realizing that I was painfully subscribed to the wrong set of choices, and it took me even longer to settle into a new set of choices. Now, if I don’t have the cash to pay for something, I don’t buy it – and often I have the willpower to not buy things I want, even if I do have the money to buy them. The end result? I’m no longer scared of the amount I have to pay each month for debt repayment. I’m no longer worried about losing my source of income, because I’m secure enough that I’ll have time to find a new one if I need to. If an emergency strikes (like a wrecked car), I can deal with it almost without blinking. And, if I do decide I want something, I know I can easily save up for most things.
It’s the power of the choice – and the consequences of that choice.