Not too long ago, I was on Facebook reading a post from one of the few personal finance communities I am a part of. The post I was reading discussed cars, and whether or not you should fork out more dough to get a newer car in order to have the latest and greatest safety features.
As you can imagine, the opinions ranged dramatically, and while the community is usually pretty subdued, tempers were flaring. People were losing their cool while discussing what type of car to buy. I don’t know enough about cars to make a well informed decision, but what I can say is, you’ll probably be fine not going with the latest and greatest Mercedes-Benz with its top-of-the-line features.
The post got me thinking, what are my financial blind spots? A few potential fallacies I have observed in myself, and other people, are:
- I care about my body and want to be healthy as long as possible, so I need to eat organic/high quality foods from places like Whole Foods (there are good healthy options out there that are not prohibitively expensive)
- Eating healthy is too expensive, I don’t have the budget for that. I know it’s not ideal, but what choice do I have? (Eating healthy doesn’t have to be super expensive. A head of romaine lettuce is $1 from many stores and can feed several people)
- I am about to have my first kid, so I’m going to get a mini-van in preparation for my future family. (Do you really need to buy a car 3 steps ahead of where you are today?)
- Family is the most important thing to me, so I need to ensure that I always have the most updated vehicle, with the latest and greatest safety features. You can’t put a price on safety. I would never forgive myself if I lost a family member because I didn’t pay the money to get a suitable vehicle.
- I don’t care about things, I care about experiences, so I don’t have an issue spending lots of money on vacations. (While I try to prioritize experiences over things, this is often an excuse people use to spend money they don’t have on expensive vacations, or not plan it out to get good deals)
- I don’t want to die with millions of dollars in the bank, so I’m going to enjoy my money today. (as if the extreme is to EITHER enjoy your money today or enjoy your money when you’re old. I find this is often just a convenient excuse to not critically assess where your money is going)
- Budgeting and investing is too hard. (There are easy options out there to track your spending, which is much better than blindly spending every month)
Ultimately, it’s not my place, or anyone’s for that matter, to tell you how to spend your hard-earned money. The reason for this post isn’t to insult, or infuriate anyone, but we all have blind spots, and whether we like it or not, those blind spots often drive our actions.
There may be times that you discover a blind spot, but decide to continue on the same course. For example, maybe you say you’re buying a new car for the safety features, but in all reality, you just really like the look and feel of a new car. Again, we’re not dogmatic, it’s your money, buy the car, just make it a conscious decision.
The purpose of this blog is to help highlight that there are consequences and tradeoffs for all decisions you make. Money you spend today won’t be around tomorrow, or more importantly, money you spend today won’t continue as little green employees, working for you to create other green employees, and so on.
Warren Buffet is frugal because he truly understands the time value of money. He understands that spending $1 today isn’t just $1, but rather that dollar could become $16 dollars in 32 years (assuming a 9% return) with very little effort on his part. Spending more money today requires more work tomorrow, and less spending today requires less work tomorrow.
Hopefully this post will help you to challenge your status-quos and allow you to live you life more deliberately, more in line with your true values. Let us know in the comments some of the blindspots you’ve encountered.