Living beyond our means: 5 mistakes we make with money

Be emotional

Dr. Brad Klontz is a financial psychologist (yes, there are such things) who argues that the emotional part of our brain is larger than the logical part. He says that it is emotional financial decisions that lead us into confusion and most often they can then be called stupid.

Imagine that you are buying a good, reliable car. The left, more logical part of your brain recognizes that you're on a budget and you need something reasonably priced. As you walk, you will see the car of your dreams: the expensive luxury model you've been dreaming about.

Suddenly, the emotional side of your brain kicks in, reminding you that life is short, you work hard, and you deserve to drive a nice car.

No matter how smart and successful you are in other areas of your life, you can easily do stupid things when it comes to money. Since it's impossible to separate emotions from financial decisions, it's important to have a plan when the two parts of the brain collide:

Validate how you feel.
Admit that you are under the influence of emotions.
Give yourself a cooling-off period. If you're making a large purchase, such as a car, give yourself 24 hours to weigh your options. If you're considering something small, like a kettle or drill, go out to lunch or have a cup of coffee and think about it while you're at it.
Instead of worrying about how sad you'll be if you don't make a purchase, imagine how good you'll feel about being financially responsible.

Living beyond your means

How to learn to live within your means so that you have enough for everything

You need to start with accounting and control of personal and family finances. And these are the first 5 steps. Then build a system of financial stability (steps 6 and 7) and decide where to develop your financial strategy (so that there is enough for everything). Moreover, this “everything was enough” must be clearly formulated and planned. These are the remaining steps on the list. As you understand, there is no point in jumping over points.

First, I will list these 10 steps, then short explanations below the list:

Identify all sources of your income.
Record all basic living expenses for 1-2 months.
Analyze your habits that lead to unreasonable spending.
Based on an analysis of the collected data on expenses and income, determine the required cost of living.
Be honest with yourself and develop a personal program to reduce unnecessary costs.
Create a "safety cushion".
Get rid of all debts and loans.
Invest in yourself or in reliable assets.
Discuss with your spouse your steps to improve the family budget.
Teach your children to treat money wisely and thriftily.

Now I’ll briefly go over the points:

It is advisable to go through steps 1-4 in a group during the training process. I took a similar course in the free flylady course.

Step 5 is done independently and the further development of your financial condition depends on determination and honesty with yourself.

After the work done to collect information for analysis and conclusions, the financial strategy “How to learn to live within your means and have enough for everything” is further developed.

Briefly it looks like this:

Calculating income and expenses should lead to the formula of wealth and peace of mind.
Then to the accumulation of the “airbag” first.
And then to the amounts that should be used (“delta” from the formula for wealth and peace of mind).
And as a logical step, you need to choose a niche to develop your business. You decide which business to start based on your own circumstances (for me it was the decision to develop my business on the Internet).

Step 7. I understand that it is sometimes very difficult to completely get rid of loans. In this case, try to optimize loan payments if it is for a long time (refinance with a lower % rate). The ideal option is to pay off your loans.

Regarding debts, friends have an excellent saying: “You take other people’s money for a while, but give yours away forever.” Take this into account and do not become financially and morally dependent, even on good people.

Lend money

Any person has a feeling of pity when one of his relatives or friends tearfully asks for a loan. But at this moment you need to remember that emotions and finances should never be mixed. Yes, it's really hard to resist helping, but there are many reasons why borrowing money is a bad idea:

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Possibility of not getting your money back. Relatives often borrow for a long time, and sometimes do not repay at all. Asking a loved one for a duty is considered a shameful act. Therefore, you need to be prepared for the fact that you will no longer see this money, and perhaps ruin your relationships with loved ones.
You may need this money. Even if you feel financially comfortable today, unexpected events can occur at any time: job loss, illness or other emergencies that will radically change your situation.
You are taking on unnecessary risk (for larger loan amounts). If a person comes to you to borrow money, most likely the banks will refuse him loans, which means that after you give him a decent amount, the entire risk of loss remains with you.

How to teach your husband to live within his means?

Olya! This cannot be taught. We are all different people, raised in different families, accustomed to living on different incomes. If you see a problem in this, but he does not, then this is not good, since positive changes can only be obtained if he has the proper desire for these changes. If this also bothers him, and he would like to change, then this is entirely possible, but if not... then, alas, he is already an adult with his own established views. I invite you to my website, I have material on financial difficulties in life, and I also conduct trainings on this topic. Good luck***

Beliefs that prevent you from earning, receiving and having money. Posted in Articles | June 15, 2013

I want to tell you an interesting and instructive story about a woman who was engaged in business, loved her job, but did not have the money she would like to have.

Working as a family psychologist in Moscow, I know many stories of difficult personal lives. But this example, fortunately, was quite positive.

So, a woman in her thirties came to see me and had a family that suited her: a husband and three children. By the way, she is minding her own business, which is very useful and conducive to creating a family. She has her own marriage agency. In this case, she herself served as such an illustrative example.

I worked with her as a psychotherapist and psychologist, working on the topic of her personal fears and minor problems with children.

And then we discovered her financial instability. She put a lot of effort, knowledge and skills into her work, but there was no financial gain.

Next, we identified her problematic condition. The client had the belief that “rich women are divorced women,” and the second belief was: “either rich or happy.”

By the way, the last belief had the following meaning: “If I become rich, it may turn against me. I will lose my family and the love of a man who, being next to me, will not be realized as a person.”

Now think, can a person with such a conviction become successful in business? As a family psychologist who has been working with clients’ problems for many years, including money ones, I can tell you a firm “no,” because according to the law of embodiment, everything that is embodied in our head and in our thoughts is embodied in our lives.

Based on the above, if a problem is embodied in our head, then it is realized in our life, so to speak, in all its glory.

The result of our work was the following 2 positive beliefs, where we managed to connect both family and money.

First: “family and money can be united.”

Second: “I am ready to receive money to support the family and my husband will do the same.”

A positive aspect of the work of a psychologist and psychotherapist is a kind of “erasing of memory” of negative events.

As a result of this, the client only has positive beliefs, and the negative ones seem to disappear from his life, they are no longer relevant for him and he begins to live in a new way.

So, having worked through his problems, leaving a psychologist, a person expands his capabilities, becoming happier and more prosperous. This is the choice of the person himself: “the one who walks will master the road.”

How to learn to behave like an adult?

Liliya Veniaminovna Afanasyeva, psychologist Voronezh
Good answer3 Bad answer2

Not knowing the difference between cheap and modest

The words "cheap" and "humble" are not interchangeable. One means that money is so tight that you don't care about quality, and the other means being careful with the money you have. Let's take a closer look at the difference.

Cheap: You need a sofa for your new apartment. The price of new furniture seems enormous to you, so you buy a used sofa. Within a year it breaks and you are forced to buy another sofa.

Modestly: you go shopping at a good furniture store, look around for a long time and choose the right sofa, and then enjoy it for years.

There is a saying in Spanish: Lo barato saie caro. It translates as “cheap comes out expensive.” The difference between cheap and thrifty comes down to the fact that cutting corners will cost you more in the long run.

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My husband's brother and his family live beyond their means. How does he do it? The answer turned out to be simple and unpleasant.

My husband has a younger brother. A couple of years ago he married a simple village girl and brought her to live in Moscow.

Like us, my younger brother and his wife rented an apartment, since no one wanted to live with their parents, and there was no desire to live in a small two-room apartment.

And it seems that my younger brother’s family and I lived on approximately the same salary amounts. We even paid more for a rented apartment. But I felt some kind of envy on their part.

Although that would be something to envy. We lived from paycheck to paycheck, and we barely managed to save for something. My husband and I did not eat luxuriously and lived modestly.

And as soon as we buy something, the younger ones also immediately need the same thing.

We got a cat. And they immediately needed a cat.

I had money saved (inherited from my parents). My husband had an old car. And we decided to change it.

So my husband’s father bought our old car (much cheaper, by the way, than we could have sold) for his youngest son, so that he could have the car and pass it on his license.

But the young wife didn’t want to drive our old car, and now they are already selling it, getting loans and buying a new car.

Here I would also like to note that when we go into a store together, what immediately catches our eye is our attitude towards shopping. If we take only what we need and try to get it cheaper and on sale. Our younger ones grab everything indiscriminately. I want this right away, I’ll buy it.

With this approach to shopping and to life in general, my husband and I were surprised at how they had enough money for everything. Everyone has loans, a rented apartment is still luxurious.

And then one day it became clear why they treat money this way and waste it without thinking.

The answer turned out to be simple. It’s very easy to part with money that you didn’t earn, that you got for nothing.

In fact, our younger ones have settled down well. And every time they came to visit their parents, they asked them to borrow money, supposedly they didn’t even have enough for food. And, of course, the parents helped; they wouldn’t leave their children hungry. They knew how to present...

And the children squandered this money once again. They especially liked to spend money on new clothes, manicures and hair extensions and a bunch of other procedures for their young wife (a girl escaped from the village).

And a week later we went back to our parents.

And their father bought them a car from us on the condition that they would give him the money gradually.

But then a new car is bought on credit and the debt to the father is forgotten. And he was offered to demand his money from the new owner, to whom they sold our old car. And now they have a new car, what questions do they have, they bought it on credit. Here I was simply shocked by the logic.

But that is not all. In addition, it turned out that when they bought a new car on credit, they still did not have enough money and they borrowed 100,000 rubles from our common aunt. Which over time forgave them this debt. Still, there was nothing to give.

This is how my husband’s brother and wife settled comfortably. They borrowed money from everyone and naturally did not give it to anyone. They spent everything on their entertainment and whims.

And they slowly slandered us to our parents, dreaming of taking over their apartment. But that is another story.

Have you ever met such relatives? How did you react to such antics? For example, we are offended that we saved, achieved everything ourselves and never asked anyone for a penny, while they lived at the expense of all their relatives, supposedly in debt that would never be repaid.

Source

We plan to invest “tomorrow”

Many people over 50 do not have sufficient savings to live with dignity in old age. Few people use such a wonderful tool as investing. By the way, this is not as difficult as it seems at first glance. It is enough to read a little literature to begin to understand “what’s what.”

Very often, the reason for refusing to invest is procrastination, or putting off until tomorrow. You may think that at the moment you don’t have enough money to invest somewhere else, that you need to first pay off loans, buy the necessary things, and later you can try.

What does living beyond your means lead to? Part 2

I know the son of a man whose face, with its characteristic Leninist squint, occasionally appears on television news and in magazines about the “life of the elite.” The son of this man is the owner of a very expensive sports car, gifted, of course, by his father. But the parent doesn’t give his son money for gasoline!

The main emphasis is on ensuring that the offspring earns money for himself to live the life he wants. “If you want to go to McDonald’s for lunch, go ahead. If you want to visit elite restaurants on weekends, work hard.” Regardless of its effectiveness, such a method of dealing with life beyond one’s means is quite interesting...

Naked natives in hats.

We moved from display to display in the jewelry store. A friend’s anniversary was coming up, and we urgently needed to find gold cufflinks of the required modification (my friend is very picky when it comes to appearance). There was a nineteen-year-old girl with us.

The girl got married a year ago and gave birth to a daughter a year and a half ago. Such is the “precociousness”. Our companion was interested in something, and she paused at one of the display cases. I started asking the saleswoman questions. “I want to buy Nikita a clothespin for money,” the girl explained. We were taken aback: - Why? - Well... how... is...

Let's skip the girl's inarticulate attempts to explain the need to buy clothespins for money. I'll explain. The fact is that this girl’s husband does not work. He is plowing. Works like a horse working two jobs. And a twenty-year-old guy invests everything he earns in the most valuable thing he has - his wife.

A nineteen-year-old connoisseur of gold clothespins sports a fur coat and changes her phones (causing scandals for her husband) every two months. However, it doesn't work. At the same time, he has a daughter who was given to her grandparents for upbringing.

At the same time, he lives in a rented apartment without the slightest sign of renovation. At the same time, he wants more. And there is nothing wrong with wanting more. But there is basic common sense: - Nikita and I didn’t have a wedding, because I want everything to be... How to say... Like in the movies!

They are already painted, but the girl certainly wants to drive up to the house in a limousine and throw dust in the eyes of the neighbors. When the neighbors shake off the golden dust thrown into their eyes, they will laugh at the dust blowers. Because the king is naked. Or rather, the girl’s husband is practically naked.

But the wife, dressed in a fur coat, in a jewelry store is thinking about buying her husband (with his own money!) a gold clothespin worth a thousand dollars. Where is the logic?

However, the next phrase from the gold dust lover simply knocks my wife and I off our feet. “In general, I’m used to luxury...” and eyes to the ceiling. And the gaze becomes foggy. He probably remembers the luxurious days. The girl has been known to us since childhood. Mom was engaged in commerce - she worked as a saleswoman in a kiosk, dad was engaged in ferrous metal - he sold nails at the market. Where did the “habit” of luxury come from? From films, apparently. From an endless series of low-grade soaps, consumed by the girl in terrifying quantities.

In fact, her day begins with watching the next “masterpiece”, where everyone is rich, but no one does anything.

Have you paid attention to domestic TV series? Everyone there has “serious business”, everyone calls someone, negotiates “deliveries”, goes on business trips, “resolves issues”, lives in mansions and drives exclusively in a Bentley.

But, in essence, they do nothing. And the fools who fill their heads with such films get the impression that a luxurious life is the start of big money.

This is a parrot's repetition of what is a consequence, a visible part.

In the glorious nineties, vocational school students bought crimson polyester jackets with the proceeds from the sale of their grandfather’s stamps. And it seemed to them that in this way they were “joining” people living a “chic life.”

From the same song are the gold stamps on the fingers of trolleybus drivers, and the foreign cars bought on credit by supermarket cleaners. The natives consider hats worn on the heads of white people to be a sign of wealth. But a naked native in a hat looks no less hilarious than a supermarket cleaner working on gasoline for a borrowed foreign car...

The suffering party in the situation with my friend is the husband. This young man, in love with his elegant device for destroying banknotes, saves on everything.

He doesn’t dress in the best way, eats at fast foods, doesn’t go on vacation, but sends a banknote shredding machine to warm countries (his wife sees the sea at least twice a year) and exhausts himself at work. How long this existence on the verge of falling into a hungry faint, provoked, in addition, by chronic overwork, will last is unknown.

Thus, the wife’s habit of living beyond her means robs her loving husband of strength, health, and simply years of life. Years of normal human life, and not years of endless running in a wheel...

Escape from melancholy by being held in a vice.

This is that terrible case of an unjustifiably wasteful lifestyle in which a person believes that only in this way can he drown out his internal problems and complexes. ...Buying new shoes or going to an expensive restaurant. These universal methods of curing the blues are widely known and no less widely used by women and men. But there are people, like drug addicts, who increase the dose of monetary investment in this effective, but quite cost-intensive method. There are unfortunate people who bring themselves to obvious overdoses in this matter.

the ending follows...

Tags: expenses, people, income, money

Example

But if you think about it and do simple arithmetic, you get the following: let’s say you are 28 years old and you are thinking about starting to save $100 every month at 8%. In this case, by age 67, you will have $309,700 saved up. Not a bad increase in pension, isn’t it?

What happens if you start postponing investing and start investing in 10 years? With the same investment of the same $100 at 8% per year, by your 67th birthday you will have only $134,752. Therefore, the sooner you start thinking about old age, the better. If, at the moment, money is really bad, then you can put aside small amounts of money saved on a cup of coffee or not going to a concert.