One of the big unspoken elements of improving one’s personal finance situation is the “why” element. Why are you doing this?
It’s easy to understand the “why” when you’re looking at digging out of a really bad financial situation. You don’t want your car repossessed. You don’t want to be paying 10% of your paycheck each month to a payday lender. You don’t want to be kicked out of your apartment. You don’t want to damage your credit because that leads to high interest rate loans or even refusal of loans. Those are very visceral things, things where it is extremely obvious why, if you don’t make some good financial moves and cut your spending right now, there are going to be some really negative consequences to your daily life.
But what about if you’re beyond that point? You’re able to pay the bills every month and you’re not behind on anything. You’ve got a job, you go to work whenever you’re supposed to and you’re in good standing there. You keep yourself and the people you’re responsible for fed, keep a roof over their head and keep clothes on their back.
Why? Why push yourself to get further ahead financially? What’s the benefit in doing so, particularly when doing so will take away trappings from your current life? After all, every dollar you put in the bank is a dollar that you can’t spend on things today. Why do that to yourself?
There are a lot of easy answers to that question. You should do it to save for retirement. You should do it to save for big expenses you know are coming, like replacing your car.
Those answers are absolutely spot on, but there’s a problem with them: they don’t mean anything in your life today, not in any tangible way. Your long term future is rarely front and center in your mind.
The reason so many people live paycheck to paycheck and choose to spend money today rather than save for the future is because spending today is a much more direct path to feeling happy today than saving for the future is. What’s going to make you feel that immediate burst of pleasure more: a cup of delicious sweet coffee from a coffee shop or $5 more in your savings account? For a lot of people, it’s the former. For almost everyone, there’s something you can substitute for “coffee” that elicits the same short term response — a new cell phone or a new book or a new shirt or whatever. Those things bring a burst of pleasure right now, whereas money in the bank really doesn’t do that.
From a short-term perspective, spending money now makes complete sense. It’s only from a long-term perspective that it seems silly. Unfortunately, humans are wired for mostly short-term behavior — that’s just how we’re made.
To me, this is the key conundrum of personal finance: we’re wired for the short term and spending money now is more happy to bring happiness in the short term, but over the course of our lives, avoiding frivolous expenses and saving for the future brings much more happiness — we just don’t see it in our moment-to-moment spending decisions.
As soon as we step back from the moment-to-moment and look at the broader scale of our life, it becomes much more clear why we save for the future. The problem is that, in the moment-to-moment, those reasons are a lot more vague because they don’t bring immediate happiness in the way that a momentary indulgence does. As I noted earlier, $5 in savings doesn’t make you feel the way a $5 coffee does.
So, how do we break out of this? When our finances are stable enough that imminent collapse is no longer a threat, how do we continue to value at least some level of long term financial success as strongly as we value our momentary pleasures?
I think it comes back to “why.”
You have to bring the “why” front and center.
The reason we so often choose to spend money in the moment is that the “why” for spending the money is front and center and obvious — it brings a burst of pleasure, it’s something we want — but the “why” for not spending the money isn’t front and center at all. This is particularly true for people who have achieved some degree of financial stability and have a solid income. In those reasons, the financial reason for not spending the money isn’t front and center at all.
I speak from experience here. For years, our life was one where we had at least minimal financial stability and a decent income, and during those years the financial reasons for not spending money were rarely on our minds when we were spending money. I didn’t think about retirement when I was spending money. I didn’t think about college savings. Instead, my mind was focused on what particular item to choose from the menu or which books to grab at the bookstore, not whether I should be doing this at all.
Contrast that to now, when I often say “no” to frivolous purchases. The thought of retirement instinctively springs to mind. The thought of college savings does, too. The thought of many of my longer term goals jumps right into my mind.
What’s the difference? I think there are two things.
One, I’ve spent a lot of time thinking about the future I want for myself and my kids in a very deep way. I don’t just stop with a vague vision of that future. I fill it in with a lot of detail, even if some of those details won’t turn out to be perfectly accurate.
Two, I intentionally tie those visions of the future to what I’m doing today. I’ve got this detailed vision of the future that I love and another vision that I don’t like as much, but the difference between those two visions is the spending choices I’m making right now.
Let’s look at those two tools and how they work together.
Visualizing the future is the most powerful tool we have for making the future feel more urgent.
The first strategy I use is that I spend quite a bit of time visualizing the future. By “visualizing,” I don’t mean vague daydreaming; rather, I try to visualize with a lot of detail what my life will be like if I continue to make good choices in the areas I care about, finances being one of them.
Perhaps once a month, I’ll spend some time actually thinking in detail what my life will be like 10 years from now if I make good choices in various areas of my life and move forward in a reasonable way. I’ll envision myself on the cusp of retiring early. I’ll imagine what my marriage will be like, what my children might be doing, and so on.
I usually like to walk myself through a day in that life, just so that I can really grasp what things are like. What do I do when I wake up? What does a good day really look like?
At the same time, I visualize what my life will be like in ten years if I don’t make good financial decisions along the way and spend every dime I have, along with other bad choices in other areas of my life. This picture is usually pretty miserable. I’m often alone, with no money, and in bad physical shape.
Again, I’ll walk myself through a day in that life, just so I can really grasp how bad that image is.
Often, the simple act of visualizing those two distinct futures makes me realize how important my goals are and how important a continuous effort to improve myself really is. However, it doesn’t really hit home until I visualize it in detail. The more detail I add, the more real it becomes. I find that “walking through” a day in that future really makes it come home, and visualizing a negative future is just as powerful as visualizing a positive future, particularly when you’re doing both.
The choice between the good future and the bad future is decided today.
Hand in hand with visualizing a positive and a negative future comes the realization that the difference between those two futures comes down to daily choices. The decisions I make today really are the difference between those two futures. Yesterday doesn’t matter. Tomorrow doesn’t matter. What matters is today, because today’s choices are the only ones I can really control.
In that sense, that choice as to whether to spend $5 frivolously or not really is a choice between those two outcomes, because it is the only choice I can control right now. Once I get past this little burst of pleasure, which path is this purchase going to send me down?
Most of the time, those little frivolous expenses obviously are choices that lead toward the future I don’t want, so I pass by them. This leaves me feeling good that I’m heading toward the future I do want.
For me, this pops up again and again and again throughout a given day. It helps guide what I eat, whether I exercise, how diligently I work, how I relate to my family and close friends, how I spend my money and so on. I almost always make the choice now that points me toward the better future because the only thing I can control is that choice. I can’t control the past. I can’t control the decisions I make in the future. All I can control is that decision in front of me right now.
Isn’t that a life without spontaneity?
One might look at this as a path to a life devoid of short term pleasures, but after a while, I stopped seeing it like that at all, for several reasons.
First, I pretty quickly stopped even putting myself in positions to make those choices. If you’re not seriously intent on buying a specific book, why go to a bookstore? Why not just go home and read what’s on your shelf? If you’re not going out for an exceptional meal and social experience you can’t have at home, why eat out? Why not just go home and make something quick and simple that’s healthier, a lot cheaper and easier?
Because of that, I often don’t even bother going to places where I’d be forced to make those kinds of decisions. Why go to a bookstore if I’m just going to be faced with that question when, unless I’m going there to specifically buy a book, I already know the answer? I just don’t go. I find somewhere else to go. I find something else to do.
That’s really the key of it. When you start couching your daily decisions in that gap between your positive and negative futures, you start to not only make different decisions, but you put yourself in situations where the decisions before you are different. If you don’t stop at a fast food restaurant, you don’t have to decide between the dollar menu and that tasty $5 item. If you don’t stop at a coffee kiosk, you don’t have to decide whether to buy that $5 coffee or not.
Spontaneity then finds other channels, ones that don’t involve undermining the things I want out of life. I’m not spontaneous in the stuff that I buy very often, but I’m spontaneous in the ways I interact with others. I’m spontaneous in the things I choose to do with my time. Rather than being spontaneous by stopping at a coffee shop for fifteen minutes, I’ll find something else to do with that time that doesn’t involve spending money.
Furthermore, I do actually budget in advance with my pocket money. I’ll put a certain amount of cash in my pocket each month and that money can be used for purely spontaneous things. However, when that money is gone, those choices are simply off the table. It’s not as if I never buy a coffee — it’s just that when I do, it comes out of that “spontaneity” money and there’s a limited amount of it.
That’s because I do actually view spontaneity is a valuable part of life. Those unplanned moments do add a lot of spice. It’s just that they don’t all have to be about spending money and by putting a gentle money constraint on it, I can sometimes spend spontaneously while also realizing it’s a bad idea to choose to go into situations where I might be tempted to spend spontaneously.
To put it really simply, don’t go shopping or out to eat for entertainment’s sake. Find other ways to be spontaneous. It’s fine to go out to eat and go shopping sometimes, but have an actual reason for it beyond “I’m bored” or “I’m too lazy to fix supper.”
Here’s how this actually works in my own life.
Let’s say I need to go shopping for some groceries and some household supplies. I make a list and head out to buy the stuff.
On the way, I drive by the bookstore. I think about a book series I’ve been reading and wonder whether I should stop in and pick up the next one — but I recognize that the library probably has it. I don’t even go in there. Stopping and buying books I haven’t read isn’t in line with the financial and material life I want going forward.
I stop at the store and go inside. There’s a coffee kiosk right by the entrance and boy it smells good. Do I go over there? Eh. I don’t really need the calories and don’t need to spend the cash, either. Doing so with any frequency isn’t really in line with the life I want in terms of health or finances. I can just make some coffee when I get home if I want some.
However, when I’m shopping, I do decide to buy one spontaneous item that I see on the shelves, something I often do when shopping because it lets me be a little spontaneous without derailing my financial future. I usually choose something I can share in some way with people in my life so that it bolsters my relationships. I end up grabbing a half-gallon of chocolate almond milk, which I quite like and my two youngest children absolutely love. We’ll share a glass of it after school and talk about their day.
As I’m leaving the store lot, I spy a fast food restaurant nearby … and I am a little hungry. I could drive through there and get something to eat on the way home. Alternately, I could go home, make a healthier sandwich, and eat it in the amount of time I’d be sitting in that drive-through, plus it’s a lot less expensive and almost exactly what I like. So, I choose to drive home instead — it’s more in line with the health and financial future I want for myself.
The thing to note is that these decisions are almost instinctive. I don’t consciously sit around and think like that; rather, my time spent doing negative and positive visualization of my future (as well as thinking about common situations that come up in my life) nudge me toward an instinct where I make much better decisions then I would otherwise.
Negative and positive visualization are both valuable. Use them.
It is well worth your time to regularly visualize your future, both negatively and positively.
Imagine what your future will look like in ten years if you make positive steps in all of the things you’re working on in your life. Don’t imagine radical success, just reasonable success. What does a day in that life look like?
Then, imagine what your future will look like in ten years if you just don’t bother and make sideways or negative steps in all of the things you want to improve in your life. What does a day in that life look like?
The stark difference should be enough to shock you.
Then, remember that the only decision you have any control over in your life is the one you’re making right now, and it can lead to one of those two futures.
Which one do you choose?
Do that often enough and you’ll be walking a path toward a wonderful future for yourself and your family.