(Guest Post by Babs Wagner)
Everyone in the financial advice biz tells you to make plans to achieve your financial goals. I’ve made a few plans myself, but rarely followed them. I finally stopped planning and budgeting about a decade ago.
Even so, in a couple of months I’ll achieve my goal of leaving the paid work force at an early age. I don’t think I’m unique in my aversion to plans—there must be a bunch of folks like me or J$ wouldn’t be trying so hard to reform us.
Why we don’t like financial plans
I also think I know why we don’t follow financial plans: we just don’t like the plans we make. Most budgeting feels like punishment. Saving money is like dieting. You know you should lose a few pounds (or save a few bucks) but it sucks depriving yourself. You starve for a week, sweat 2 hours a day in the gym, step on the scales, and you’ve lost half a pound. Great! There’s a week of your life you won’t get back.
Likewise, when you start budgeting and saving for some far-off goal, it’s pretty hard to get excited about the short-term results. You give up lattes for a year, put a thousand smackers in the bank, check your statement at the end of the year and voila! You’ve earned a lousy $10 bucks in interest for your trouble. Yeah, yeah, you pat yourself on the back for setting up that emergency fund and being a responsible adult, but (and don’t tell J$) it’s really not that sexy. And just like the dieter who binges after blowing the diet, it’s pretty tempting to take that credit card and charge a latte or a European vacation and run up more debt than you’ve saved. After one botched attempt to save in my 20’s, I cut to the chase and just piled up debt for a decade.
Don’t shoot for a bazillion dollars
My husband and I eventually spent a year paying off $20,000 in credit card debt and I spent nearly another year losing 40 lbs. Those experiences taught me two things that really clicked. The first is, you need a great goal. Not a vague “I want a bazillion dollars sometime” goal. Money isn’t a thing, it’s a symbol. Before we had money, we traded things directly. Now we trade money for things. Your goal needs to be the thing you really want, not the dollar value you attach to it. It might be small, like a vacation. It might be big, like retirement. Either way you need to visualize your goal, dream about it, make it real.
Imagine yourself living the goal—what you’ll do and how you’ll feel. Make your goal a complete vision. Figure out how much that life costs, then make a plan to get that amount of money. While you’re piling up the money, you need to focus on all the aspects of your life that are part of the goal. If your goal is to be a millionaire rock star in your 30’s, you better be taking guitar lessons, or having the million dollars won’t get you to your goal. Once you’ve fully explored your dream goal, and understand everything it takes to achieve it, you’ll be excited about doing what it takes and the financial steps will be a lot easier.
My husband and I started out with the “bazillionaire” goal. We got out of debt and saved a good bit, but our heart wasn’t in it. One day, I realized what I really wanted was freedom. I simply didn’t want to work for a paycheck. I decided I didn’t need to be a bazillionaire to be free; I just needed to stop working. So I lowered my total savings target, so I could be free sooner. Then I calculated what kind of hovel I could afford on my freedom income, and decided to raise the dollar target and extend the time frame. Over the years the numbers have evolved as I researched the cost of living in my dream city, decided how big a house I wanted, and fleshed out how I’d like to spend my time. (Being a full-time volunteer takes a lot less income than being a professional shopper.) We took family vacations in our dream city so we’d know what it would be like to live there and what kinds of activities we’d want to include. The more we explored our dream of freedom, the more excited we were about saving money. My husband and I have been enthusiastically saving a third of our income for many years, because we finally got passionate about our goal.
Follow your values, not “the rules”
The other thing I learned is that your financial choices need to follow your values, more than they need to follow “the rules.” There’s lots of great advice out there, but blindly following every tip for piling up money might not be the way you want to go. Consider this plan for piling up a bazillion dollars, based on actual financial advice:
- Get a college degree in whatever field has the most jobs that pay the most money, forget following your bliss.
- No loans for college—work full time and see if you can get your degree in less than four years. Too much free time and socializing lowers your grades and increases the likelihood you’ll drop out.
- Work for whatever company pays the most, even if you hate the work and everything the corporate machine stands for.
- Spend only what is necessary for survival, buy used or rent everything but food, and invest the rest.
- No debt, period.
- DO NOT indulge in dating, personal relationships or any social interaction that isn’t free or reduced price.
- If you must date, insist everyone pay their own way and do things for which you have a coupon.
- Screw philanthropic donations. Since you don’t own a house, charity isn’t tax-deductible—better to donate to your bazillionaire fund.
- If you have the free time to volunteer, ask for overtime at work instead.
- Avoid marriage at all costs, it’s tax-disadvantaged and there’s a risk you’ll be stuck with your spouse’s previous debts, shopaholic issues, and poor credit history.
- Above all else, don’t have children. They’re an endless money pit and will expect you to pay for college.
If you follow these rules, you’ll be a bazillionaire while you’re still young. Plenty of time after that to buy the trophy spouse and settle down. To be on the safe side, get an airtight pre-nup.
OK, I’m being snarky. My point is there’s a lot of good financial wisdom out there, but if it doesn’t track with your values, it isn’t right for you. Being a slave to the “rules” of finance is just as bad as being a slave to overspending and debt.
The values that took away from my freedom plan
My values include doing work that makes a difference, marriage and family, occasionally spoiling my kids, and taking awesome family vacations. These all took money away from the freedom plan.
- My husband elected to stay home to raise our two boys, a major hit to our income and savings.
- While we were piling up money for our goal, we also blew lots of money in big and little ways.
- We probably paid too much for housing, because we chose to live in neighborhoods with the best schools
- We don’t buy expensive cars and we drive them till they’re dead, but we always buy new.
- While I’m happy to buy a t-shirt on sale at Target, I’m just as happy to pay regular price at a high-end store.
- We don’t budget. We figured out how much we want to save for our goal, we have that automatically removed from our paycheck, we pay our bills, then the rest is ours to blow.
- We generally pay off our credit cards every month, but give ourselves a few months to pay off the big vacations.
We could have retired several years ago if we’d been more diligent or more willing to economize, but I love my job, and was happy to keep working. We probably look capricious, undisciplined, wasteful and dumb to the casual financial observer, because we don’t follow rules–we follow our values. So sue me, I’m still leaving the workforce at a young age.
It’s important to live your dream life now, rather than waiting till you’ve got bazillions to start living the dream. It’s equally important to remember that planning and saving money are just tools to achieve dreams; they’re not the dream itself. I’m convinced if we don’t keep that straight, we become the tools. :)
Barbara “Babs” Wagner is a former poster child for financial misadventure, who learned most of what she knows the hard way. She has a degree in business and has studied personal finance, most of which she now ignores. Her mission is to poke fun at conventional wisdom, keep money subservient to her values, and inspire others to learn from her mistakes. She loves to read your comments, but prefers they not start out with, “Babs you ignorant slut.” (watch SNL Point-Counterpoint on Youtube if you don’t get this joke)
(Photo by Magic Robot)
Jay loves talking about money, collecting coins, blasting hip-hop, and hanging out with his three beautiful boys. You can check out all of his online projects at jmoney.biz. Thanks for reading the blog!