Habits...Good and Bad

November 14, 2022

A quick internet search of “How to build good habits” yields a lot of results.  ~399 Million actually.  Dang, that is a lot of info.  It’s funny because I think pretty much everyone knows how to build good habits.  It’s quite simple, start doing things that are positive for your life and will lead to long-term success.  Well, duh!  It’s not really my job to help you build good habits generally.  It is my job though, to help you build good financial habits.  And, quite frankly, you know how to do that too…but life happens.  Why is it the average person spends more time planning a vacation than they do retirement?  5-10 days of enjoyment vs. 30 years?  Because it’s right here and now.  In my experience, when people tend to get focused on retirement, they have had a life event that spurred them along.  Maybe someone they are friends with retired, or they just turned 50 or 60.  Regardless, a focus on your finances is a GOOD thing and will make life a lot easier…someday.  We know money doesn’t buy happiness, but it does buy everything else and makes life a whole lot easier.  As Daniel Tosh says, “It buys a Waverunner.  Ever see a sad person on a Waverunner?”  I never have either. 

A hilarious habit I had in college (My first college😊…and part of my second) was every time I sat on someone’s couch, I would reach between the cushions in the hopes to find loose change.  What’s that?  A quarter!  Jackpot!  Ha, those were good times…glad they are behind me but good times nevertheless.  

I think the biggest challenge we face with habits is we’ve lost our connection to money.  As a kid, I saw my parents make purchases with cash or checks.  Credit cards became more widely accepted as I got into my teenage years but prior to, if you didn’t have the cash, you couldn’t buy it.  Cards were somewhat rare.  Remember in Trading Places when Dan Akroyd showed his credit card collection to Jamie Lee Curtis and said, “You don’t think they give these to just anyone do you?”  Cards were reserved for the wealthy back then.  It was a flex to show off your gold card.  Not the case anymore.  By the way, do yourself a favor and look up “80’s credit card commercials” on YouTube.  You’re welcome. 

A question I often ask clients is how much money they spend each month?  Almost everyone I ask, tries to add it up on the spot and still underestimates that number.  Why?  Because money spends easier than it ever has before.  Believe it or not, there once was a time without the internet.  We call those days the dark ages.  Again, good times, glad we are not there anymore.  I would bet that if I asked the average person in in 1975 how much they spend each month, they could rattle off the answer quickly and with accuracy.  Not the case in 2022.  So, ask yourself right now, how much money do you spend every month?  Can you answer in 30 seconds or less?  I bet you are off by a minimum of $1,000.  So, here is my challenge to you, find out what that number has been over the last 3 months.  This includes everything, even the “one-offs” that might occur.  Mainly because the “one-offs”…happen multiple times each year.  We just call them “one-offs” to make ourselves feel better.  How many times have you said to yourself, at least I don’t have any big expenses coming up, God laughs, cracks knuckles, says let’s do this, and then BOOM!  The HVAC goes out, or the dishwasher dies, or there is a plumbing issue, or a leak in the roof, or all of the smoke detectors need replacing, or something happens to the car, or your lawn gets a fungus and you have to treat it.  And so on.  All of these have happened to me since I’ve been in my current home along with others that aren’t mentioned.  We just hit 4 years in this house.  So, when calculating your monthly expenses, don’t discount those “one-offs”.  Include every dollar that went out even if you had a vacation or “one-off” expenses. 

Okay, now you have your number.  Good.  Are you surprised by what it is?  Sigh, I always am too.  Now, ask yourself, is it too high?  Well, maybe it is maybe it isn’t.  Are you out of consumer debt, i.e., credit card debt.  Is your emergency fund sufficient (3-6 months worth of expenses…the real expenses)?  Are you investing enough for your long-term goals?  Are you giving as much as you would like to?  If you are satisfied with the above answers, then you are not spending too much money.  

If you are not satisfied with the above answers, then you are spending too much each month.  Now it’s time for one good habit to be implemented.  Check your banking and credit card accounts each week and know what you are spending each month.  You don’t have to look at every single item you’ve purchased, but look them over to know where you stand.  It makes it a lot easier to catch overspending early.  The more connected you are to those expenses the better as that will make you think more about it.  Some advice I give folks to get out of credit card debt is to make a payment every single day.  It’s top of mind at that point.  How do you keep things top of mind?  Put them in a place where you consistently see them.  Make it happen by having an accountability partner, mark it on your calendar, write it on your bathroom mirror, email yourself to do it.  Whatever it takes, make sure you are looking weekly and tracking the monthly outflow. 

Most people spend more money than they realize but it isn’t necessarily a problem.  That is what my favorite doctor would call a champagne problem.  To me, that means that life is so good and income is so great, you are able to loosen the reins a bit and still operate in the black.  This is a bad habit but it works out okay.  The trouble arrives when you have been loose for a long time and suddenly it’s time to tighten things back up.  Have you ever had buyer’s remorse?  It’s okay if you have, I sure have.  I’ve tried to learn from it over the years and hopefully you have as well.  

So, I have two challenges for you.  First, calculate your monthly expenses over the last 3 months and include EVERYTHING.  For bonus points (There are no points, I’m just curious as to whether you take me up on this) shoot me an email and let me know if you are surprised about it or not.  Second, set a goal for the next month and make your spending line up to that goal.  A pro-tip is to allow yourself a little wiggle room in case one of these “one-offs” pops up as they tend to do.  As I’m writing this, my wife yelled to me from downstairs “The dishwasher is leaking!”  Sigh, another “one-off” strikes again. 

This is a basic tenet of financial management but as Michael Jordan said, “Get the fundamentals down and the level of everything you do will rise.” 

Go get em!


Rory Hartmann, CFP®

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