Financial Success Is More Than Math: It's About Mindset
Spend less than you earn is the golden rule of personal finance. It's incredibly simple, but it's not easy. Your brain likes to get in the way by tricking you to go against what you know to be true. Here's how your brain sabotages your finances, and how you can overcome those tendencies.
Keep Yourself Motivated, Whatever the Cost
Motivation is a tricky thing. Sometimes, it's hard to feel like you're in control of your money, but many of us need that feeling to get things in order.
For example, when it comes to debt, the Stack Method makes the most sense on paper. You pay debts with the highest interest rate first. But in practice, the Debt Snowball actually works better for people. You slash your smaller balances first, and this gives you a sense of accomplishment and control. Yeah, you end up paying more in interest. But if Stack doesn't work for you, you'll just be in debt longer, and that's even more costly.
Having that control doesn't mean you're going to suddenly get out of debt and start making millions. It just means you're taking an active role in building your financial life, even if that only means coming up with a plan to tackle your debt.
You can work with this tendency beyond debt, too. When you budget or create financial goals, focus on that control. Devise a plan that makes you feel like you're calling the shots with your money. Feeding your need for control will make you feel motivated. And that'll go a long way toward the whole spend less than you earn thing.
Control Your Impulsive Nature
To spend less, we're supposed to simply create a budget and stick to it. We crunch the numbers, they add up, and that's that. But impulsive, emotional behavior gets in the way of the math. We know a new phone isn't in our budget, but we buy it anyway. That silly price tag doesn't stop us.
This can also happen if your budget is toostrict. For example, I wanted to pay off my debt as quickly as possible. So I drafted a tight budget that left no room for spending—only necessities. Every penny went toward my debt. On paper, the math worked. In reality, I busted my budget and overdrew my account. My intentions were good, but my impulsive human nature—my desire to pay unrealistic amounts—got in the way of my better judgment.
To work with this, create a realisticbudget that helps curb your impulse. Put less pressure on your limited willpower by giving yourself a little breathing room for spending.
Obviously, it also helps to control your impulses as much as possible. That's easier said than done, but here are a few techniques I've used:
- Make a list of stuff I already have. When I feel like shopping, I take a look at that list.
- Getting rid of junk I already have when I feel the desire to spend.
- Staying away from the stores that tempt me most.
- Not storing my credit card information with the sites that tempt me most.
If you want more, we've written an entire post on how to program your brain to stop buying crap you don't need.
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