Failing at Personal Finance

Recently, I’ve been reading the wonderful book The Up Side of Down by Megan McArdle, someone whose writings I’ve enjoyed for a very long time.

The premise of the book is that, at some point in our lives, we’re going to fail. We’ll fail at a relationship or at launching a business or at a college course. Most of us will fail quite often.

McArdle’s argument is that failure is usually far more illuminating than success. When you fail, you have to deal with that failure. You learn internal coping mechanisms that show you how to emotionally handle it, for starters.

However, some people also develop other tools for handling failure. They ask why they failed and what they can do to prevent that failure from happening again. Ideally, they do this evaluation quickly, figuring out steps they need to take and implementing them as fast as they can. Another key factor is persistence – even in the face of repeated failures, successful people keep looking for opportunity.

The key message I’ve taken from the book is that life is a long sequence of opportunities, some of which we won’t be able to grab ahold of. The real question of success isn’t whether you fail – you inevitably will – but whether you keep grabbing for those opportunities even after the failure. Do you give up and stop trying and just coast through the path of least resistance? Or do you keep working for a better opportunity?

I see this in my own life. I know people who believe that they will never achieve financial success, so they just blow their paycheck as soon as they get it.

I understand that personal finance track of failure quite well, because I was once on it. For a long time, my thoughts about my financial future were vague thoughts that I would probably someday be successful, but I would constantly fail in the short term. I sunk further and further into debt and I coped with it by largely ignoring it – a terrible strategy for coping with failure.

It wasn’t until I adopted a different strategy for dealing with the failure that things turned around. Rather than just accepting that things were slowly sinking and believing that “future me” would probably fix things, I started asking myself what I could do today to fix things.

I looked for tangible things I could do to fix the problems. Every day is filled with countless opportunities to make smart money choices. Every time you choose a better path, you are moving yourself toward success.

I focused on short term success so I could quickly see the results of my efforts. I studied my account balances and my debts constantly. I calculated my net worth every single pay period and focused on improving things.

Perhaps most of all, I stuck with it. I’m still doing many of the same things several years later. I spend a lot less than I earn. I look at every purchase with critical eyes. I watch for bad spending patterns and stomp them out when I find them. I buy generics at the grocery store even though I could afford the name brands. Those steps, repeated over and over and over and over again, made my debts disappear and, eventually, my accounts fill up.

Every time we fail in life, those principles will help dig us out, whether it’s a personal or professional or financial crisis. Look for tangible things to fix the problem that you can do frequently. Focus on seeing your short term success in some tangible way. Most important, keep using the successful tactics over the long haul.

The same thing applies to employment. I know people who have been unemployed for years that believe that they just won’t ever get a job, so they stop trying to get one.

If you want to break out of that cycle, you have to look at failure in a different way. Failure isn’t telling you that you’re bad. It’s telling you that you need to try some new tactics. Put in applications at some new places. Make a goal of applying or sending your resume to a dozen or more places each week. If you don’t get a bite, change up your resume a bit and try again the next week. Keep trying new keys until the lock opens.

Every time we fail in life, those principles will help dig us out, whether it’s a personal or professional or financial crisis. Look for tangible things to fix the problem that you can do frequently. Focus on seeing your short term success in some tangible way. Most important, keep using the successful tactics over the long haul.

Failure doesn’t label us. It just shows us that we need a new approach. The only time you actually fail is when you stop trying.

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