Most of the time when we talk about personal finance, topics including credit card debt, savings, investments, insurance, and coupons creep into the discussion. Since nobody wears their net worth pinned to their chest, we truly have no inkling what our neighbors real personal financial situation is at any given point and time. What I promise you to be true is that what appears to be an ocean of success around you is merely nothing more than a mirage of many people living on an obligatory basis to pay their bills. Your friends will never tell you they are drowning in quicksand, but people around you are going broke every day and here are the reasons why.
- EGO– Your ego is something that can make you stronger or become an insurmountable obstacle to achieving success. Remember, your ego is the part of your mind that contains memory. It is ultimately what shapes your planning and your reality. When it comes to money, ego is one of those drivers that make people you know broke. This doesn’t mean that they are living out in a trailer park, but it does mean that they are fulfilled by keeping up with the Jones’ and eating out at the latest and greatest restaurant. How will your ego react when your neighbor buys a new Range Rover? Or puts in a new pool in their backyard? Or takes a 10 day vacation come Christmas time in the British Virgin Islands?
- IRRATIONALITY– One of my favorite books of all time is ‘Predictably Irrational’ by Dan Ariely. The book has some fascinating stories, but one of the truths in it is that most of your friends make irrational decisions around their money in spite of the facts in front of them. Some people don’t take advantage of the ‘free’ match from their 401(k) at work because they don’t believe they can save money. We are talking about FREE money! People don’t take gains in their investments after a great run because they believe their portfolio will go up forever. It’s similar to being at the black jack table and thinking you can beat the dealer forever. They’ll convince themselves to buy a pool telling their brain that the value of their house will go up when all other statistics say otherwise. This is why having outside counsel is so important when making big financial decisions.
- EDUCATION– Time is now the number one money killer in today’s society in my opinion. There is so much information coming at the average consumer, it’s very difficult to decipher fact from fiction. People you know who are broke (or going broke) are too ashamed to ask for help because they went to a top ranked college or have an MBA behind their name. They just assume a quick search on Google will help them get all of the information they need. However, both purchasing decisions and investment decisions have become more complex. Benefits at work are more difficult to understand. Credit card contracts require you read the fine print. Just because you are college educated doesn’t mean you are financially educated. In fact, when was the last time you took a serious personal finance course?
The reality behind all of this is that knowing and doing are two very different concepts. We all know we need to lose weight, yet without a program most people fail. We all know we need to exercise, yet without a weekly regimen most of us get off track. If you meet someone in their 40’s or early 50’s and ask them what their biggest worry is in life they won’t say their health, but instead they’ll respond “money”. If that’s the case, then why are so many people going broke and living just to meet the standard of life that they have built for themselves? Ask your friends . . . that is if they are willing to put their ego on the table!
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Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®, is co-CEO of oXYGen Financial and is a top ranked personal finance blogger (www.yoursmartmoneymoves.com). He is a regular contributor to Investment News, The Wall Street Journal, and The Atlanta Journal Constitution. Securities and Investment Advisory Services offered through NFP Advisor Services, LLC (NFPAS), Member FINRA/SIPC. Oxygen Financial is not affiliated with NFPAS.