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For the past year, I have been working out at a local boot camp program. I typically try to attend four times a week. While I am definitely in much better shape, I’m not where I want to be. Admittedly, there are times that I’m incredibly frustrated by my [lack of] progress.
Here I am, working out, varying up my workouts between strength and cardio, trying to eat healthy and sleep well. I’m sweating up a storm at these sessions and sacrificing time that I could be lazily sitting at home watching TV. I thought I would undergo a body transformation as a result of attending this bootcamp. However, there is still no six-pack to be seen.
It probably also doesn’t help that I cheat quite a bit in the diet arena. I eat sweets more often than I should. Did I mention that Mrs. MSM is a fantastic baker? It’s hard to turn down her delicious treats, especially when she has some leftovers when she bakes for a friend.
Sure, I’ve lost some weight. My clothes fit better, and I do feel better. But I expected that I would have a beach body by now. You know, the ones you see on TV on those infomercials for whatever miracle diet or workout plan that is being promoted. Yes, I realize I may have had some unreasonable expectations.
What does this have to do with finances?
Everything.
In all the years that I have discussed finances with peers, we always seem to end up at the realization that expectations sometimes need to be reset. So many people with $0 in savings expect to be able to buy a home, have a fully-funded retirement account, retire in five years, and live happily ever after.
We live in an instant gratification society. So, I’m not surprised when I meet someone who is shocked to hear how much time and effort is required to meet the aforementioned financial goals.
As I shared in How Fast It Takes to Make a Million Dollars, it may astound some to learn how long it really does take to accumulate $1 million. When I first started my financial journey in my early 20s, I thought I did everything right. I contributed to my 401(k) match. I maxed out my IRA. With laser-focus, I saved up enough for a downpayment for my house. However, I also spent more than I should have along the way.
It wasn’t until I hit my 30s when I really reflected upon my financial situation. I considered where I was and wondered why I wasn’t further along. Sure, contributing up to the match and maxing out your IRA will help out tremendously. However, it won’t accelerate you nearly as quickly as when you start cutting your expenses to the bone and looking for opportunities to save wherever you can.
I didn’t fully grasp my financial situation until I started to understand the concepts of denial vs. delusion. That helped me to really understand what was going on.
So let’s first break these concepts down.
Denial
Denial is when you see a problem but choose not do anything about it. Maybe there is a stack of bills that are piling up around you. If you do nothing about them, you might deny that you truly have a debt problem. In essence, it is just ignoring the problem and its existence.
While denial is bad, delusion can be even worse.
Delusion
Delusion, according to Psychology Today, is when you create an “alternate path”, which allows you to continue making poor decisions. Those decisions could be justifying spending more money, even though the mortgage payment is tight each month. You figure that if you earned a bonus last month, you can somehow earn another one just as easy to make up for these spending mistakes.
I’ve met far too many people who are delusional with their finances. They figure they can eventually go on a financial crash diet, and everything will be fine. As most of us know, however, that’s not usually how it works. Diets are hard to sustain. Usually in a month’s time, we are back to the bad habits all over again.
The way I explain it is: If it took you years to climb into debt, depending on how much damage has been done, it may take years to climb back out.
That’s why my course Reaching FIRE is so helpful. If you follow the 12 Pillars, you’ll see that by setting smaller, attainable goals, you are that much more likely to succeed in your financial journey.
I think Pablo Picasso said it best:
“Our goals can only be reached through a vehicle of a plan, in which we must fervently believe, and upon which we must vigorously act. There is no other route to success.”
Couples and Money
When I talk finances with couples, I stress that they need to create a budget together. Most of the time, one spouse will allow the other to handle all of the finances.
To me, that passive spouse is being completely delusional. How can you be sure that your spouse is making great decisions at all times? I hate hearing that one spouse is totally uninvolved with their family’s finances.
What happens if your spouse dies unexpectedly? Would you know how to pick up the finances after that?
While one spouse may be better at handling the finances, the other needs to understand the situation at a minimum. As an example, my mother-in-law had always handled all things finance in her household. When she passed away, it took months to figure everything out. It would have been much easier if one other person in the family had been at least knowledgeable about the financials.
Ignorance Is Not Really Bliss
It may be tempting to stick your head in the sand and hope things will turn out alright. But that usually comes with a price. The price could be additional time, money, or worse, friction that could lead to marital strife.
Start the year off right: get on the same page as your spouse or significant other. If you haven’t taken a finance class, take one. Gain knowledge. Don’t let another year go by unsure of your financial situation. Make the change today.
I want you to see your feeling that you are not where you ought to be in a different way. It can be positive at times. Meaning that you are not complacent. Feeling a sense of accomplishment/attainment sometimes leads to delusion. Meaning that there is no room for improvement or progress.
Myfinancekits recently posted…How to Get Preapproved For a Mortgage Loan
Thanks for sharing Myfinancekits!!! Sometimes when you optimize enough there isn’t much else you can do 🙂
I was never in a denial or delusional state with my finances as I grew up with very little to no money. Hence, I had never had any money to spend to start with.
Since I started with no money and I had to earn my keeps, I realized that money was hard to come by. If I really want to be financially successful, I need to earn more, spend less, save diligently and invest wisely.
Only you can control your own finances and the path that you choose will either lead you to success or failure. I just avoid the denial and delusional path.
Leo T. Ly @ isaved5k.com recently posted…My Personal Net Worth Review – 2017 Year-end
Thanks for sharing Leo!!! Sounds like you definitely know the value of a dollar 🙂 Plus it’s amazing how few people understand that you need to spend less than you earn 🙂
I certainly was dillusianal coming out of college. I thought my salary would go way longer and spent accordingly. I never went into debt but it took a while to figure out how to save more then the basics of a 401k match.
FullTimeFinance recently posted…Making Hay While the Sun Shines
I’m right there with you. It took me years before I could finally save up enough to increase my 401k match 🙂
I’m sure many people share your struggles when trying to lose weight. I also cheated quite a bit in the diet area when I was trying to shed a couple of pounds.
I think it’s great that you realizes that there’s room for improvement. Best of luck with the weight loss!
Ms. Frugal Asian Finance recently posted…7 Reasons Why Traveling Isn’t Always Fun
Same here, specifically over the holidays – but the food all tasted great 🙂
Thanks for stopping by!!! I definitely need to eat a lot better. I know it’s just a matter of discipline which is unfortunately not my strong suit 🙁
I feel one item you didn’t take into account for the reason behind behavior you spoke of. One of the main drivers for some who spend more money then they have or don’t worry about utilizing their full retirement account spurs from the mentality of “when I die I can’t take it with me.”
This attitude towards life dictates the financial mindset of doing this or buy this now because I want to enjoy life now, since one day I may not be around to enjoy it.
I am not in agreeance with the philosophy – it has been one stated to me when talking about personal finance with different individuals. I feel people do have the right to make their own decisions and then, of course, deal with the consequences of the years of debt tackling you spoke of above!
Thanks for sharing and getting my mind going this morning!
Chris @ Duke of Dollars recently posted…Peer Lending – Can you Stomach A Little Risk??
Thanks for sharing Chris!!! That’s a great point of those that want to take everything with them when they die. Seems like a pretty slippery slope to think that way but clearly people do it 🙂
Awesome post, Rob. We have at times been both in denial and delusional. Luckily now we have learned how to avoid both.
I want to encourage readers that are in one hell of a seemingly unsolvable financial mess not to stay in denial/delusion because things are so bad. We’ve been there. It’s horrible. However, with time, effort and the willingness to be blunt with yourself you can dig out. Do your best and track your progress. Those daily small victories will indeed add up to big changes eventually.
Laurie Blank recently posted…3 Ways Telehandlers Can Help Out on a Farm
Thanks for sharing Laurie!!! Hopefully some of the readers will take your advice. Drowning in debt and acting like nothing is wrong is no way to live.
I think I was in denial after I was laid off from my company during the recession. I continued to live and spend as I did when I was working full time, which for my working years would best be considered apathetic about my money, so not a good foundation to begin with. My wake up call was realizing the job market (at the time) was not getting better and I did not have enough money to go around. #truth! lol
Thanks for sharing Tonya!!! Sounds like a tough lesson to learn but being an avid reader I know you are on the right path now 🙂
Based on your definition, I guess I was guilty of being in denial when I was younger. I’d say when I was in my 20s and possibly early 30s. Just the thought of thinking about my bills really stressed me out back then. Nowadays, it’s more of like simply managing my debt and not be stress by it.
I also remember back then that every time my wife started talking about our bills, I’d rather not talk about it and kind of ignore it instead of simply dealing with the situation.
I”m right there with you. There were times that I didn’t want to talk about my financial situation because it stressed me out so much. I’m in a much better place these days 🙂
Hi Rob, Nice post. I can say that I have many weaknesses. I drink alcohol, my nutrition is substandard, I do not exercise enough and I should be more kind, empathetic and respectful to everyone I meet. That said, personal finances have always been one of my strengths. I have made many mistakes in personal finance, but have learned from them and continue to learn and grow in that particular area as I get older. I should be working on my 6 pack abs right now, but I’m not.
I am reading a personal finance blog. Enough said. Tom
Tom @ Dividends Diversify recently posted…I’ve Heard Smoking Used To Be Cool
Thanks for sharing Tom!!! Like you I struggle with exercise and treating everyone I meet like I’d like to. Hopefully this will be the year that I do what I need to do 🙂
“However, I also spent more than I should have along the way. ”
That was totally me for a long time. Every time I got a raise or moved to a job with better pay, I spent more. Making more money (a LOT over time) did not get me any further ahead. It wasn’t until we started budgeting and paying attention to where our money was going that we finally got a grip on things and set ourselves onto the FIRE path.
Brad – MaximizeYourMoney.com recently posted…How To Pay Off Your Student Loans Faster
If I could go back and talk to myself, I definitely would have set up a budget much earlier in life. I was flying by the seat of my pants and I’m sure I’d be much further ahead if I had done what I needed to do 🙂
Those six pack abs also use a trick akin to accounting legerdemain. Those fitness models in the ads or at bodybuilding competitions almost all use diuretics and other dehydration methods to make their abdominal muscles more defined. It is the equivalent of not accounting for your credit card debt until after the 1st of the month so your month-end net worth looks higher.
All these people in denial at some point in their lives I just don’t understand. If your net worth is negative, there is no denying that. If you choose to not calculate your net worth because you know it is negative, that is the same as refusing to step on the scale because you know you have gained weight.
You have a lot of patience to deal with people who are in denial about their finances. I remember many years ago, I had a “friend” (maybe friendly workplace acquaintance is more accurate). We chatted casually about personal finances. I didn’t share any specific numbers although I do recall he was impressed that I was able to contribute to my 401k.
Anyway, one day he approached me and said that I seemed on top of my finances and that he was having trouble with his. He asked if I could look at his finances because he “couldn’t afford to contribute to his 401k.” I was kind of concerned he really wanted to know my take-home pay for comparison purposes so I told him to just itemize his expenses for the past 3 to 6 months. The guy was spending $2000 more per month than my take-home pay and I think we were in the same general pay range. So I look through his credit card & bank statements – multiple >$200 transactions with restaurants (he generously picked up the tab on multiple group dinners), $200 per month cable tv bills (he had to have all the premium channels), $800 per month car payment (he needed a luxury vehicle to attract the ladies), finance charges left & right, etc.
He gave me excuses why those expenses are non-discretionary. I ask him flat out “Are you in debt?” He answers “Yes.” I ask “Is the debt getting bigger or smaller?” He answer that it is getting bigger. So we go around and around. Finally, I say “Look this is so simple that the stupidest human being on Earth can understand. If your take-home pay is $X, you need to spend less than $X to get out of debt. Are you willing to cut your expenses to less than your take-home pay?” Instead of saying “Yes” immediately, he chokes on the words. I was kind of stunned at this point. I show the guy a clear path out of debt & he won’t take the first step. I said “Are you stupid or ignorant? Pull your head out of your ass and cut your damn spending!”
Oddly he didn’t talk to me much for the remaining 1.5 years we worked together.
Dan you have some of the most fascinating stories. I love your blunt way of sharing the truth 🙂
I totally see what your saying, and it’s definitely the same thing that helps both financial and fitness delusion: creating habits.
Stop spending money on lunches out everyday.
Start walking to work.
Start cooking from scratch.
Being fit comes hand in hand with being frugal, which I think is pretty neat!
It is amazing the correlation between being frugal and being fit. I never thought about it before but you are absolutely right 🙂
Great post! I always tell people, you need to be realistic and honest with yourself! You are only fooling yourself if you are not!
You are absolutely right!!!
I was in denial with my finances when I was in my 20s. I always paid the minimum on my credit card it helped contributed to have myself in debt along with my student loans. I definitely learned my lesson to be in denial with my debt because it kept building up.
Now with my student loans wiped away and CCs paid off every month, I am no longer in denial.
Kris recently posted…Expense Chronicles – December 2017 Holiday Shopping and Using Gift Cards
Congrats on wiping out the student loans and paying off your CC. I know that must have been a major shift, one that isn’t very easy 🙂
Nice post here!
Hmm… Despite not being in debt and apparently on the right track according to some ppl, I think I’m still delusional about our finances to a degree (in a different way). I have this thought in my head that we can increase our net worth by X amount by the end of each year.
My fiancé is definitely a lot more reasonable and realistic than me. I admit that I come up with numbers that are too high and don’t make sense (mainly expecting too high returns from the markets) but I’m slowly adjusting my expectations. I don’t want to end up feeling disappointed w/ our financial results if I set a relatively high benchmark in my mind. I realize that my goals have to be realistic.
There’s definitely a lot more I need to learn and accept. It’s time for me to come back to reality…
fin$avvy panda @ finsavvypanda recently posted…How To Save (and Spend) Money The Sexy Way
Thanks for sharing Fin$avvyPanda!!! I’m right there with you. With the market returning such positive gains over the years it’s hard not to set too high of a number. Hopefully this is another great year for the market 🙂