The latter half of January each year brings a lot of people who are finding that it’s difficult to stick with a New Year’s resolution. Often, breaking a big resolution that you thought about a lot and tried to keep requires some internal justification. Why are you giving up on this big plan?
I see this effect occurring in the form of messages from readers, who typically write in with reasons for why they should give up on their big financial plans and seem to want me to approve of their change in direction. They’ll tell me that being financially responsible is adding a great deal of misery and even suffering to their lives. I’ll hear about how their lives are now devoid of all fun and pleasure. Some will ask if it’s okay to just go on a giant spending spree, as though I am responsible for giving permissions in their adult life; others will just tell me that any information I’ve shared about financial success is misleading or a lie or something.
Whenever I hear from someone who has made an effort to find a new financial direction but has found it to not be enjoyable, I point them to six key principles. Not all of these principles will ring true for everyone struggling with a better financial path, but at least some of these principles will hit home.
Here are six principles to think about when you’re finding that you want to “live” and “have fun” rather than be financially responsible.
Principle #1: Bad Feelings Usually Come from a Misstep, Not a Wrong Direction
Typically, when a person feels as though they need to “live” or “have fun,” it means that they’re resisting some of the changes they’ve made in their life. More specifically, they’ve made a spending cut or two or three that turns out to be a cut into something they really value, and because they miss whatever that handful of things are, they feel as though financial progress as a whole is flawed. Their view becomes centered around that little handful of lost things and they use that to drive themselves into a state of misery so that backlash is inevitable.
If you feel like financially responsible choices are making you miserable, rather than tossing the baby out with the bathwater, stop and consider what specifically is making you miserable. What exactly do you feel that you’re really missing out on? Make a list of those things that you have cut that are making you feel as though your life is miserable. Rank that list – think about which cuts sting the most.
Then… are you ready for this… undo the top two or three cuts on that list.
If you’re feeling like financial sacrifice is pure misery because you’ve given up that daily latte at the coffee shop next to work, bring back that daily latte at the coffee shop next to work.
If you’re feeling like your life is miserable because you said no to a couple of social invites in the last few weeks, stop saying no to so many invites.
These feelings are a perfect indication of how the perfect is the enemy of the good. If you make a ton of changes to your life in order to be “perfect” in terms of your financial choices, only to find that a few of those choices are making you miserable, go back on those few choices. Aim for “very good” rather than “perfect” and don’t cut the things that you truly value most.
While you’re doing this, of course, it’s always wise to keep looking around your life for unnecessary or excessive spending in other areas. You may find some areas where you’re needlessly spending money that push you back in the other direction at the same time, balancing out the restoration of the thing you cut that made you miserable.
Principle #2: Every Dollar Spent Represents Lost Opportunities
This is all about a concept called opportunity cost, which is defined by Wikipedia as “the value (not a benefit) of the choice of a best alternative cost while making a decision. A choice needs to be made between several mutually exclusive alternatives; assuming the best choice is made, it is the ‘cost’ incurred by not enjoying the benefit that would have been had by taking the second best available choice.”
In other words, whenever you spend a dollar, the hidden cost of it is that you’re losing the opportunity to do whatever the next best thing you could have done with that dollar is.
For example, a $20 meal and drink at Applebees means that there’s now $20 you don’t have for going to a movie with your friends. Spending $15 on a book instead of checking it out from the library means that you have $15 less to save for a car down payment.
Is the way I’m choosing to spend my money right now that much better than the other things I could be doing with that money? Because, like it or not, spending that money comes with the cost of shutting the door on that other opportunity. If I spend $50 of my hobby budget on a new board game, I’ve shut myself off from quite a few other hobby experiences and items. Is that worth it?
This alone isn’t a great persuasive argument, but is foundational for the other ones to make sense. A lot of smart personal finance relies on the idea of an opportunity cost.
Principle #3: Not Having a Strong Financial Foundation Adds Stress to Everyday Decisions
Over time, financial missteps and unexpected events and big upcoming expenses can add up to a ton of stress.
It is stressful to not have enough money to pay the bills. It is stressful to be facing retirement without adequate savings. It is stressful to face a life emergency without having money in the bank.
The stress of not having enough money is an “opportunity cost” associated with spending money freely. When you spend money on “fun,” part of the cost of that “fun” is the stress that comes from not having money when you really need it.
For example, you might buy a $20 dinner at Applebees, but when you spend that $20 on something relatively unimportant, you’re also buying stress down the road. That’s part of the opportunity cost of that meal.
I like to think of it this way: whenever I put money aside for the future, whether it’s in an emergency fund or in a car savings fund or in retirement savings, I view it as actually buying a reduced sense of stress in my life. What I’m paying for is not having to worry. What I’m paying for is knowing that when things go bad in my life, I have the resources to just handle it, which means I’m not worrying at night about that funny noise the car is making and I’m not completely freaking out if my car gets damaged in a hailstorm or if my transmission fails.
All of that stress just vanishes if I have money in the bank, so, in essence, that’s part of what I’m buying when I save for the future. I’m buying stress reduction along with (eventually) buying a transmission and also avoiding interest payments that would come with having to buy a transmission in an emergency. (Of course, a transmission is just an example here – it could be almost anything you need in the future.)
Principle #4: The Vast Majority of Short-Term Pleasures Fade Quickly Into Nothingness
Can you remember what you did for fun a month ago? What about a year ago?
I know that I went out to eat at least once in the last month or so, but I honestly don’t remember the meal or where we even ate. I know at some point in the last few weeks, I picked up a breakfast burrito because I was really hungry and driving somewhere. I can’t really remember if it was good or not or even for sure where I bought it. Were those choices really an effective use of my money? No, not really. They’re just forgotten, money that just floated out of my fingers.
I often find things that I’ve purchased in the past, barely used or not used at all. Sometimes, I don’t even remember buying them. Did I get this as a gift? Did I buy this at some point? I really can’t remember at all.
Sometimes, I’ll look through credit card receipts and find little expenses, like $6 spent at a gas station or $10 spent at Target, and I literally don’t remember what I spent that money on. What did I even buy? Why? It was some momentary pleasure that was forgotten almost as soon as I spent the money.
Many pleasures slip right through our fingers – entertainment products we don’t use, forgettable movies, an expensive latte that we gulp down and forget, overpriced meals gobbled down in a hurry, dinners at mediocre forgettable restaurants, and so on. We spend money on something that’s pleasurable in the moment, but we almost completely forget about it within days.
Yet, we continue to pay the opportunity cost for those expenses. Since we have less money put aside for the future, we’re more prone to worry and stress about unexpected expenses and about retirement – and what if one of those bad events actually happens? Furthermore, we’re not making much progress toward our positive goals, either – there’s less saved for that dream vacation, for example.
That stress and worry persists. Is it really worth having that momentary pleasure, the thing you forget practically as soon as it’s bought or consumed, when it causes that continuation of stress and worry and that distance between where you are and where you want to be?
Most of those forgettable pleasures really don’t have a lot of upside outside of the next few minutes. Make sure they’re really worth it.
Principle #5: ‘Living’ and ‘Having Fun’ Are Not Predicated on Spending Money
What exactly does a person mean when they talk about “living” and “having fun”? Is it really just spending money? Is spending money the primary source of “living” and “having fun”?
If the only way to “live” and “have fun” is to shell out cash, you’re locking out a lot of opportunities in your life.
Try to seek out things that you consider to be “living” and “having fun” that don’t involve spending money. I have a long list of things I enjoy doing that don’t involve spending money and that’s what I tap for my own leisure time.
Here are 10 of those things:
– I enjoy reading books I’ve checked out from the library.
– I enjoy hiking in the parks and wooded areas near my home.
– I enjoy going to a community board game night in my area.
– I enjoy making food at home, particularly fermented foods like sauerkraut and homemade items like pasta.
– I enjoy having potluck dinner parties at my house.
– I enjoy looking at the community calendar and doing something pretty much at random in my community.
– I enjoy doing exercises in my living room.
– I enjoy working on lettering and calligraphy.
– I enjoy gardening.
– I enjoy learning about new topics from Wikipedia or from free online classes.
Come up with your own list. If you have a repertoire of things to draw from that are enjoyable and free, it becomes a lot easier to find something to do at any given moment.
Of course, this doesn’t mean that every fun thing that involves spending money is now off limits – that’s an absolutist black-and-white view that people use as an excuse to avoid self reflection. It’s simply a reminder that things that are all about “living” and “having fun” that are also free do not come with a stressful opportunity cost. If you make an effort to identify things that are low cost and free that equate to “living” and “having fun,” then you drastically reduce the long term stress in your life.
Principle #6: Every Decision You Make Is Shared By Your Future Self
The decisions I make today aren’t just about me in the here and now. They’re also about the person that I’m going to be in the future.
Your future self is a stakeholder in every decision that you make. You are making choices always on your future self’s behalf, from how you spend money to what you put in your body to who you spend time with to what things you read and learn about.
Consciously recognizing your future self as a part of every decision you make, along with a recognition that it’s often a good idea to make a choice that really benefits “future you,” is a great way to approach the whole idea.
For example, let’s say I’ve got a friend coming to town and he wants to go out and eat somewhere for lunch – “nothing fancy,” he says. I remember the type of foods that he likes – Mexican and spicy. I look at the places nearby to choose from. One I exclude because it’s rather expensive and about as “fancy” as one can get in that particular niche. However, I also eliminate another because they serve fairly greasy food. I end up choosing a low cost place that’s known for their spicy rice. When we get there, I end up ordering their daily special, which is reasonably priced and seems pretty healthy, and I focus instead on the conversation with my friend.
With almost all of those decisions, my future self is a big part of the decision making process. I’m choosing a reasonably priced place. I’m avoiding a very unhealthy place. I choose a reasonably priced and reasonably healthy dish. I focus on my friend and building up that relationship rather than the food.
None of those things are preventing me from having fun in the moment, but every decision is one that’s better for my long term self. I’m making lower cost and healthier choices. I’m focusing on building a relationship instead of momentary pleasure. My pleasure today is perfectly fine, but my future self is happy, too. I’m not sacrificing my future self just to get a tiny bit higher today, especially since that “tiny bit higher” is likely to be forgotten.
Just keep your future self in mind when you make decisions. What choice could you make today that will have the best impact for you five or ten years down he road? Give that choice a little extra weight.
“Living” and “having fun” are great, but they begin to fail you when you ignore the cost of some avenues of “living” and “having fun.” The best avenues I’ve found for “living” and “having fun” are ones that come without those costs, or that minimize those costs.
Yes, there are absolutely times when the fun choice in the moment is the right call, but putting in the time to recognize that the most benefit sometimes comes from the choice that isn’t the most pure fun in the moment is a powerful step on the road to a better life.