The State of Denial

I’ve been an avid journaler since I was about 12 years old, meaning I have about 25 years of pretty clear personal history out there. I like reading through those old journals sometimes, looking for patterns and re-reading my thoughts on interesting events.

Lately, I’ve been really interested in a particular eight-month period of my life, running from September 2005 to April 2006.

Now, as I’ve mentioned to you guys before, I hit my “financial bottom” in April 2006. I’ve written about it many times. It was a night in which I realized that I was having difficulty paying my bills and I was truly letting my infant son down. I was not building a good future for him or for myself. It was on that early April day that I vowed to change things and it really marks the beginning of my own financial turnaround.

Yet, as I also noted in another post, I wasn’t exactly oblivious to the problem. Here’s a quick excerpt from my September 23, 2005 entry in my journal:

Sometimes I feel like my life is completely without purpose and I’m just following some invisible pattern that someone else has put into place.

Today was a typical day. But every day is a typical day.

I woke up about 6:30 and said good bye to Sarah as she left. I watched the news for a while, got dressed, and headed off to work. I stopped at Gregory’s and ate a bagel and drank a cup of coffee while I read the paper. I drove to work. I got a few tasks done, surfed the web for a while, did a few more things. I went out to lunch at El Azteca and dropped $12 on a tasteless lunch. I sat at my desk most of the afternoon, thinking about the weekend and wishing I wasn’t a complete failure at writing. I stopped at the bookstore on the way home and bought three books. I went to the music store and got the new Basement Jaxx album that Charlie talked about. I listened to it on the way home and didn’t like it at all. I got home, tried to write a little bit while waiting for Sarah, hated everything. Deleted all of it. We went out to dinner. Now she’s watching a movie and I’m sitting here doing nothing.

I do all of these things almost every single day – but I feel like I’m going nowhere at all.

At that point, I was clearly realizing that something was out of whack in my life. I knew I was headed down a path I didn’t like. I knew that I was not making progress toward any sort of a better future. I was even acutely aware that I was wasting a lot of money on things I didn’t even really care about.

During that eight-month period, I actually visited a few websites about personal finance here and there. I remember reading a number of articles from websites like The Motley Fool and CNN Money regarding financial turnaround. Again, it wasn’t as if I was not aware of what I needed to do.

So, why didn’t I change?

The answer is simple: denial. I was absolutely in denial about a number of things.

I was in denial about how bad my financial state was. I made a good income. I could largely pay the bills. Things must not be too bad, right?

Even though I knew on some level that things were a train wreck, I often chose to look at my financial state from very carefully selected angles, leaving me with the impression that things were going well even when they weren’t. I would look at my income and compare it to, say, my parents at a similar age and argue that I must be doing well because I was making money. I would look at a stack of paid utility bills and argue that I must be doing well because I was (mostly) keeping those bills paid.

What I ignored were things like our debt level, which actually continued to grow with consumer debt on top of student loan debt and automobile debt, and our lack of saving for a home of our own and our lack of financial preparation for having a child. Yes, our first child arrived in the midst of that eight month period.

I was in denial about the fact that I had the power to fix things with behavior changes. Rather than recognizing that I could actually make changes to my daily life that would undo many of the problems I was facing, I chose to instead believe that my current income just wasn’t enough to “live” and that I was just doing the best I could. My “future self,” who would be making more than I was now and would probably have other advantages, would fix these financial problems.

This was a really weak excuse to avoid doing anything right now. In reality, my future self is actually less likely to be able to handle my problems. Any number of unfortunate events could happen between now and then, plus it’s assured that I will be older, with worse health and with more responsibilities (like children). You’re never in a better position to solve your financial challenges than you are right now.

I was in denial about what my daily choices were doing to my long term future. I could clearly see that my finances and other aspects of my life were headed in a direction I didn’t like. I even understood how many of my daily choices were individually bad ideas in the long run. Still, I chose to blame those things on broader patterns that I felt I had little control over. “My job doesn’t pay well.” (It did.) “We have big student loan debts.” (We did, but that had nothing to do with my daily spending choices.) “Prices are high, taxes are high, etc.” (Blaming society for your current situation is the ultimate crutch.)

This was just pure resistance to change. I was afraid to change. There were many aspects of my life that I really liked and I felt that if I were to start changing things, I would drastically reduce the quality of my life. Like many people, when I thought about cutting my spending, my mind immediately went to the luxuries that I held most dear and I did not want to give those up. They would make my life miserable and thus all smarter financial moves would make my life miserable, too.

Adding those things together, a picture of denial becomes clear. I denied the precariousness of our financial situation. I denied that change was possible in my life.

So, how did I break through this giant ball of denial?

The first key, and probably the most important step, was education. I spent significant time learning about personal finance. Not only did I read through a lot of the personal finance blogs at the time, I read a lot of personal finance books, too. Some of them were forgettable, while others (like Your Money or Your Life and The Total Money Makeover and The Millionaire Next Door) were life-changing. All of that reading, however, reinforced the core principles of personal finance and made it clear how simple the solution was. It also made it crystal clear that the key to everything was my own behavior.

The second key was inspiration. Inspiration came from a number of places, but the biggest one was my infant son. I would see him laying there so helplessly, so dependent on me for almost everything, and I could not help but reflect on my actions. Was I really doing my job as a father? I could tell, even through the denial, that I wasn’t doing right by him in terms of our money. I wasn’t going to be able to protect him or build a safe and secure life for him. I wanted him to have a great life, and that sentiment motivated me greatly.

The third key was experimentation. I realized that simply trying things didn’t mean that they had to be permanent fixes. If I did something like making a meal at home, it wasn’t a permanent life change. It was just one meal. If I skipped a trip to the coffee shop or the bookstore, it wasn’t a permanent life change. I could buy stuff next time. I just tried lots of little things and I made sure to put aside the money I saved or earned due to those trials. Many of those trials didn’t stick around, but I discovered that a lot of them worked completely seamlessly or that it didn’t really hurt to give up some of my wasteful spending.

If you find that you’re in denial with regards to your finances (or other aspects of your life) and you find that the whole picture of denial resonates with you, apply these keys. Educate yourself. Find inspiration. Experiment with your routines.

Trust me, it can change your life.

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Trent Hamm

Founder & Columnist

Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.