Whatever we do in our lives, whether it’s relationships or finances, we need to make sure the moves we make propel us forward.
We are our own worst enemies in both regards. Setting relationships aside, let’s look at the financial problem associated with being our own worst enemy and one that in particular that crops us and causes us to take steps backwards, over and over again.
“I graduated college, I deserve this new car.”
“I got a promotion, I deserve a new house.”
“I finished number one at the company in sales, I deserve a new boat.”
Surely you’ve heard people say this. And maybe you’ve said it yourself. I know I have and every time I walk around feeling entitled or saying I deserve something, it usually ends up going south and turning out poorly.
We have a bad habit of turning success (or even pseudo success) into poor choices. What people often don’t assess when they have big accomplishments is what they need to do with that success. With how bad we are with money, statistically, what we ought to with the money is rarely “New boat, new car, or new house”. For most Americans the answer is probably “Credit card bills, student loans, and medical bills”.
Unfortunately we’ve grown to think that once we hit a milestone “We deserve [x]” when in actuality, that entitlement is getting us further and further into the hole. It’s making us look like foolish children one step away from throwing ourselves on the ground and having a tantrum.
So what should we do with the success?
There is nothing wrong with celebrating a success. All of those aforementioned items are huge accomplishments, no denying it. But we need to make sure we prioritize and direct our money in a responsible way.
Let’s say you got a cash bonus of $5,000 and you have $3,000 in credit card debt and no other debt. The smart answer is put 3k on the credit card debt (knocking it out) and then save some of the 2k and spend some of it. Our answer usually, sadly, is putting all 5k down on a new car and ignoring the credit card debt.
Don’t do that!
I promise you that no debt, money in savings, and some free spending money is far better than more debt. The former beats the latter every day of the week!
Let’s do a little exercise, go back to the top of the post and replace the word “deserve” with “can afford”. Once you can say “I can afford this…” is when you should buy it. Your temporary success doesn’t determine your buying power; only your current financial position.
Lastly, note that “can afford” doesn’t mean “I can afford the payments”. If you’re not buying a house, you should never go into debt and have to pay interest on anything. It’s never a wise decision. It’s setting yourself up for failure.
Your success is going to come from long-term planning, not short-term fulfillment. I’ve made several mistakes financially (still do once in a while), but the most success I’ve had with money is when I’ve used it wisely and thought long-term.