Can we change our financial habits if our backs aren't against the wall?

By Get Rich Slowly

Published: Wednesday, Feb. 5 2014 10:00 a.m. MST

Can we change our financial habits if our backs aren't against the wall?


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Editor's note: This article originally ran on Get Rich Slowly. It has been reprinted here with permission.

I recently had a discussion with a friend who made an argument why it’s better to eat out in Manhattan than to save money by cooking because of the convenience and the joy of eating with friends. I’m all for breaking bread with good people, just not so much if you’re concerned about income. My friend just went through a divorce and eventually needs to find a job since she gave up her career in the arts to raise her son for a decade.

The reality is my friend does have income in the form of alimony. And I’m sure the alimony is a healthy amount because her now ex-husband is a wealthy businessman worth millions. I’ve been to their fabulous, 2,000-plus-square-foot apartment downtown. But alimony doesn’t usually last forever and when she was challenged by her brother to reduce her spending by eliminating eating out for one month, she failed after one week.

Let’s assume, for the sake of argument, that you are in her shoes and your alimony will last five years. Would you really drastically cut back on your lifestyle and master personal finance? Probably not. The more likely scenario for people is to keep on living like they always have until the last year of alimony and then realize, “Oh, man, I’d better change my ways!” It’s the same idea as waiting until the last minute to study for a final exam.

Maybe the alimony is indefinite since, in many instances, spousal support can be ordered for as long as necessary to help the recipient spouse receive training and become self-supporting. Who knows?

Starting a project

I was thinking about starting Financial Samurai in 2003 but did nothing to pursue it for six years until the financial crisis finally pushed my lazy self to launch in 2009. If there hadn’t been a financial crisis, I’d probably still be working my Wall Street job now. It wouldn’t be the end of the world, but after 14 consecutive years of doing the exact same job, I started to get bored with life. I was already beginning to tire after Year 10. I’d probably tell myself “just one more year of work,” which would ultimately turn out to be 10 more years. Golden handcuffs are hard to slip.

I’ve always encouraged readers to really focus on their X Factor. The X Factor is a project one is passionate about that may not seem like much in the beginning but that, with time and enough consistent effort, could turn out to be substantial in the future. You never know what will hit, so it’s also important to keep on trying new things. If you’re in any game long enough, good things happen.

Financial Samurai led me to escape Corporate America after 13 years in 2012 because it helped me create a financial plan that I methodically executed over the next three years. Financial Samurai also gave me something to do, one of the biggest questions people have when they no longer want to work a day job. If you can find a purpose after retirement, it makes retiring that much easier.

Getting out of debt

I speak to folks in debt all the time through my financial consultancy practice. Some have credit card debt amounts equivalent to their salaries! How on Earth does this happen? The most credit I can get on my main personal credit card is $30,000 compared with my average monthly credit card spend of $1,500.

Not paying off in full and letting your debt compound at 15 percent plus the annual rate is a scary thing to do. Not even Warren Buffett has averaged those returns in his glorious career, which should jolt you into never accepting revolving credit card debt again.

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