There are dozens of dopey rationalizations people give for not taking their financial responsibility seriously. While it’s human to make up all sorts of excuses why we do things or don’t do them, those rationalizations typically come back to bite us where it hurts the most.
Here are the top 10 excuses I’ve heard in the last 12 months alone:
I won’t need to put money away for college. My kid is a star soccer player and he’s a shoe-in for a scholarship. My kids will take care of me if I run out of money. I’m expecting a big bump in pay and a bonus; that will get me out of the hole. I don’t need to put money into the 401(k) plan—I’ll die before I retire. Insurance? Who needs insurance? If I die, I won’t know. Why save? I could be run over by a bus tomorrow. I’m going to win the lottery. God will provide. Something good will happen, I can feel it. The more I make, the more the government takes, so why bother?
Making excuses can be fun when it lets you beg off from some lame party that you just couldn’t convince yourself to attend. But when it comes to money, security and financial freedom? Not so much.
Why has excuse making become so fashionable? Mostly because we live in a constant state of overwhelm. There are too many requirements and too little time; too much to know and too little understandable information. While technology makes data more accessible, it’s also of tidal wave proportion.
So just start here, with some basic financial management concepts:
If you make more than you spend, you have a surplus—something to save, accumulate and spend now or later (or better yet, now AND later). If you spend more than you make, you have a deficit—which can only happen if you dip into savings to make up the difference or you use credit as a float. Unless that float is very temporary, it’s a very, very bad idea. When you stop working, you need to have funds accumulated to make up for what is not coming in from pension, social security or other sources. If you have unexpected expenses and no place to draw those funds from, you’re in deep trouble. Goals are important when they are tied to what you value the most. For example, a 60-inch flat screen is not a goal—it is a purchase of a thing. As opposed to “financial independence”…now there’s a goal you can sink your teeth into. Risk is real. It comes in multiple flavors and colors. If you cannot bear the risk of volatility in the stock market—and keep your money in a savings account—you WILL suffer inflation risk. If instead of keeping a certain amount of your assets in a savings account, you put them in the stock market, you will bear the risk of market volatility. Time is either your best ally or your worst enemy. Be wary of the calendar. If you wait until you’re 58 to begin savings and expect to retire at 66, you’d better have a bundle to put away and hope that you don’t live too long, especially if you have a high cost of living. But if you’re 22 and you can start putting away for retirement, you are giving your future a huge boost. Avoid stock tips from friends or through the media unless you don’t care if you lose your investment. If you don’t know where your paycheck goes (how you spend your money), you will never have control. Making sacrifices for the future might come with short-term pain. NOT making those sacrifices is sure to result in long-term agony.
Planning your today and your future doesn’t have to be painful or mysterious. It’s mostly common sense AND being willing to avoid making excuses.
