The Trap of Spending While Waiting to Get Rich
When I first graduated from college, I was fortunate enough to get a pretty good job almost immediately. In fact, my first day in this new job was literally nine days after I graduated from college. My starting salary in this job up to that point greatly reduced my income.
This post was originally published on The Simple Dollar .
In fact, it was higher than my parents’ earnings at the time. Moreover, it was pretty clear that this job offers real opportunities for career advancement. Although this was a one-year contractual position, I worked actively with many outstanding people in my narrow field, and I knew that I would be forging many connections, developing many skills and gaining a lot of experience in this field. year.
In short, not only was I making a lot of money then, I sincerely believed that I would earn much more in the near future.
Problem? I spent the money on this assumption. I truly believed that I would earn a lot more in the future and that during my adult life I would make tons of money, so I spent as if all that future income was a given.
In short, I believed in the “I am from the future” fallacy. I spent in terms of future income, not in terms of my real income.
What happened? By 2006, we were in such a financial crisis that we had trouble paying bills, and at that moment we experienced a major financial turnaround (which is why the Simple Dollar was born as a tool to help us track our turnover and share what we learned).
Assumptions of “future self-deception”
In my opinion, there are three broad categories of assumptions that come with “self-misconception in the future.”
First, it is assumed that your physical, mental and spiritual health remains excellent. The implication is that you will not be overwhelmed by a physical illness, accident, mental health problem, or other fundamental change in your personal condition. In other words, it assumes that you personally continue to do your current job.
Secondly, it implies stable employment and progress in your field. You will save your current work. You will not be affected by the machinations of other people in the workplace. You will also be doing your current job well enough to turn those new resume list items into better jobs with higher pay and benefits, and then do it again and possibly again after that.
Thirdly, it presupposes perfect life stability. You don’t get married or divorced. You have no children. If you have children, they are all perfectly healthy and do not have permanent physical, mental or emotional problems. You don’t have to take care of a sick parent. You will not be in a car accident in which someone else dies, and you will be held accountable for it.
Assumptions are true
Of course, this is an unrealistic view of anyone’s future, unless you’re very lucky. People change careers all the time and start over when their current careers don’t work out. People, too, are constantly losing their jobs and forced to restart their careers.
People don’t have perfect health either. They have accidents. Are sick. They are suffering from mental illness.
Life constantly intervenes in unexpected ways. There are positive changes, such as having a spouse or having children, but even these changes can derail a career and income plan. Life also undergoes many negative changes in accordance with Murphy’s Law. Things are not going as you expect.
In fact , no matter how much you plan and no matter how much you believe in it, your bright, shiny future has a very good chance of somehow falling off the rails. And if this bright, shiny future collapses and you find yourself not making money, like you believe you are… well, let’s just say it’s going to be difficult.
Self-Deception of the Future Meets a Realistic Future
Often times, when the “future self-misconception” meets the real future, financial disaster occurs. In fact, this is exactly what happened to me.
I had very vivid visions of this great future, with high wages and many opportunities.
However, in my career, I was involved in a three-person project and one of the team members essentially decided not to work. It didn’t turn out to be a complete failure, but it did turn into a project that struggled with water for a while, as we were missing some of our team’s key skills that we really need. In the end, I was given a choice: take a long-term job with a wage rate not much higher than what I was earning, or head out into the wild blue there to see what I could get.
At the same time, I got married, gave birth to a child, then another child. Rather than making risky choices, the changes in my life more or less dictated a safe path for me. So, while my income grew slightly, I no longer had the opportunity for the huge salary jump that I once dreamed of.
In short, I ended up without the high income that I expected, but at the same time I had a lot more expenses than I expected.
For years, I spent money on visions of this ultra-bright future, but suddenly this super-bright future was gone, and financial reality overtook me painfully . It took a very difficult financial turnaround to get things right and get things back on track.
The reality is that spending in anticipation of huge income or wealth without spending too much forces you to dig a big financial hole for your future self that your future self will probably not be able to fulfill. If you spend in an optimistic future and a more realistic future is actually happening, you will actually end up with a rather bleak future because that realistic future will also be burdened with debt from your excessive spending. …
The best approach
A much better approach: use some of what you have now – money, time, energy – to improve the situation for yourself “in the future.” You might be expecting an ultra-bright future, but in all likelihood, you will have a much more realistic future in which some of your dreams have come true, but others have been muted and a burden placed on you that you did not expect. your shoulders.
Right now, you have decisions that you can make that will either increase the burden on the shoulders of your future version … or can reduce that burden. You can waste money on the little joys of the moment … or you can give it up a bit and find other ways to have fun and enjoy life.
You can have an expensive car and an expensive apartment or an expensive house … or you can live a little more modestly, still have everything you need and not be burdened with large debts.
The goal is not to live in some kind of self-esteem today. Instead, the goal is simply to keep costs down today while taking the burden off your future in the future.
Remember that your future self will not be as energetic as it is today. This future self may have physical or mental disabilities. He or she may be saddled with unexpected life changes or a failed career. Burying yourself further in the future with bad spending decisions today will make the future even darker.
On the other hand, making smart spending decisions today lightens the burden on that future self, making that future brighter, no matter what happens in between.
“But what if my future is Bright?
This is a typical response to this kind of discussion and there is a simple answer to it: if it turns out that your future will actually turn out to be big, then your smart choices right now will only multiply the possibilities.
Not only have your career and your life turned out incredibly well, you are also not burdened to recoup the costs you spent at an earlier age. Your possibilities are even wider. You can make big career leaps without worrying about money. You can retire early. You can do whatever you want.
The world becomes your oyster simply because you have not fettered your future with additional financial burden.
Here’s the truth: no matter what happens, your “future self” won’t want to deal with the burden of paying for your unnecessary expenses, period. At this point, you will not even remember what you spent all this money on. All you come across is bills for it, and it will be nothing more than a burden.
It’s easy too. Instead of living an expensive life today, cut your spending a little. Live modestly, especially in areas you are not interested in, but it doesn’t have to be a life of poverty . Drive a used car of the latest model instead of the latest shiny model. Live in a more modest apartment than the best location you can afford. Come out a little less often and have dinner parties – maybe even dinner parties. Find a hobby that doesn’t require you to constantly spend money.
You will be completely satisfied with your life, and your future will be in awe of your smart choices and the opportunities it gives you. This is a win-win.
The Expectation of Enrichment Spending Trap | Simple dollar