One of the best things you can do if you want to achieve financial success is to know yourself and be honest with yourself. Many people don’t know what they want, what their tendencies are, and how their behavior affects their finances. It reminds me of the movie, “Runaway Bride” where Julia Roberts’ character likes the same type of eggs as her current fiance. Her preference has changed with every boyfriend until the end of the movie when she gets honest with herself and takes the time to figure out exactly which type of eggs she prefers. Many of us are like this with our finances. We either assume the preferences and tendencies of those around us, or what the media tells us we should do and prefer.
What does it mean to know yourself? It means several things. Some people are likely to have trouble with some or all of these areas.
Know what triggers your spending: Are you just unable to leave things like gizmos, DVD’s, or clothes alone? Do you shop when you’re sad, happy, or bored? If you go out in a group and others are spending do you feel compelled to, as well? When you spend money, write down what you were doing or feeling at the time. Write down what you bought. You’re likely to start seeing some patterns emerge and then you can create strategies to deal with it. Which brings us to…
Know how you can deal with temptation: Can you walk away form spending opportunities or do you have to spend a little something? Can you be happy staying home and not going to the stores at all, or do you have to go? Some people can quit spending cold turkey and for others that will lead to a binge. If you’re likely to go on a binge, it’s better to go ahead and spend a little something than risk having a breakdown and blowing several hundred dollars. Knowing how you deal with the temptation to spend and being honest about your weaknesses will help you gain control.
Know your limits: Some people can be very happy living a frugal life. Others will rebel if forced to cut back too much. Get to know how far you can go before you crack. You may not be able to save thousands of dollars, but you can pare down to your comfort level. Going further than that for an extended period of time may lead to a binge. You can always experiment with how frugal you can be but if it starts to get uncomfortable, pull back before you go crazy.
Know your preferences: What will you really eat and use? We’re told to eat healthy. But if you know you’ll never eat those vegetables, buying them is a waste of money. We’re told we should own certain products but if you’ll never use them, buying them is pointless. You have to know what you’ll honestly eat and use. It’s not good to eat nothing but junk food, but if this is your preference and you know you’re not ready to change, you might as well buy the Twinkies.
How organized are you? Some people have no trouble keeping track of their finances and organizing every bill and statement. Others use the shoebox method and toss it all together. Still others don’t even bother at all. You can try to turn a disorganized person into an organizer, but it probably won’t work. It will probably lead to frustration and anger. You have to work within your limitations. Can you improve your record keeping even a little? Can you find a way to start keeping records at all? You have to know your organizational limits and work within them to create a workable financial system for you.
Know what you want out of life: Do you want to retire early? Do you want to own a lot of luxury goods? Do you want to move to a different area? Do you want a different career? There’s nothing wrong with any goal you might have. However, every goal will require different saving and spending strategies. Some may be incompatible with each other so you may have to choose which is most important. For example, if you want to retire early but you also want to own nothing but designer goods (and you make a limited income), you’ll likely have to choose which goal is more important to you. It’s up to you, but being honest with yourself is the only way to achieve anything.
It’s not always pretty to examine your weaknesses, preferences, and tolerance levels. It means admitting that you’re not perfect, or that you don’t share the preferences and goals of those around you. You may have to deal with the fact that you’re not the person you want to be. You may not be the person that those around you want you to be, either, which can be problematic. You can either accept it or try to change it. But knowing yourself is the only way you can begin to craft a financial life that will really work for you.