Personal Finance Success and Directionlessness in Life

A few days ago, I received a handwritten letter from an old acquaintance, someone I hadn’t seen in a healthy handful of years. The letter was full of reminiscence, but then it moved onto a request for some advice on some issues that he didn’t know how to handle.

The advice request started out in the domain of personal finance, but as he wrote more and more details, it became clear that the real problem in the whole picture wasn’t just financial.

The key issue was a sense of directionlessness.

The person who wrote the letter was fairly insightful regarding that sense of directionlessness, too. He was aware that he wasn’t being particularly challenged at work and that was provoking a fairly strong sense of frustration. His main financial issue was really rooted in that same sense of directionlessness, as it boiled down to a choice between a smarter short term decision and a smarter long term decision, a fact he already recognized.

The whole letter brought to the forefront a major truth about personal finance: it is really hard to make good personal finance decisions without some sense of direction in life. If you don’t have any idea where you are headed, making the right financial choices becomes essentially impossible.

For many people, this kind of directionlessness in life ends up manifesting itself as financial inaction. There’s no sense of where you’re going, so a lot of financial articles seem to make little sense and it becomes easier to just do nothing and assume that when things become clear in the future, then you’ll make good financial choices. In fact, that was part of what was going on in this letter – the person in question was making some good financial choices in terms of actually putting money into a 401(k), but in terms of other choices, like figuring out whether to rent or to buy, he was stuck, paralyzed by a lack of direction.

So, if we accept the basic idea that directionlessness makes it much harder to make optimal personal finance choices, how does one break through? How does one move from a sense of personal and professional wandering to a state where there’s at least enough forward direction to make some smart choices?

Here are some of my thoughts on the subject, from years of working through these kinds of challenges in my own life.

Picture of the Future

My default strategy when it comes to solidifying some idea of the future is what I call the “picture of the future” strategy. I’ve tried lots of different techniques to come up with at least some idea of where I’m headed and nothing has worked nearly as well for me.

This strategy is simple. Just pick a particular point in the future – five years from now, ten years from now, whatever – and think about what you would like your life to be like at that point if things went reasonably well for you. Don’t visualize yourself becoming a world-breaking success and don’t imagine pure failure, either; instead, imagine modest success. Also, try to imagine a life you’re happy with – don’t imagine a life that just carries forward things you dread about today.

What does that look like? What is your job like? Your career? What are your main relationships like? Where are you living? How do you spend your free time? What about that life would make you jump out of bed in the morning with a smile on your face?

Give it some real thought. Don’t jump on board the first set of cool ideas that you have. Think about whether you really want those things. Think about the elements of your life that you want to maintain, and which ones you would really like to improve and what that improvement would look like five or ten or twenty years from now.

I actually do this exercise pretty regularly, at least once every few months. I visualize things at different points, too.

Now, one thing you’ll realize when you’re doing this is that any picture you paint in your mind is not set in stone. It’s not certain at all, especially when you dig into details.

So, why dig into the details, then?

The real purpose of this exercise is to establish the kind of things you want from your future, the kind of things that you’re going to be willing to work for. That doesn’t mean you’ll wind up with those things, but there’s a good chance that, if you set those things as your goal, you’re going to wind up with something similar to those things.

I’ll use myself as an example. Around the time of the birth of my first child, I envisioned myself with some sort of job where I worked from home so I could be there when they got off the bus. This was important to me. My mother was always there when I got off the bus and, looking back, it was a great thing to have that friendly smile and greeting and a snack waiting for me when I came in the door, almost every single day. I wanted that for my own kids.

At the time, I thought I would probably be consulting or something in the field I was in at the time, but I knew that whatever I did, I’d be looking for some sort of path forward that offered that kind of flexibility.

Flash forward to now. I never expected I would wind up being a writer of personal finance and personal growth material, but I did expect that when my kids got off the bus, they’d run home and a parent would be there for them with a snack and a friendly ear that was ready to hear all about their day at school.

It was holding onto that desire for truly flexible hours, however, that led me to where I am today. I am sure I could be making more money doing other things if I so chose, but a big part of what I wanted to do with my life during the years where I was a parent of young children is to be there at home when they got off the bus, and that principle, which I recognized by doing these kinds of pictures of the future, helped guide me here.

Another example: for years, I visualized eventually being a homeowner. I visualized lots of houses, none of which were particularly like the one we live in now. The only certainty I had was that I wanted to live in an area with a lot of stable families nearby for my children to grow up with. Simply knowing that I wanted to become a homeowner had an enormous impact on my finances over the three years leading up to our home purchase.

The purpose of this picture isn’t to map out exactly what your future will be like, because it probably won’t be exactly like that. The purpose is to fill in lots of details so that, through those details, you begin to really understand the broad strokes of your future that are really important to you.

If you’re visualizing a life where you greet your kids where they come home off the bus, you’re probably wanting a future with employment with flexible hours.

If you’re visualizing a life where you have a nice large home, you’re probably wanting to eventually become a homeowner, probably in a place with a relatively low cost of living so you can afford that home.

If you’re visualizing yourself spending your time on particular projects, you’re probably either going to want to steer your career in that direction or else start building a side gig that takes you there or else commit fully to the idea of your job being mostly a support for that greater interest.

The weather that you visualize probably shapes where you’ll live, too. I often visualize chilly fall weather when I think about the future, where there are leaves falling and a strong chill in the air and maybe even some snow, but not blistering cold. Thus, the upper Midwest or New England make sense for me.

The whole purpose of these kinds of pictures is to fill in many of the broad strokes of where you want to go in life so that you have a framework to use when making professional and financial and personal decisions going forward.

If You Don’t Like How Things Are Right Now, Start Doing Something Different

Quite often, directionlessness comes from a life with which you’re very happy with some aspects but generally indifferent to many others and unhappy with still others, and there’s an underlying gentle fear that making big changes will cause you to lose the elements you’re happy with.

Maybe you have a stable job that pays well, which you’re happy with, but you yearn for new challenges and those new directions are stifled. You don’t want to lose the stability that you value, but the happiness of that stability is counterbalanced (or more) by the yearning for new challenges.

Maybe you have a family that you adore, but you utterly loathe your overall career path, but you have this underlying fear that making a radical change to that path will undermine your family’s happiness. Or, maybe you’re single and you love your social and cultural life, but your career makes you feel empty.

Maybe the reverse is true – you have a job that you really love, but you have this underlying sense that it’s everything to you and you don’t have any room for anything else in your life. You don’t want to sacrifice this job that you deeply enjoy just to find more enjoyment in your other areas of life.

Our tendency as humans is to simply hold things in place out of fear of losing what we love about our lives, so we wind up tolerating the things we don’t like about our lives. In other words, we resist change, and when resisting change means a life with some aspects we don’t enjoy, that can really end up feeling like directionlessness. “I don’t fully like where I’m at, but I don’t want to lose what I have, so I’ll just stay put.”

The problem is that in accepting that kind of directionlessness, you abandon the search for better things in those areas that you’re lacking. That, of course, means that those things will never get better.

The best solution here is to never stop looking for ways to improve the areas of your life that you’re not happy with. Ever.

If you’re unhappy with your financial life, start looking at how you’re spending money. How much of your money is spent on unimportant things that really have no lasting impact on your life? Cut all (or at least most) of that out of your life.

If you’re unhappy with your job, start looking for ways to improve that situation without rocking the boat. Use your downtime to build something new, or if you’re in an overstuffed job, focus on tasks that are really resume-worthy and keep that resume polished up. If you’re in a job that seems to absorb all of your time even though it’s pretty flexible, consider some new approaches within that job, like forming new sub-groups of people to work with or building new relationships with people you don’t know as well.

If you’re unhappy with your social life, start checking out meetups, just to see what’s out there. Go to a few, even if you’re nervous about the prospect. Make an agreement with yourself to stay for a certain period of time, and to have a meaningful conversation with at least three people.

Obviously, these kinds of changes are good things, but how do these changes help with an overall sense of directionlessness?

First of all, if your life is in a good place, a direction forward comes almost automatically. If you like how things are, you’re going to want to make choices that preserve and enhance your current life and set the stage for things that are clearly coming down the road. Dealing with the aspects of your life that you’re unhappy with directly can really help.

Second, making attempts at solving what seems like the biggest problem in your life can sometimes expose the real problem, which isn’t immediately obvious. Digging into a career dissatisfaction issue might uncover that the real problem is the lack of meaningful social connections, for example; you’re digging for more meaningful work relationships that just aren’t there in order to make up for having fewer meaningful relationships outside of work, which is what you really need to work on.

Finally, trying new approaches to one’s life problems often uncovers new sources of happiness and joy that you didn’t expect. Going to a meetup might expose you to a new hobby that you deeply enjoy, or helps you find a new circle of friends. Pursuing further education through your workplace might light a fire in your life that wasn’t there before because you’re engaged in the new topics so deeply.

When You’re In Doubt, Choose Flexibility

Even if you apply the above strategies, you still might find yourself less than sure about what to do going forward. I know that I oscillate back and forth between having a really clear direction for the future and being less certain about things, even though I’m pretty happy with how things are and I know generally where I want to go from here all the time.

If you find yourself uncertain as to what the future might hold for you, my honest suggestion is to choose the path forward that offers the most flexibility.

What does that mean?

For your living quarters, lean toward renting over owning. Renting usually has a lower monthly cost and it is much easier to extract yourself from a rental situation than a house with a mortgage on it. Homeownership is a great way to build equity, but it only really begins to click after you’re in the house for a few years, the growth in the value of the house has compounded a little, and you’re past the worst part of your mortgage (when payments are almost entirely going to interest). If you’re not sure where you’re going to be living in the next few years, rent, don’t own.

For your savings, lean toward options that are low risk and fairly liquid. In general, when you raise the risk level of investments, you increase the chance of losing money in the short term so that you have a better average annual rate of return in the long run. For example, compare a savings account to investing in the stock market. A savings account is going to return a boring 1% per year, but it’s not going to lose money no matter what. Stocks might average a 7% annual rate of return, but some individual years might see losses – even big losses. 2008, for example, saw a huge loss in stocks.

As for liquidity, lean towards things where you can extract the money quickly and use it for other things. Again, savings accounts are pretty strong here, as are stocks; things like real estate are a bit harder to quickly liquidate while maintaining your gains.

This doesn’t mean you shouldn’t save for retirement. Take advantage of a Roth IRA, and especially take advantage of any matching money you might get at work into a 401(k), 403(b), or TSP available there. You will virtually never regret putting away money for retirement. All of us are going to grow older.

For your job, keep your resume and skill set polished at all times. Keep a copy of it on LinkedIn with fresh updates so that people can find you if they have opportunities. Focus on things at work that will directly bolster your skill set and enable you to actually add meaningful things to that resume. Look to add education to your resume as well (though that’s something you should always be doing). In short, put yourself in a position where doors might open easily for you elsewhere, even if you don’t intend to jump right away.

In your social life, focus on connections that may provide a professional springboard or directly lead to new opportunities in life. It’s great to have old friends, but those old friends generally don’t open new doors in life, which is what you need to have if you’re feeling directionless. Don’t toss aside old friends, but put in the effort to build new friendships, ones that might potentially open new doors for you.

If you’re actively taking steps in your life to find a direction, the advice here will work well until you find what you’re looking for, at which point things begin to change. You may start making some longer-term commitments, like buying a home or investing for the long term. You may get more involved in local communities that are focused on improving things locally, like a local church or city or county governance or a civic organization. You may end up shaping your career going forward to meet the specific needs of your current employer.

Final Thoughts

Even at this stage in my life, there are definitely moments where I feel directionless, where I don’t know for sure where my life is headed. In those moments, I take a lot of the steps above: I visualize where I want to go, I look for ways to seed my life with the opportunity for change, and I plan for the prospect of short term change as well.

It’s when those things take root and I begin to feel more direction that I begin to make specific plans to push myself in those directions.

That transition is rarely easy, and it is rarely quick, but it’s well worth working towards.

Good luck.

Trent Hamm
Trent Hamm
Founder of The Simple Dollar

Trent Hamm founded The Simple Dollar in 2006 after developing innovative financial strategies to get out of debt. Since then, he’s written three books (published by Simon & Schuster and Financial Times Press), contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.

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