When Sarah and I first hit our financial bottom, our natural response was to deal with the immediate problems.
We simply didn’t have enough cash on hand to pay our bills. At that moment, the money in our checking account wasn’t enough even to pay the bills we owed that were due before our next paycheck, even assuming we spent $0 on food or anything else in that timeframe.
We had a lot of debt – multiple car loans, a pile of student loans, a bunch of credit card debt, and some other loans, too.
We had an infant who had just added a bunch of additional expenses to our life – child care being the biggest, of course, but far from the only thing.
It was a hefty list of challenges, but we tackled them head on. I took charge of selling off a bunch of items from our closets, including some vintage sports cards and Magic: the Gathering cards and DVD box sets and video games, and used that to rapidly eliminate the worst of the debt. We started eating all of our meals at home. We started engaging in a bunch of intense frugal “money free weekends” and 30 day challenges to curb our spending. I threw myself into freelance work and side gigs and other opportunities to make a little more money – in terms of work, there were a few years that were basically just a blur.
Unsurprisingly, we hammered a lot of that debt really quickly. We got ourselves back on track with our bills, with a nice little emergency fund to boot. We blew through paying off all of our debt in a little over a year – we were debt free a little over a year after hitting that financial bottom. Things seemed good.
However, there was still a core problem underlying all of this. Our default habits were still oriented toward spending everything we brought in, if not more. We were absolutely more mindful of how we were spending money, but our instincts were still very oriented toward spending, even as our debt went away.
During that period when we were paying down debt, I found myself alternating between being thrilled with my financial progress and then, almost in the next breath, resorting right back to those bad financial habits that put us in a bad situation to begin with. Things were going in the right direction, but for every three steps forward, there were two steps backward.
In short, we were really good at treating the symptoms, but we were completely missing the disease.
The symptoms were obvious. We were in debt. We had a bunch of bills that we were unable to pay. If something bad were to happen to us in the short term, like an illness or a job loss or a car breakdown, things would get really awful really quick.
Those symptoms, just like the symptoms of a disease, were the things that would actually affect our day to day life. We could definitely feel the impact immediately from a maxed out credit card or a car breakdown that we couldn’t pay for. We felt it in terms of stress. We felt it in terms of not being able to buy groceries at the store or go out to eat. It impacted our life immediately.
Yet, those were just the symptoms.
So, what was the disease, then?
The disease, as I see it now, was that we didn’t really have a clear idea of what we wanted out of life, and because of that, it was very easy to have our thoughts and desires become oriented toward the impulsive desires for things in the short term. The disease is a short term focus on life. The disease is living life through momentary desires and impulses.
There was a sense that we needed to “live a little,” but that sentence translated from actually having meaningful experiences to just buying things without any real rhyme or reason, just chasing the things we wanted in the moment.
Here’s the problem: we are all driven by that kind of desire-filled short term thinking. We are all deeply wired for it, going back to our hunter-gatherer roots as human beings. We seek out berries and eat them. We go on a hunt and quickly eat what we find, only saving pieces to help us survive and get more food. Humans did that for millions of years; agriculture first pops up only 10,000 years ago (and that’s mostly just a smarter approach at gathering, at least at first) and almost all of civilization occurs in the last handful of thousands of years. We are inherently short term thinkers at an instinct level.
The thing is, if life was all about simply surviving until the next meal, then that’s a great way to live. If you lived on the plains 15,000 years ago and your thoughts were about what your life would be like ten years in the future, you were probably not going to make it. You needed to be focused on your next meal, your next pleasure.
That’s not the world we live in anymore. In the West, the average person lives until they are in their seventies or early eighties. Almost all of us don’t have a realistic concern of starving to death or dying of exposure to the weather. Think about your life. Are you really going to starve at any point in the next several months? Are you going to die of exposure in the winter (outside of something going seriously, seriously wrong)? No. The reality is that almost all of us have a lot more than ten years left to live, and most of us have many decades left to live.
Our instincts are all about seeking the best short term option, the thing that gives us the most pleasure today or this week, but our lives are best lived when we seek the best long term option that gives us the best life over the long term. That’s the disease.
Most debt repayment strategies and frugal tips treat the symptoms. They help you make it to the next paycheck. They help you get out of debt and eliminate a few bills.
What they don’t do is keep you from desiring the stuff your neighbors have. They don’t keep you from feeling jealous. They don’t help you not feel a wave of desire whenever something cool comes out. I’m willing to bet I could point to something that you specifically really want, if I happened to know you well, but that something is an item or experience that does nothing for the long term quality of your life.
Addressing Just the Symptoms
There’s absolutely nothing wrong with addressing just the symptoms. Addressing just the symptoms will help you get caught up on your bills, get you out of debt, and get some cash in savings so you can handle an emergency without really changing much else about your life. If you are happy with your life, there is absolutely nothing wrong with just addressing the symptoms, getting yourself out of debt, getting your bills paid, and moving on.
Except that if you just focus on the symptoms, they’re going to come back again. And again. And again. Even if you start making more money. Even if you make a lot of other changes to your life.
As long as you keep up with a life where you keep chasing after the latest short term desire and throwing your money at the things you impulsively want and desiring what others have, the symptoms of financial instability are going to keep popping up. Credit card debt. Difficulty paying the bills. No pathway to retirement. A tightrope at work because you’re afraid to risk your job and that paycheck at all.
The desires never go away, either. The stuff you buy never makes you feel better in a lasting way, and you just end up wanting something else. You end up wishing you had some new thing, or you end up feeling jealous that someone else has that thing.
And soon the symptoms are back.
What’s the Cure?
Figuring out the solution for all of this has really been at the core of my personal finance reading and investigation over the past few years, and the truth is I don’t have a ready-made solution that works for everyone. I know that a few things have really helped me.
For starters, I intentionally try to think about every decision I make from a long term perspective. How will this choice, right now, impact my life ten years from now? Will I be glad I did this in ten years? Or if I’m looking back from that vantage point, will I just shake my head and think “that was kind of a waste”? What things am I doing today that will register as a positive in my life ten years from now and, ideally, also register as a positive today and tomorrow? That’s what I want to load my life with, but that requires a lot of reflection on my daily choices. The thing is, a lot of things I might do today will either register as “no impact” or, even worse, a “negative” on my life ten years down the road. I want to eliminate the things that come up as “negative” and minimize the things that have “no impact.” Ideally, I want a life full of things today that are a big positive ten years from now and also, ideally, a positive today, too, if I can. I want to spend at least some of each day making myself better.
Along with that, I need to have an understanding of what I want out of life. I’ve spent a lot of time figuring out a “philosophy of life,” or what I want out of life in a broad sense. What do I want my life to be like ten years from now? Twenty? What do I want to achieve? What actually matters to me?
My marriage matters to me, as does my relationship with my kids. Having a rich understanding of the world matters to me. Being in good physical shape matters to me, though I struggle with getting to where I want to be. Having a life full of interesting challenges that take me into a “flow state” matters to me. Having good friendships and lots of good acquaintances in my community matters to me. Writing and creating material that helps others to move in a positive direction matters to me. Living a virtuous life matters to me.
At the same time, having a nice new car really doesn’t matter to me. Having an expensive house doesn’t matter to me – as long as home has space for my family and a few hobbies and activities, I’m good. Having the latest and greatest tech doesn’t matter to me. A good home-cooked meal means more to me than a meal at a fancy restaurant – I’d rather have friends over for a great meal at my house, if at all possible.
Those lists are likely to be different for you, as it should be. What matters is that you have a list that’s really true for what really matters to you, one which you can use as a basis to live by each and every day. Ideally, that daily effort to make myself better is improving things that will make my life better and happier in the future.
In terms of purely financial choices, I try to make financial decisions that will benefit me the most ten or more years from now. What financial choices can I make today that will have the most positive impact on my personal freedom and financial choices ten or twenty years from now? With that perspective, things like contributing to retirement trump things like buying junk food. Things that are just momentary pleasures are almost entirely not worth it, especially since there are so many free things (or things I already own) that provide much that same burst of pleasure.
My prescription for anyone running into financial trouble is to treat both the symptoms and the disease.
You treat the symptoms of financial difficulty by focusing on paying off debts, cutting spending in smart ways, building a little emergency fund, and so on – very practical, concrete steps. These steps are almost purely practical and short term.
You treat the disease of financial difficulty by focusing on the long term direction of your life and what you want out of it, questioning the source of your desire to spend money needlessly, ending your concern of what other people think of your life, and so on. It’s much more psychological and philosophical and long term.
If you don’t cure the diseases of desire and envy and life without direction, those symptoms of financial distress are going to pop up again and again in your life, causing you lots of stress and forcing you into lots of no-win decisions. Treat the symptoms, but don’t let the disease stay around unchecked. Treat the disease with just as much seriousness, if not more.
Don’t think just about how you got into a difficult financial state and how you’ll get out of it. Think about why, too.