Building wealth requires a rock solid understanding of finance, discipline and a little bit of luck. Yet there are plenty of people who understand finance, are well disciplined and have significant wealth building opportunities blow past them every day.
So why aren’t more people rich?
Sure, there are well documented legislative, economic, systemic, and horrific forces working against some people. But for those who don’t have life’s boot on their necks 24/7… what’s the deal?
At some point along the path of building wealth, you have to acknowledge the role that managing expenses plays. Face it, the money needed to invest, build start up funds, get in on that ground level deal of a lifetime comes at the expense of a huge lifestyle adjustment. With that said, if you look at the largest expenses to your lifestyle [housing, transportation and food] they are largely driven by emotions.
Look, I get it. Nobody came here to talk about their feelings. You want tactics, tools and tips on how to get your money together. But, as the Warren Buffet, the OG wizard of Omaha famously said “If you can’t control your emotions, you can’t control your money“.
Buying a home is likely one of the most expensive emotional decisions you’ll ever make. The process of choosing a neighborhood and building your whole life around it, is not one people make lightly. There are very few times in your life that you’ll walk into a building, take a deep breath and spend obscene amounts of money that you haven’t even earned yet to have “that feeling” indefinitely.
The same is true with cars. Yet in addition to the feeling, cars are visual cues into who you are and your status in life. Despite knowing that is 100% bullshit, those pesky emotions get all in the way and far too often, we sign on the dotted line to be unlucky members of the car note club.
Lastly, food is without question an emotional decision. I’m getting teary eyed just thinking about my snacks. Like homes and cars, food can be tied to perceived social status. That Whole Foods® brown bag is damn near a Coach purse for grocery shoppers. Yet, regardless of your store of choice, food related impulse buys happen frequently and can blow a budget easily.
When I bought my modest town home in 2007 it was 1,000% an emotional decision. As someone that values going against the grain, jumping directly into homeownership instead of renting was purely ego-driven. Adding fuel to the fire was the cultural and societal pressure that reminds you how wasteful renting is vs. owning. I distinctly recall the closing date, signing my name about fiftyleven times and not even cracking a grin.
I couldn’t. I was terrified.
All of these feelings led to an immense pressure to maintain that home, to make it presentable and to prove to myself that I could correct the dumb a$$ decision I’d already made. Luckily, over time, I was able to army crawl out of the hole.
So what can we do about it these feelings? How do we manage our emotions to avoid making huge financial mistakes? The answer…you can’t. More importantly, you shouldn’t. Instead of avoidance, you should embrace them because, your feelings are a great fuel for holding yourself accountable.
I distinctly remember the day I bought that first home. That queasy feeling is one I can access anytime I need to remind myself what stupidity feels like. It’s also pretty hard to forget the feeling of having about twenty hands in your pockets as you sit in a boardroom pretending to know what you’re signing over and over. The difference is, when I recall those feelings today, the story ends with…never again.
Never again will I let my ego or emotions lead me into financial disarray
Bottom line –
Beating yourself up over past emotional financial mistakes is a waste of energy and nothing more than a commitment to remain where you are. Instead, harness that feeling and flip it into a promise to never be under-equipped, never be mis-informed and never be broke again. Just like that hump you need to get over after a nasty breakup; the same is true with your finances.