This article first appeared in U.S. News and World Report Money.
The recipe for finding financial success is an easy one. Spend less than you earn and do something sensible with the difference. If you do that over and over, you will see financial success. The challenge is actually making that happen. It’s not easy and most of us eventually hit a bump or two along the way.
The challenge comes when you recover from that misstep. Do you brush yourself off and get back to work?
Many people don’t. Instead, they find excuses for why they made that move. Even better, that excuse usually still works for the next mistake – and the one after that. Soon, the excuse is a “rule” by which they live their life. Unfortunately, it’s a “rule” that ensures their continued financial misery.
There are as many excuses as there are grains of sand on the beach, but there are a number of common ones. Like most excuses people use to avoid facing a challenge, it’s pretty easy to poke giant holes in them.
“You only live once!” That’s correct, you do only live once. Every day, you’re making choices that shape what the rest of your life is going to be like. You’ll never get those choices back.
The “you only live once” excuse is often used to avoid reflecting on impulsive behavior. The worst part of this excuse is that most of the impulses that the person is defending are quickly forgotten. Most of the great memories in life revolve around the experiences you had and the people you shared them with – and most of those experiences cost very little when you get rid of the unnecessary elements.
You don’t have to live a boring life to be financially responsible. You just have to be willing to look at how you’re spending your money and choose to not spend it on the things that you won’t remember in a few days. You might only live once, but that’s not a reason to simply watch money vanish. Choose your expenses wisely and you’ll have a great life now and later.
“It’s impossible to get ahead! The game is rigged!” This excuse appeals to people who want to believe that there are people out there actively holding them back from financial success. Rather than looking inward for reasons why they’re not succeeding, they look outward and find someone or something holding them back.
In reality, our financial situation is the result of thousands of our own choices. No one is making us spend money on our hobbies or interests. No one is forcing us to make impulse buys. No one is requiring us to make risky career choices or to not give our full effort in our professional lives. We choose to do those things – and when we make those choices, we face the consequences.
If you’re finding that you’re not getting the results you want, the first place to look is at yourself and the preparation and effort you’re putting in. Blaming others or shouting about a “rigged” game simply lets you shake your fist in anger so that you don’t have to look at yourself.
“Every time I get a little ahead, something comes up!” Life is filled with little emergencies. If you find that those emergencies are constantly undoing your plans, then you need to make different plans, ones that include some breathing room for emergencies.
The single most important thing people can do for their first financial move is to build an emergency fund. Everyone should strive to have at least $1,000 sitting in a savings account at all times. That should be your number one goal.
If you have that money, then you can start to make progress in other areas without a small emergency causing your plans to derail. If something happens, you just pay it off, then take a short break to build your emergency fund back up to $1,000. Later on, you can strive for an emergency fund equal to a few months of living expenses.
“I have plenty of time to take care of it!” The problem with this excuse is that there is no better time than right now to save for your financial goals, no matter what those goals are. The second you start believing that your “future self” will fix your problems, the harder you make every single goal in your life.
The reason is simple: compound interest is how you build up money for any goal, and the more years you give compound interest to grow, the more powerful it will be. A few bucks saved now turns out to be the same as a lot of money saved in a few years. If you start saving for retirement at age 25, you might only have to save a few percent of your take-home pay. Wait until 45 and you’ll have to save 25% or more to make up that ground. The same phenomenon is true with debts – a little extra payment right now adds up to a lot by the end of your loan.
There is never, ever a better time to start making progress toward financial goals than today. Every day you wait, the harder it becomes to reach your savings goals or to dig out of debt.
“I have to spend in order to keep up and look good!” This is the spotlight effect in action. We always believe that the spotlight is on us and that others notice us in great detail, but the reality is that others usually notice us far less than we think they do.
Unless you do something truly exceptional (in either a positive or negative way), you’re not going to stand out distinctly from the crowd. Dumping money into simply “keeping up with the Joneses” won’t get you lauded and won’t earn you extra attention. If everyone on the block drives approximately the same car, no one is going to notice if your car is two years older or two years newer than everyone else’s car.
Instead of spending a mint to “keep up appearances,” look instead for the best bang for the buck for your needs. Buy functional cars that don’t stand out in a negative way but last for a long time and provide good gas mileage. No one will notice but your wallet will breathe a sigh of relief. Apply that same perspective to everything in your life and, again, no one will notice too much but your financial situation will get a lot better.
“I’ll never get out from under this huge mountain of debt!” When you make poor financial choices with this as your excuse, all you’re doing is guaranteeing the truth of your statement. If you keep adding to your debt mountain, you never even give yourself a chance to shrink it.
Each year, thousands of people make the final payment on piles of debt that once seemed insurmountable to them. They just made the decision to start trying to shrink that mountain every day instead of throwing their hands up in the air.
Each month, just focus on making your minimum payment on every debt and making a small extra payment on your smallest debt. Before long, that smallest debt will vanish and that debt mountain will look a lot more fragile.
“Investing is too risky! You’ll just lose your money!” Most investments outside of a savings account carry at least some risk. Here’s the catch, though: if you’re investing in anything outside of a savings account, you’re probably not touching that money tomorrow or next week or even next year.
That’s because most investments outside of savings accounts are meant for the long term. Unless you’re a professional day trader, you’re not going to be buying and selling investments on a day-to-day basis. You’re going to buy them and sit on them until you either need that money back or you want to make an investment change. That often takes years and sometimes takes decades. You can’t judge that based on just what happened yesterday – or even what happened last year.
Even more than that, sensible people diversify. They don’t put all of their money into one basket. They own a lot of stocks (often by buying an index fund) and they might also own bonds and real estate and sometimes other things as well. If one thing happens to drop, it’s not that big of a deal because you’ll be invested in a lot of other things.
Don’t let these excuses rule you. Everyone can find financial success if excuses are put aside and new choices are made. It might mean letting go of some familiar routines, but once you break free, you’ll have a new life ahead of you.