The Secret of Financial “Secrets”

For my next trick, I will now summarize every single book on personal finance that has ever been written:

1.    Don’t spend more than you have.

2.    Put a little bit away every day.

3.    Don’t touch what’s in #2 for a long, long time.

Yes, the so-called secrets of creating wealth really are as simple as the three steps described above.   Kinda like how every diet really boils down to “eat less, move more”.  So why is this so hard for so many people? 

Part of it comes from lack of education.  Since there are no required courses around the subject (I’ll save my rant on that for another post), we are forced to learn the mechanics of money from whoever happens to be influencing us.  (Better hope that person knows what they’re talking about!)  We end up doing ourselves a disservice because we don’t see, or lose sight of the bigger picture.  Just like the vast majority of us are blissfully unaware (or in complete denial) of how many calories that donut contains, few of us fully understand the eroding power a little splurge here and there has on our future finances. 

Humans being the complex creatures that we are, we also have our psychosocial or emotional states to contend with, sometimes even going so far as to cause ourselves intentional harm.  Continuing with my diet metaphor, this is the situation where we know full well that eating that donut is not what we should be doing, but we either feel bad and think treating ourselves will make it better, or even worse, we are rewarding ourselves for having been “good” up until this point. 

Lastly, there is the situation of not having the proper tools to make the system work like it should.  Unforeseen situations that derail (or fail to ignite) a sufficient income stream to support one’s lifestyle wreck just as much havoc as a hormonal or metabolic imbalance on the most dedicated of healthy lifestyle enthusiasts.  As artists this last one hits home particularly hard because not only do we often incur the most expenses during periods of the least stable income, and our “cost of doing business” is so high to begin with.

So what should you do?

1.    Educate yourself

Knowledge is power here.  You owe it to yourself to have a basic understanding of the way money works, especially the way forces of time, taxes, compounding interest and risk allocation affect it.  Read up, ask questions and talk with a licensed financial professional.

2.    Be realistic

In order to live within your means, you first need to know what your “means” are.  This includes researching the income potential of your chosen vocation.  Then look at the life you either are already living, or want to have.  Do the two match?  The more honest you are with yourself now, the less frustration you will have down the road.

3.    Adapt

So what if after a thorough examination you find yourself at a stalemate for income potential verses basic needs?  Now it’s time to do some soul searching and figure out if you need to figure out a way to bring more in or give some things up.  One or the other will have to budge, because it will eventually catch up with you.

Just like someone who has a significant amount of weight to lose, getting financially healthy can seem like a daunting, insurmountable task.  Have the resolve to stay the course, however, and the rewards are sweeter than anything else you’ve ever tasted.