In this comedy sketch featuring Bob Newhart as a therapist, a new patient of his details the issues plaguing her. He responds by simply telling her two words, “stop it!”
We all have problems and bad habits we need to stop, especially when it comes to money. Sometimes we just need someone like Bob Newhart to tell us to “stop it!”
Some of these bad habits are easier to identify than others. In fact, even a “financial expert” like myself is not immune to them.
As we take a look at bad habits to stop, identify which ones resonate most with you.
Stop being a casualty of lifestyle creep.
If you feel like you’re still not where you want to be financially, despite years of progress in your career and income, you might be a victim of lifestyle creep.
Lifestyle creep occurs when spending on nonessential items crowds out your ability to save money wisely as income increases.
Think back to your income at the beginning of your career and compare it to what you make today. With the increase in income, have you been able to prudently grow your savings?
If not, chances are you’ve moved some expenses from the “nonessential” side of the budget to the “essential” side. Increasing your lifestyle isn’t bad. What’s bad is when your “lifestyle” grows when other areas of your budget don’t.
If you’re a victim of lifestyle creep, try a 50/20/30 budget. It’s a simple way to categorize expenses:
- 50% to essentials
- 30% to lifestyle
- 20% to savings
In addition to being easy, it allows all your budget categories to increase with your income. If you don’t have this framework, it’s tempting to put all that raise toward your lifestyle.
Has lifestyle creep crept in? Stop it!
Stop ignoring your “future self.”
A few years ago, I joined a new gym. After the free two-week trial, the owner met with me to review the membership options. I knew it would be a sales pitch, and I had already decided the price was too high.
During our meeting, he asked me to think about my future self in five years. His question was, “How does your ‘future self’ look and feel if you commit to this gym membership?”
I signed up.
Why did this work? It transported me into the future to motivate action.
The problem is, we see our future selves differently, as a complete stranger! This can explain why we make decisions today that we know will be harmful long-term.
From using technology to show young people digitally altered photos of themselves in their 60’s, to writing a letter to your future self, these activities increase the connectedness you have to the future you. Research shows exercises like this can also affect financial behaviors.
Do you know you need to be saving more retirement, but have a hard time making it happen? Perhaps you’re ignoring your future self. Stop it!
Stop looking at your investments.
Not much benefit comes from “keeping tabs” on your investments.
Consider these two investors: one followed his investments daily throughout the craziness of 2020. The other never looked at her investments until October. Both made it through, relieved to have a positive year-to-date performance at the end of October. Which had a more relaxing journey?
The first investor watched a more than 30% decline, with single-day losses among the highest in history. The second investor realized short-term volatility happens and decided not to make a bad situation worse by watching her portfolio.
We can’t control the market. Why bother looking all the time?
Frequently looking at our investments increases stress, encourages unnecessary changes, and decreases our comfort level with volatility.
Are you constantly looking at your investments? Stop it!
Stop being dogmatic.
We say at Stewardship, personal finances are personal. There is not a one-size-fits-all approach. Unfortunately, personal finances breed a sort of dogmatism, fueled by media personalities and bloggers. This dogmatism asserts a certain viewpoint is undeniably correct, without regard to other evidence or opinions.
Financial dogmatism results in people making suboptimal decisions because someone told them “this is good” and “that is bad.” Evidence to the contrary is squashed.
Are you following a way of doing things because someone told you to? If presented with a different solution, would you consider the alternative?
Stuck in your dogmatic ways? Stop it!
Stop snubbing the uncomfortable aspects of finances.
Financial planning isn’t all rosy and fun. There are uncomfortable things to plan for, too.
I find it’s easy to ignore these uncomfortable financial areas rather than deal with them head-on. Examples include:
- A retiree saying, “I’ll just tell them to pull the plug” instead of actually planning for long-term care expenses.
- A young husband saying, “My wife will just find a job” instead of buying inexpensive term life insurance.
- A student loan borrower taking forbearance instead of planning how to pay down his loans.
- Someone who needs to find a way to increase her income so she can properly plan for her future.
- A person putting his family in jeopardy because he’s too cheap to buy disability insurance.
Maybe you can think of something you’ve been snubbing for too long. What step can you take today to move closer to resolving this issue?
Are you ignoring something in your finances because it makes you uncomfortable? Stop it!
Don’t just stop…start!
Breaking a bad habit is easier said than done. Instead of taking Bob Newhart’s not-so-helpful advice, try flipping the script:
- Start budgeting to allow for increases in both saving and lifestyle.
- Start thinking of your future self when making financial decisions.
- Start trusting the process and letting your investments work.
- Start being open-minded about personal finances.
- Start taking control of the uncomfortable parts of your finances.
Can Stewardship help you start any of these new habits? Our financial planners are here to guide you. Schedule an appointment today!