Are You Being Honest with Yourself About Your Finances?
From time to time people have been known to tell little white lies – sometimes. You might tell you Aunt Jean that her (overcooked) pot roast is delicious. Or you might gush about your best friend’s new hideous haircut to make her feel better. Sometimes, we don’t just reserve these small acts of kindness for those we love, but also to make ourselves feel better. When it comes to lying to yourself about your finances, you might find that the consequences are more than you bargained for.
Being honest about your true financial picture is crucial if you want to dig yourself out of debt, build a healthy savings fund or plan ahead for that European vacation you’ve been organizing since your twenties. However, we often hold ourselves back by tossing aside inconvenient truths or dismissing signs that our finances are heading down a dangerous path. For example, have you ever thought to yourself, “My $15,000 credit card bill isn’t that bad? Some people owe $35,000 in credit card debt.” If so, it may be time to have an honest conversation with yourself about your spending. There are a number of ways you can begin the dreaded conversation and come out with an effective spending plan to get back on track.
1. Look close and hard your finances
When is the last time you sat down and looked at all your credit card balances and savings and checking accounts? If it’s been a while, and your finances are on autopilot, now is the time to assess them more thoroughly. Examine your last few credit card statements, interest charges and payment history. Can you only afford to pay the minimum balance? When you do, do you immediately use your credit card to spend again? Do you regularly contribute to savings? These are questions you should ask yourself to measure where you stand, and where you’re headed.
2. Face the ugly truths
Now that you know what your finances look like, you need to examine what led you to this path. You might be lazy about contributing to savings because you spend your money on luxury items or going out each weekend. Your debt may be skyrocketing because you’re living beyond your means. Whatever the case, it’s important that you address the reasons your finances are not where you want them to be.
3. Make better choices
Scaling back your lifestyle to make better financial decisions may seem like an inconvenience, but look at it as a step toward financial independence. Find ways to make it fun — for every $500 you save, treat yourself to something small. Rather than going out every Friday, plan a once-a-month potluck party at your home for your friends. Once you adjust to your new lifestyle and improved finances, your former splurges won’t seem so important.