The following post is by MPFJ staff writer, Laurie Blank. Laurie is a wife, mother to 4 and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom and to a simpler, more peaceful life.
Financial expert Dave Ramsey often talks about how choosing to live a debt free life means re-writing your financial family tree. Many people who are in debt can look at their family tree and see that a host of other family members have also struggled or are still struggling financially. For many families, debt, poverty and lack are a way of life. Not saving money is normal. Not planning for retirement is normal.
For these folks, changing your money is going to take changing the way you’ve always been taught to think about money. It’s going to take renewing your mind to be like the minds of savers, investors and wealth-growing people. Here are 7 mindsets you might need to change if you really want to change your family’s financial tree for good.
I Have No Control Over My Financial Situation
We thought this for years. My husband and I were raised with the unspoken message that people either have money or they don’t, and that there’s nothing an individual can do to change that – it’s simply luck of the draw.
While people don’t always have control over every expenditure that comes their way, you do have the option to save more and spend less when it comes to items that are in your control, and practicing discipline on those things will help put you in a better financial position when unexpected expenses come.
The rule: control what spending you can so that you’re better prepared for those expenses you can’t control.
Saving Isn’t Important
Or as we used to say, “My credit card is my emergency fund.” The general rule is that if one chooses to rely on credit for covering emergencies they’ll never make saving money a priority. The truth of the matter is that money in the bank always trumps available credit in terms of enhancing financial security.
Choose to put a designated amount into a savings account, and commit to leaving it there. Even if it’s just $10 or $20 a paycheck, it’s something and it will eventually begin to add up to big bucks.
Debt is Okay
Some experts agree that some types of debt are okay. Mortgages and student loan debts are among those types of debt that are considered to be acceptable debts.
But the fact of the matter is that as long as you owe somebody money, they have a certain amount of control over the way you live your life. And as long as you’ve got payments to make, you decrease your financial security in situations where you might be forced to live with less income, such as in a job layoff situation.
It’s a “debt is okay” attitude that keeps people borrowing instead of saving to pay cash for items.
If you’re going to change your financial family tree, you’ve got to reject the mindset that debt is okay. That doesn’t necessarily mean that you can never borrow money again, but in order to truly change your habits and start building wealth, taking on debt has to be an exception instead of a rule in your financial life.
Financial Goals Aren’t Necessary
For years our family’s financial goals consisted of vague statements such as “I want to get out of debt”. Unfortunately, those types of semi-goals don’t usually get achieved.
People who achieve financial independence usually have written out goals that contain a step-by-step action plan that will help them achieve those goals. Here’s an example.
Goal: I will pay off $20,000 in credit card debt in two years by putting an extra $800 a month toward my credit card bills. I will find that extra $800 a month by cutting X, Y and Z expenses and by making X amount of money at a second job delivering pizzas.
Without specific, written goals you can pretty much guarantee that your financial family tree will continue to follow the path of those before you who also never had written financial goals.
Retirement Will Just Work Itself Out
I remember my grandparents struggling tremendously in retirement (and in all the years before retirement) from a financial standpoint. Birthday and Christmas presents from their kids and grandkids always had to be cash to help them pay the bills or purchases to repair things on the house because they didn’t have the money for anything other than the basics.
Back in the olden days, when social security money was guaranteed and debt wasn’t the norm, your grandparents and great-grandparents might have been able to get away with this mindset. After all, they probably had little to no debt and didn’t need much to live on.
Also, healthcare coverage in those days was much more all-encompassing than it is now. In today’s world, however, people need to have a plan for their money if they want to retire and be able to eat and pay the bills.
Choose to change your financial family tree by starting to save for retirement right now. Again, it doesn’t take much to add up to big bucks if you’re still in your thirties or below. Take advantage of employee matches on your 401(k), set a monthly pre-tax contribution amount to go into your 401(k) and put a small amount of cash monthly into an IRA.
If you’re into your forties and fifties and are on the road to a dismal financial place in retirement as your ancestors were, take steps now to do things differently. Cut expenses drastically, downsize your house if need be and start making retirement savings a top priority so that you can make big strides to live a more financially secure retirement than your parents and grandparents have or had.
I/We Don’t Really Spend That Much Money
This was our mantra – and the mantra of our family members – for many years. Then one day back in October of 2012, when we hit our financial rock bottom, we gathered our bank and credit card statements and took a look at what we actually spent our money on.
Here’s what we learned.
We spent 50% more on groceries per month than we thought we did. Three times as much on entertainment and eating out than we thought we did. Twice as much on gas for the cars as we thought we did.
It was then that we began changing our family’s financial tree and spend tracking each and every month. Spend tracking allows us to have a daily update of what we’re spending so that if we see we’re getting near our budget limit on a particular item we can reign in spending immediately.
Now that we know exactly what we’re spending money on each month, we are paying off our debt instead of accumulating more debt and not understanding why.
I Just Need to Earn More Money and Then We’ll Do Better Financially
I can’t count how many times my husband and I said this to each other. But the truth of the matter is that financial problems are rarely (as in 1% of the time) due to a lack of money, but instead due to a lack of restraint when it comes to spending.
If you can face this and other facts regarding how you and your ancestors manage money, you can indeed make the necessary changes to change your financial family tree from one of constant money struggles to a lifetime of financial freedom.
How about you all? As you look at your family’s financial history, do you see a pattern that lines up with your own spending and saving habits?
Share your experiences by commenting below!
***Photo courtesy https://pixabay.com/en/family-dollar-money-hedged-forward-960451/
