Why many good people have problems following sound financial advice

You’ve no doubt heard it all before. Don’t overspend. Save as much money as possible. Start saving for retirement early. Put as much money as you can into your 401K. These sound simple, but for those of your learning to how to survive on minimum wage it isn’t all that easy.

These are some of the hallmarks of successful money management and, in all but the worst of cases, most people should easily have more money than they need. The fact is however that many people don’t follow these rules and that has led to some of the most difficult financial times that we’ve seen in generations.

So the question is simply this; why don’t people follow good financial advice?

There are certainly plenty of factors that explain why many people have difficulty in their financial lives, including the fact that life is certainly expensive, not all people have 6-figure incomes and sometimes circumstances can arise that even the most financially astute person will have trouble surviving. Still and all, the question about why many people still make bad financial choices is a good one and the reasons below, while they might not actually help someone financially, will certainly give some insight into the mindset of many and may just help you to handle your finances better. Enjoy.

One of the first factors is psychological. Simply put, many of us think that buying things will ‘make us happy’. Of course there’s the opposite side of that coin that’s best put in the old adage about money not being able to buy happiness. The trouble is, most people don’t pay much attention to old adages anymore and, to add to that problem, many people use purchasing things as a way to improve their mood, including food, gadgets, clothing and so forth. Then there’s the fact that humans are inherently jealous of their family, friends and neighbors and, like the other old adage goes, are always trying to ‘keep up with the Joneses’.

Another reason is that bad money choices can become habitual. While most people who purchase ridiculous amounts of lottery tickets, shoes or electronic items actually know that their actions will make things worse, they do it out of habit and, in some cases, these habits can become quite addictive. Like an alcoholic searching for their next drink, a person who has a bad spending habits is always looking for new ways to spend their money, even if they don’t actually have any.

While it’s easy to blame one’s parents for some of their faults, it seems that many parents are actually to blame for their children’s lousy financial habits. While there are certainly many who are prudent with their finances, spend less than they earn and save or invest the rest of their money, many people grew up watching their parents make purchases that they couldn’t afford to, save practically nothing and go through up and down financial cycles that had more effect on them than they thought. This, in many cases, least of these children becoming adults who have bad financial habits as well.

Many of us are simply trying to make a good impression with our family and friends, something that induces us to spend more than we have. Many times it’s a parent who is trying to make their child happy and, in the process, spends much more money than they can afford in order to do it. This is something that seems to be happening more and more today as we become a society of ‘people pleasers’ who believe that the more things we purchase for our loved ones the happier they will be.

Indeed, much of the research that has been done in the last few decades shows that, when offered an immediate reward, most people tend to take it and overspend even if they fully realize that it means a delayed punishment later. The fact is, if immediate rewards weren’t incredibly enticing to us humans, there would be fewer drug addicts and alcoholics, unprotected sex would be practically nonexistent, the obesity problem wouldn’t be a problem and hangovers would be a thing of the past.

Now that we’ve played devil’s advocate, would like to give you some good news before signing off. The fact is, most people can learn how to have restraint when it comes to their finances, especially when shown the upside to saving and investing. The fact is, as much comfort as a new tablet computer may give, having a large amount of money in the bank is equally comforting.

In the end, good spending and financial habits can be learned and bad ones unlearned. It just takes a little bit of time, diligence and practice. If you have financial problems, questions or concerns please let us know and we’ll get back to you with advice, suggestions and answers ASAP.

 

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