Money is simple and straightforward. Here’s how you do it; spend less than you make and live below your means.
But that appears to be impossible for most Americans. Three in five Americans are living paycheck-to-paycheck. 77% of us are anxious about money.
Is it just a problem for young people? Do we figure money out as we get older? No. The group with the most credit card debt are folks over 75 ($8,100 on average).
An inability to live below your means will guarantee financial hardship and stress. It guarantees you’ll never become financially independent. I’m 100% confident in those statements.
It’s worth exploring the reasons this is happening, and more valuable to talk about how to break the cycle. I’ll do both.
For over 20 years as a financial advisor, I’ve been helping people master this necessary skill. I’m honored to be named to Investopedia’s list of the top 100 financial advisors many years running.
Here’s what we’ll cover:
- What’s causing this?
- The way forward
Let’s get started.
What’s causing this?
Is it a lack of financial literacy? No. Everyone intellectually knows they should spend less money than they earn. It’s evidence of a lack of, or misaligned values.
Too many of us are wanting. We’re wanting more, better, or different than we currently have. We’re constantly trying to find what’s missing, and our current solutions are almost guaranteed to come up short. If you’re not happy with where your life is, buying more crap will not fix it. More spending and consumption will not get us there.
Where are your current financial behaviors guaranteed to get you? More than likely, old, regretful, and broke. Spend a few moments thinking about what your life is going to be like in 10 and 20 years if you continue on your current path.
It all comes back to one thing; what is it we truly want? We must have a compelling vision for our future.
The way forward
Cutting down on lifestyle for the sake of saving money is not a recipe for sustainable financial success. We can try and push ourselves to change behaviors, but it simply doesn’t work over the long term. Think about it from a weight loss perspective: Perhaps you had a beach vacation coming up, so you buckled down for the three weeks leading up to it. You ate right, exercised, and lost five pounds. But were you able to maintain the lifestyle? Commonly, no.
If you want sustainable success, you need to be pulled towards something, not pushed. With personal finances, we need to create a compelling vision for our future that pulls us towards it.
Most of us are stuck. We follow the same predictable patterns every day, and get the same results. We move from one thing to the next on autopilot. And most of us have never taken the time to think about who we are, and how we want our lives to be.
Earlier, I talked about how I was 100% confident that an inability to live below your means will guarantee financial hardship, and will keep you from financial independence. Here’s something else I’m 100% confident in; the only way to live how you want is to know how you want to live.
In order to get what you want, you need to know what you want. In order to do that, you’ve got to set goals, clarify your values, and create beneficial habits.
Goals = What you want
Values = Who you are
Habits = How you do things
Setting goals
Our goals are what we want. We can think about the future we desire, and to make plans for making it our reality. But if we don’t use this ability, we stay stuck.
I think about and set goals for six key areas of life:
- Family
- Community
- Career and financial
- Wellbeing
- Personal development
- Peace of mind
In each of the six areas, think about what you’d like to have. To dig deeper into this, you can access our Goals course for free.
Clarifying your values
Our values are who we are. When we have strong values, they help inform how we allocate our most important resources. We can more confidently decide and end up making better decisions in the service of getting what we truly want.
Habits
Our habits are the tactics we use to accomplish our goals. If you’re living paycheck-to-paycheck, you currently have poor financial habits. Simply trying to create new and better habits isn’t enough. You must start with your goals and values. From there, you can put the tactics in place which will eventually become your new habits.
Closing
What happens when you do this work and discover that the life you want differs from the one you’ve got? The fear of that keeps many people from doing the work. For those who are courageous enough, there’s opportunity.
Success is available to everyone. The life you want is available to you. Figure out how you want to live, and start aligning your behavior to that compelling vision for your future.
If you’re ready to take control of your financial life, check out our DIY Financial Plan course.
We’ve got three free courses as well: Our Goals Course, Values Course, and our Get Out of Debt course.
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