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INVESTING

The Art of Failure 5 reasons why you are failing yourself financially

There are many things in life that we focus our attention on and put our best into; however when it comes to personal finances, many of us carry a narrow view of success.

Basically we say to ourselves “if there is enough money in the bank to pay my bills and I can do the things that I want now, then I am satisfied”. This is a type of freedom, absolutely.  However, when life throws a few curve balls, we are forced to get a little more serious about the details and need to figure out how to either make more money or cut our expenses. Once back on track, we are content with letting that aspect of our lives chug along again.  Of course, we are all different. Some of us are better at earning money, some better at spending and some are all over the details.

The fact is, most of us are leaving money on the table.

Giving your personal finances the attention it deserves makes it possible for you to have more flexibility.  It buys you Freedom. Freedom with your career and business choices, Freedom to shave years off your retirement age, Freedom to help your children get ahead when they need it most, or even Freedom to take those 3 months off to reassess what you really want in life.

We choose our Freedoms but the question is…. Are you aware that you are making a choice by not giving your personal finances focus?

Why do we fail to financially thrive? 

Here is our observation based on years of experience helping people through financial crises.

1.  Lack of Time

Most of us suffer from this to some extent and very few of us allocate sufficient time to managing our financial progress. There are so many demands on our time these days – work, business, family, keeping friendships, home projects, the list is endless and all are worthy of our attention.

With so many competing priorities, it truly is hard to pick the most important thing to spend time on or we simply run out of mental energy to even try.  It may be that we don’t even know what time needs to be spent, and on what. Regardless of the cause, the effect is the same.

2. Lack of Discipline

That is harsh, isn’t it!  Let’s soften it a little, because it’s not quite true, and say “lack of “financial discipline”.  Lets face it, you have already applied your finite will and discipline to so many other aspects of your life, there is simply none left for this. Maybe you and your partner have different perspectives on how money should be handled and you have let go of arguing about that one.

Not recognising the disciplines that should be in place to secure your financial health is just as eroding.  This is a huge part of why people fail financially. But, knowing you need to apply discipline (and not following the disciplines that are required) is no less financially devastating.

People with the best self-control aren’t the ones who use it all day long. They’re people who structure their lives so they conserve it.


Tierney, coauthor with Baumeister of Willpower: Rediscovering the Greatest Human Strength.


 

3. Lack of Management Skills

While writing down your expenses is a great start, when there are lot of things going on in life, it takes attention and sometimes serious management skills to ensure that funds are available to meet costs when those costs occur. Expenses are not static. They are not the same amount every month. Some are weekly, some monthly, some quarterly, some bi-annual . Often these bills vary from payment period to payment period. There is an art to ensuring that these funds are available and that discretionary spending does not erode the funds available to meet these fixed costs.  Without the skill to wield a spreadsheet; or the time to keep your budget app up to date, or to track your discretionary spending habits, our lack of focused management can lead to failure.

The result,  bad habits hold us back.

4. Lack of a Comprehensive Picture

Having all of your financial information spread across various banks and financial services companies makes it difficult to get a clear picture of your overall situation, or of the impacts of your actions on your financial health. To ensure you are not leaving money on the table you need to manage your money like a business.  Know your income and outgoing flows, make conscious decisions on where each dollar is spent and have a clear picture of what lays ahead. In other words, be across your Cash Flow Forecasts!

5. Lack of Expertise – “It is not your thing”

Your talents lie elsewhere.  When it comes to spending your valuable time perhaps you are better off focusing your energies where you can achieve the best results,  this might be your business or career.  Not everyone has the skills or the interest  to manage their own money. It is a fact of life that some people are simply not wired to understand their own financial shortfalls, to create and follow a workable budget that will address their cashflow leaks, reduce their debt and discretionary spending, and ultimately create surplus funds.

We waste lots of time and energy trying to do something the right way ourselves, rather than making the most logical decision: to hire an expert for the job.


Dan Ariely, a behavioral-economics professor at Duke University, North Carolina, and author of Predictably Irrational