Bundle up
A mother reminds her child to take a jacket while waiting for the morning bus ride to school. The child doesn’t want to look uncool in front of his peers and doesn’t want to deal with the hassle of carrying a jacket around in school. He forgoes the jacket and his alternative is to stand in the windy, fifty degree weather. Brrr! Impatiently waiting at the bus stop, he wished he had brought his jacket with him.
How many times have you wished you would have bundled up a little more to keep you warm during colder months–adding an extra layer of undergarments? In the context of money, like the child wishing he had brought his jacket with him to keep warm, often people wish they had more money.
When told how to manage it or even have been educated, people do exactly what the child did–brush off the advice for whatever reason. Simply, no matter what others may think of you, when it’s a little chilly outside, you put on a jacket to keep you warm. I would rather stay warm than look cool in front of my friends.
I probably couldn’t tell you the countless times I’ve heard people say they wish they had more money. Like a mother who sounds like a broken record, I ask “What did you do with it? You were paid last week.” I think to myself about the times, I’ve provided education on how to manage money. Was my advice brushed off?
Paycheck to paycheck
I imagine the average person who lives paycheck to paycheck (and even those who don’t) are thinking to themselves how many more days are left until the next paycheck. Listening to the psychological barriers people tell themselves, I’ve heard the scripts people tell themselves indicating they wished they had more money. You wish you had more money if…
- you are impatiently waiting until your next payday.
- you have spent more than half of your paycheck within the first week of your payroll deposit.
- you are salivating at the mouth for the latest fall fashion trends.
- you had buyer’s remorse.
- you had to recollect how much you spent the last time you hung out with your friends.
- you ever had to decide what bill to pay first.
- you thought it mean that everything would be okay.
If you wished you had more money two things are going on in your life. One, you really don’t make enough money to sustain your lifestyle. And, two, you really don’t make enough money to sustain your lifestyle. Your lifestyle could be leaving you with empty pockets.
There are people who make well over six-figures a year and are still left hanging with their head lows and hands in empty pockets. At the same time, there are people who make under $50,000 a year and have their heads held high with pockets full of money. Although, my approach is not about telling you how to live your life, I’ve heard too many times people wishing they made more money as they pull up in their driveways in a gas-guzzling SCV. With that in mind, let’s review three common pitfalls that may be holding you back from adjusting your lifestyle.
Status quo bias
You may be comfortable with the existing status. Accepting a higher car premium without calling up the company to find out the reason for the increase or subscribing to a magazine for their free trial and forgetting to cancel it are a couple of examples. Adhering to the status quo when faced with new options is easier because you may lack the confidence to compare the alternatives or are overwhelmed with the available choices. Thus, doing nothing or maintaining your current decision comfortable.
Purchasing the same product brands or staying at the same in the same job is an internal customary policy that has manifested in your mind. Again, when faced with new options or unknown outcome from our efforts, we often stick with the status quo even if it is not optimum.
Social peer pressures
This is beyond high school peer pressure. This encompasses many factors–keeping up with the Joneses, advertisements, and impressing friends or family. And sometimes it’s not always your fault. For example, a dose of shopping releases the “feel good” chemicals in your brain. Thus, the more likely you are to do it—it reinforces the behavior. This can lead to overspending as some people may use it as a way to cope with stress.
The years before the recession, many people where gladly over extending themselves on credit with newer and bigger homes, fancy cars, and designer labels. Everyone placed themselves on a temporary hiatus when the recession hit. Afterwards, people temporally forgotten the money management mistakes that were made and have continued to purchase on credit. Even in China, credit card usage is growing quickly. With tighter lending practices, it’s a little bit more difficult to be approved. Nonetheless, I’ve witnessed thousands of cars on the road over the weekends and retail parking lots filled with various automobiles to capacity that you would have thought it was a free auto show.
To a major degree, society culture contributes to our way of life. The two percent Social Security tax cut was meant to stimulate spending. Living in a capitalistic society almost lends itself to living to a materialistic life. Advertisers keen understanding of wants, needs and desires makes it easier for them to impregnate your unconscious mind with strategic advertisements and campaigns. Your favorite retail store has “buy one get one free” and “40% off clearance” sales happening for one weekend only. With no budget established for shopping, you head to the store to check it out only to walk out with two shopping bags.
Lack of financial literacy
Taking responsibility of our money is a ping-pong concept. Speak to someone who grew up during the Great Depression and they will tell you about the importance of saving. Speak to me and I will tell you about the good ol’ days when jobs were plentiful and Wall Street was not Fall Street. Speak to my younger members of Generation Y and they will tell you about high unemployment, the one trillion dollars in student loan debt, the uncertainty surrounding Social Security, and how a parent job loss during the Great Recession negatively impacted their family.
Many of us wish we could make more money. There will be plenty that will. In the meantime, financial education is crucial. What we have all learned during the first decade of the millennium is that what goes up, must come down. One of the most important lessons anyone can take from it is that your financial success rests on your shoulders.
The last several years financial literacy has been pushed as a keynote. Until financial literacy is engrained in our society, it will be up to you to learn the skills. As much as our society talks about sex, drugs, and alcohol, the majority of Americans don’t have any provisions for unexpected events or emergencies. Planning ahead, choosing and managing financial products, making ends meets are skills and knowledge needed to make appropriate financial decisions. A friend of mine, who is a event and wedding planner, told me that the starting wedding budget is fifteen thousand dollars. Yet, they don’t have fifteen thousand dollars in their retirement accounts.
Take control
Our society hasn’t done the best job in instilling basic financial principles. By no means do I think everyone should become their own financial planners–that’s absurd. Taking control by understanding the basic concepts–managing your income, understanding credit, debt management–will help fuel the understanding of everything else to come.
Ornella Grosz is financial expert, keynote speaker, author of Moneylicious: A Financial Clue for Generation Y, and member of the National Financial Educators Council (NFEC) Financial Literacy Curriculum Advisory Board. Emerging as the optimistic financial voice during a turbulent and uncertain economy, is an advocate for young adults, women, and beyond (she doesn’t discriminate) to view money differently.
