“Denial isn’t just a river in Egypt.”
There was once a time when I pretty much turned a blind eye to what was happening with my personal finances. Well, I didn’t turn a blind eye. I at least paid the minimum payment on my credit card and invested money in my IRAs, but I wasn’t nearly as diligent about keeping my affairs in order as I could or should have been.
Part of the reasoning behind my poor behavior was because I was living in Germany, and Monkey Brain kept telling me that I was only going to be there one time, so I needed to live it up while I could.
For those of you who are new here, Monkey Brain is what I call the limbic system. There are two main thinking parts of your brain. The prefrontal cortex, or Thinking You, is the one that is responsible for making you a higher order of species than the rest of the animal kingdom. It is like the responsible person in a bachelor party – the one that is supposed to make sure that everyone gets home safely and doesn’t have too many scrapes, bruises, and lurid stories. The prefrontal cortex actually thinks and cares about the future. Without the prefrontal cortex, you wouldn’t have literature, music, or reality TV.
The other main system in the brain is the limbic system. The limbic system was predominant when we lived in caves and chased woolly mammoths. It is quick, emotional, and almost entirely unconcerned with anything more than a few minutes into the future. It wants pleasure, and it wants pleasure now, so it affects your actions by whispering sweet little nothings into your ear, and subjecting you to all sorts of behavioral biases that convince you that you can’t live without that man cave or those Jimmy Choo shoes right now.
When I was younger and carefree, Monkey Brain was strong within me. He would portray my situation as me versus them, with them being people who wanted me to be responsible with my money so that I couldn’t do what I wanted to do. It wasn’t like I didn’t have pangs of remorse, guilt, and outright questioning myself for my behavior when I’d open up those credit card bills with ever-increasing balances. I’d wonder if maybe it was time for an intervention when Monkey Brain would figuratively pipe up:
MONKEY BRAIN: “NO! BEING RESPONSIBLE MEAN NO FUN. LIFE BORING!”
Me: “You’re right. I can’t have fun unless I’m spending every last dollar I have in credit! Charge it!”
I had the wrong mindset. I was framing my choices in terms of denial. To live responsibly, I felt like I had to give something up.
No matter how much of a blind eye you want to turn to your financial situation when you don’t have a plan that you are living with, you know, somewhere deep down inside where Monkey Brain dare not look, that something isn’t right. You tell yourself that you need to get your act together, and that little voice refuses to shut up (which, by the way, is called the Zeigarnik Effect). It’s not like you don’t know the basics of personal finance, even if you’re not abiding by them.
I remember two watershed moments in our journey.
The first was when we’d paid off all of my credit card debt (by the way, MBNA is still the dirtiest four-letter word I can use in our household, even though all they did was enable my bad behavior). The next month, we paid for everything with money we already had in the bank. It was a wonderful feeling not having that anchor of consumer debt slowing us down.
The second was when we had already set enough money aside to pay for our ten year anniversary trip to the French Riviera. Previously, even though we wouldn’t run up a balance on the credit card, we’d use a credit card on our vacations and then pay it off when we got back with money from the next paycheck. While we weren’t carrying debt, we were sort of spending off of the next paycheck. Then, we started budgeting like we should, and we had plenty of cash ready for our big vacation. I remember as we’d go to little bistros or restaurants or buy a bottle of wine at the store, I’d think, “This is already paid for!” – meaning that we already had the money to pay for whatever we didn’t pay for in cash on the trip.
We make intentional decisions about what we are doing with our money, within the framework of our plan, and then we spend the money like we decided we were going to. It makes our leisure, fun, and travel much more fun because we don’t have guilt about what we are doing.
Having a plan enables you to retire at a reasonable age (and sometimes sooner)
Had I not gotten out of the military (and married an awesome spouse), I can imagine that my career would have followed the trajectory of many others who had gone before me. I’d have retired from the military as a lieutenant colonel, received a retirement, and immediately discovered that it wasn’t enough to cover my bloated spending habits. I’d have landed a job at a Department of Defense contractor and worked another 20-30 years until I could get a retirement check from them. At that point, I’d realize that my two retirement checks and Social Security would mean I’d have to do some serious cutting into my lifestyle, and I’d either reconsider my retirement date, or I’d be miserable thinking about all of those salad years and wondering why I didn’t save more.
However, thanks to the interventions of Fate and some wise decisions, that story will only remain fiction in my life. I’m not the only one, either. I have client engagements where they want me to do a sanity check on whether or not they’re going to be able to retire when they think that they can retire. Fortunately, I’m almost always able to tell them to proceed full steam ahead, and they all have one thing in common: they were diligent and lived with a plan and spent their money accordingly.
Having a plan allows you to focus on what you can have
A true plan will align neatly with your values in life. You will spend money on the things that are important to you, allowing your actions to match nicely with the mental picture you have of yourself. There will be harmony and birds will sing.
The important aspect of having a plan is that it gives you timeframes and an understanding of the actions that you need to take to turn the things you’ve dreamed of into reality. It isn’t magic. It won’t allow you to purchase the Biltmore if you’re not a billionaire already. But, it will convert the “I wish I could…” thoughts in your head into the “I can…as long as I…”
You can’t have it all, despite what the Virginia Slims ads promised. But, you can have things that are important to you and align with your values. Furthermore, by having a plan, you get to choose what you work towards and what you will achieve, which gives you a sense of power and strengthens your feeling of self-worth and accomplishment.
Once you have a plan and are focused on what you want to achieve and have chosen what you can have, you tend to forget about all of those things that you told yourself that you couldn’t have.
You focus on choice. You focus on positivity. You gain appreciation.
Most importantly, since you have control, you gain happiness.
That’s what it’s truly about – increasing your happiness.