The core principles of personal finance success are really, really simple. Spend less than you earn. Find smart ways to cut spending, especially on big stuff. Invest the extra money, first in an emergency fund, then into paying off debt, then into diversified investments. That’s really it – everything else is just nuance.
The thing is, you can say something very similar about other life changes. For example, the core principles of physical health success are really, really simple. If you’re wanting to lose weight, eat fewer calories than you burn. Exercise allows you to burn more calories and makes day-to-day physical activity easier. That’s pretty much it – everything else is just nuance.
The truth is that just because things are simple doesn’t mean that they are easy to achieve. If simple meant easy, then we’d all be millionaires and at a perfect healthy weight.
Simple just doesn’t mean easy.
The question is how exactly do you make progress on a change in your life that seems really simple but is actually really hard to put into practice? Financial change fits here, as does health improvement, independent learning, and on and on and on – almost any positive habit or routine change that a person might want.
I’ve tried to make lots of different changes in my life. Sometimes, they’ve been successful. Sometimes, they haven’t. What has been the difference between success and failure?
I think it comes down to five things.
First of all, you need to break things down to today – nothing more, nothing less. Success is about today, period.
Yes, it’s fun of dreaming of having a bunch of money or about having a thin body, but those things are simply not going to happen tomorrow or the day after or even next month. Those are long-term things.
The only way you’re going to get there is by taking one single day at a time. What can you do today to move in a positive financial direction? Or in a positive direction in terms of your health?
Today is all that matters. Succeed today and you can feel good, because you know it’s a step in the right direction. Then, just repeat it tomorrow. Do that again and again and you will find the results you want.
Second, track your progress, but don’t fret over day-to-day oscillations. I keep careful track of my finances (using You Need a Budget) and even today I notice that sometimes after a month where I felt like I made a bunch of good financial choices, I’ll find myself barely budging my net worth.
A similar thing can happen with your weight, especially if you track it daily. Sometimes, when you completely don’t expect it, you’ll find that your weight actually went up from your previous measurement and you have no idea why.
There are lots of reasons for the financial slowdown: The stock market had a bad month, or we had a big unexpected expense like an annual property tax bill. Similarly, the weight thing can be explained by changes in water intake or weighing at different times in the day.
Still, that doesn’t change the disappointment when you feel like you’ve made good choices but they don’t seem to have an impact on the numbers.
That’s why, although I record numbers like that, I don’t sweat the day-to-day numbers too much. I look at averages instead. For example, is my average weight for June less than my average weight for May? If so, I’m going in the right direction. I also like to compare numbers over a longer time frame than just a week or a month. Is my net worth in June better than my net worth last June? If so, I’m going in the right direction.
Third, spend time with people who are achieving or have achieved the thing you want. If you’re struggling to cut spending, spend time with frugal people and spend less time with people who spend money like water. If you’re struggling to lose weight, spend time with thin people who naturally eat a healthier diet.
Surrounding yourself with people who are achieving or have achieved the thing you most want in your own life means that you’re naturally surrounded by life choices and behaviors that lead to those achievements. If you hang out with frugal people, you’ll see how frugal people live and you’ll also be in situations where the crowd is making the frugal choice, making it feel less confrontational and a lot more natural. If you hang out with people who have a healthy weight, you’ll see how they eat and you’ll also be in situations where the crowd is making a healthy consumption or exercise choice, making it feel less confrontational and a lot more natural.
Take the time to seek out people in your life – and in your community – that are achieving (or have achieved) the things you want and then try to just spend time with them. Over time, their patterns in life will seem more and more natural to you.
Fourth, go extreme, but listen to your sense of burnout. A lot of people suggest that the best way to achieve your big goals is to go with moderation, but I’ve personally found that this doesn’t work well at all for me. When I go moderate, the progress is very slow and I get disheartened. A much tougher, more extreme approach to personal change tends to work better for me.
Take my own personal finance change. I didn’t do it lightly, not even at first. I dove head first into extreme frugality and I’ve largely stuck with it ever since. Sarah and I spend roughly half of our income – no joke – and bank the rest of it.
Why did that work and a more moderate approach (say, spending 10% less of our income) didn’t? The big reason was that an extreme approach started showing us results very quickly, while a moderate approach doesn’t show results for a while. However, both approaches make you feel the pinch of giving up things and both pinches hurt – the extreme approach might hurt a little more, but you’re seeing results much more quickly and the real results make the pinch easier to handle.
What about burnout? One thing I’ve learned about burnout when it comes to a major change in your life is that it usually isn’t caused by the overall picture, but by some relatively small detail.
For example, if you go all in on frugality, you might start feeling the pinch really strongly about never spending any money, but if you look deeply at your feelings, you might find that it comes from your choice to spend evenings at home alone and you’re really just feeling some social isolation and blaming it on finances. The solution? Don’t sit at home. Hit meetup.com or your community calendar and find some interesting things to do that don’t involve spending money.
When you look deep at burnout, it’s often not the broad sweep of changes that’s causing a problem, but one detail. If you find that detail and address it, the change just keeps rolling along.
Finally, never, ever celebrate your success by undoing your progress. This is the stupidest step you can take, and it’s one that’s undone a lot of my progress.
If you’re trying to improve your financial state, don’t celebrate your success over the last few weeks by spending money. If you’re trying to improve your health, don’t celebrate your success by eating a giant meal or a whole Sara Lee poundcake. If you’re trying to learn something new, don’t celebrate your success by “taking a break” from the learning.
Celebrating your short term successes and achievement of milestones is a fantastic way to feel great about how things are going, but that celebration needs to not undo the progress you’ve made.
Simple doesn’t mean easy. Fixing your finances is simple. I can explain everything you need to know on the back of five business cards.
However, it’s not easy to actually do it because the choices you have to make are hard and often run against the current of modern culture and the patterns of your life. There’s a reason that 76% of Americans live paycheck to paycheck and it’s not that personal finance success is complicated. It’s not complicated at all. It just isn’t easy.
Of course, the easy road is usually the one that puts you in a place where you don’t want to be. Perhaps it’s time to try the harder road… and you may just find that the harder road isn’t quite as hard as you thought.