How to Fix Your Finances
Very often I think about the relationship between spending habits, comfort and affordability.
If your expectation is to enjoy a better financial position in the future, there are sacrifices that must be done in the present, after all that is the natural meaning of delayed gratification.
You can either overspend in the lifestyle and things that you think you deserve now, or put a little bit of pressure on yourself and make some sacrifices here and there, in order to offer your future self a better life.
As Dave Ramsey says: "Today I will live like others won't, so tomorrow I will live like others can't"
The truth is, quitting to buy your coffee at Starbucks every morning won't make you rich in 20 years. This example is often misunderstood, because this habit alone won't make you rich or poor; but it certainly can become the first step that will give you the mental toughness to embrace uncomfort, and the will power to stick to what is right for you.
1. Be uncomfortable and embrace it.
One of the easiest ways to get stuck in the same place is to avoid uncomfort.
Staying in the same place, while complaining, without making a change, won't transform your situation.
Often times I see people complaining about their financial situation but they are not willing to make a change, they are not willing to make some adjustments to their current comfortable lifestyle, in order to be in a better situation tomorrow.
If you spend all your money with your current salary, you will spend it all no matter how much you make.
At the end you have to choose between your comfort zone and what you are willing to do to improve your situation.
No everyone has the same level of tolerance or willingness to uncomfort, and that is understandable, but if you want to improve your situation you have to find a way to make changes that will allow you to get where you want. I call it small sacrifices.
Skip the latte at Starbucks and make your own coffee, avoid buying lunch at work when you can bring it from home, avoid unnecessary subscriptions, avoid using cleaning services or paying to get your laundry done when you can do it yourself, avoid buying something you don't need, or paying for something impulsively if you can include it in your budget and afford it later.
If your mortgage or rent is very expensive, find a way to change that, either downsizing, moving to a less expensive zone, house hacking, or getting a roommate.
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2. Choose simplicity.
There are many causes to financial stress, failing to invest early on, neglecting to create or add money to your retirement account, or just some unexpected problem that messes your finances.
But I will tell you, from all of them the easiest one to take you to financial failure and also the most common one is impulsive spending, living above your means and failing to budget as well as respect that budget.
Any type of debt that is not going to leverage your power in order to create or have appreciating assets, is a debt that should be unacceptable to you.
This include cars, overpaying for rent, impulsive spending that often ends as credit card debt, fun money without limits, overspending on travelling, etc.
Let's make something clear, it is not about quitting to every experience you enjoy, it is about planning for the present and for the future. I'm a firm believer that fun money should be included in your budget, because you have to make a budget that is realistic, a budget that you know, with a little stretch and some will power, you can achieve. Those are what stretching goals are for.
A stretch goal, improves your behavior just a little bit, so then you can move to a bigger challenge. It is all about milestones.
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There are two friends. One of them exercises every day for 20 minutes, the other one exercise for 2 hours when he feels like it, normally every month or two.
Who do you think is going to be in better shape, one year later?
Much of life, as in working out, is about consistency, about putting the repetitions, creating the habits and setting up multiple stretch goals.
If you want to make a change, make sure you find a way to CONSISTENTLY stick to your plan.
There are no highest merit (an self-esteem boost) as respecting the compromises that we have made to ourselves.
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4. Evaluate progress and make the necessary adjustments.
As in every process, yours might need an adjustment.
Make sure to evaluate your progress, 6 months or a year later to check what else can be improved or changed.
Maybe you are sharing a place and find that after 1 year, it helped your finances and you no longer need it, or you worked on your changes and now you can afford to buy something either an object or an experience that you were looking forward to get.
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5. Find opportunities in life.
As you get uncomfortable and work on stretching goals for your finances, be alert for opportunities that can offer you a financial improvement.
A new job, a business idea, a side hustle, are all options.
If you are open to new opportunities you should also improve your skills, they can be the difference between a dream coming reality or just staying like a dream.
Image by Gerd Altman - Pixabay