Four Habits that Promote Financial Well-being – Part One

Let’s be honest. Finances and financial planning make a lot of us nervous. Will there really be enough to cover all my bills this month? What happens if I have an emergency and am in the hospital? Will I ever be able to retire? Will I be able to give my kids the life and lifestyle they deserve?
While most people will agree that money can’t truly buy happiness or security, we harbor the fear that without it, we certainly CAN’T be happy or secure.
What if I told you that how much money you have is not directly related to how much peace of mind you have or how well you use those funds? Yes, that does mean that I’ve seen persons with hundreds of thousands in income who are stressed out because of debt and poor spending choices. But it also means that at all levels of income there is good news.
In a recent post at cnn.com, Richard Cordray (Director of the CFPB) discussed 4 specific habits that are associated with financial well-being. Over the next 4 weeks, we will look at each of these habits one at a time and see how to make them a reality in our own lives.
Habit #1: Financially stable people live within their means
It’s wonderful to be able to treat yourself to something new. There is an undeniable rush of pleasure that comes from a great dinner out with your significant other, a new suit or pair of shoes, or giving your kids the newest console system they’ve been begging for. But, what about when the rush of joy also comes with a surge of fear or guilt? Do you find yourself doing the mental math on how long it will take you to pay for it? Having buyer’s remorse? Check in with those thoughts – money should be about optimizing your enjoyment of life, not regretting it – whether that means regretting a purchase or regretting NOT making a purchase (think insurance or a simple vacation).
Living within your means also implies not using credit to excess. While it seems so easy to swipe your card and pay later, you could be paying a LOT later. Paying only the minimum on a credit card may take decades to pay off the balance. Is it worth it to still be paying on that big TV 15 years from now (assuming it still works by then!)? Plus, the more you use credit the higher your minimum payments become – meaning you have less and less discretionary money each month to buy what you need and want. Using credit means taking away part of tomorrow’s freedom for today’s indulgence. It can become a vicious cycle that is hard to break – borrowing money to pay credit – and a huge headache as well.
I won’t deny that staying within your means is hard. It requires hard choices and giving up the instant desires for more long-term goals. Before making a purchase, here are some of the questions I’ve learned to ask myself to hone my focus: “Do I have the money for this right now?” “Will I be glad I bought it a week from now?” “Do I already own something that will fit the same perceived need as this new purchase?” “Will I get sufficient happiness out of the purchase for the cost?” Sometimes, just realizing that I’m purchasing for the sheer desire of something new can help me redirect spending to a cost-effective need rather than a want.