A coworker came to me moaning about her debt level the other day. Her New Year’s resolution is to get out of debt and she wanted to know where to start. I asked her what kind of debt she had. Car loans? Student loans? Credit cards? Almost all of the debt she had was from simple overspending on stuff she couldn’t afford. Expensive cars, trips, meals out, clothes, and electronics made up most of the credit card debt. She said, “I don’t know how we got into this mess. We don’t do anything that out of the ordinary. Everyone has this stuff.”
Now, I don’t know exactly what she and her husband make, but knowing their occupations I’m betting it’s not much above $70K combined. That’s a good income, but not high enough to afford four trips to deluxe resorts every year, a new Coach purse every two months, a new Jaguar, and three new TV’s in a year. (Those are the highlights of the debt load.) When I gently tried to tell her that she had caused this problem, she got offended. I told her that finance is pretty simple. What comes in needs to be more than what goes out and, in her case, she could totally control that. She was spending way more than was coming in and, to get out of debt, that would have to stop. It would be wise to look at at debt repayment calculator and see where things stood. She has enough income to live well on in this area, just not extravagantly.
“But I can’t vacation without staying a deluxe resort,” she said. “I’m not comfortable in a Hampton Inn or whatever.”
“Then you don’t vacation,” I told her. “Or certainly not as often. You can’t afford it,” I said.
“And the electronics. I have to have the latest cell phone for work.”
“Really?” I asked. “Does your current phone make calls? Can you check email as you need to?”
“Then your current phone is fine. Anything else is just a prettier package.”
“But the car. I need to impress clients,” she said.
“A Jaguar is certainly impressive. But other cars are just as nice as long as they are clean and well maintained. Or you could have bought a used Jag.”
We went on like this for a while with her offering up “reasons” why she had to spend all of that money. What it all boiled down to is that she preferred and wanted certain things, not that she needed them. She had created her own financial mess through her choices.
People make their own financial problems in different ways. People choose to smoke or overeat and cause their own health problems and the resulting expenses. People insist on having an enormous house or expensive car and then scream foul when the resulting payments drag them under. Even seemingly small decisions like eating out every day or buying new clothes every week can eventually add up to big financial problems. In the end, no one forced you to do any of this. You did it to yourself, just like my coworker created her own problems.
Certainly some financial problems are unavoidable. However, the vast majority of our financial “problems” stem directly from our poor decisions. This isn’t a fun way to look at it. After all, who wants to admit that they’ve messed up or caused their own hardships. It’s far easier to find someone else to blame. But when you get right down to it, no one forced you to vacation in deluxe resorts or buy all that junk you couldn’t afford. No one forced you to eat out every day or smoke and ruin your health. When it comes to fixing your finances, often the first thing you have to is look the mirror and ask yourself how you caused the problem. Once you know that, you can begin to correct the problems.