AHCU Blog

When it comes to reaching financial goals, we're often our own worst enemy.

And that's true -- we are a collection of warring impulses, all jockeying for prime position. This is especially true when it comes to how we view money. Consumer society seems to measure success in dollar bills -- but we're also told that money is no guarantee of happiness.

We all want to be financially secure. Unfortunately, many of us are failing in that regard. Total American credit card debt increased by $57 billion in 2014. That number is projected to reach $60 billion in 2015. Studies have shown that half of Americans couldn't come up with $2,000 in the event of an emergency. Most Americans are also failing to save enough for retirement.

Clearly, we understand the importance of smart financial decisions. Unfortunately, we're consistently failing to put our good intentions into practice.

Much of this can be traced to our conflicted psychological relationship with money. Intellectually, we know that we're supposed to save. We know that we're supposed to budget, and avoid unnecessary expenses. Interestingly, there's another set of impulses within us working to counteract our best-laid plans.

These are the same impulses that tell us to privilege today over tomorrow. We rationalize wasting thousands of dollars on luxury items. Or, ignore the bills we can't pay, because "maybe they will just disappear." 

These are the beliefs and biases that undermine us. There's good news, however: Through hard work and goal setting, we can minimize the influence of these beliefs -- though it requires near-constant vigilance.

Here are a few smart ideas to consider:

• If you have a hard time putting good intentions into practice, consider breaking down your goals into smaller pieces. Give yourself a few things that can be accomplished quickly and easily. Poor financial decision-making is a pattern; you need to break that pattern by creating a new one.
• Even the savviest financial person has to contend with cognitive biases. The important thing is to cultivate awareness of these biases and work toward mitigating them.
• Set realistic goals. Aim for too much, too soon, and you're likely to get discouraged. It's also important to think about what you really want. Money is just a means to an end. How can it help you achieve satisfaction and happiness?
• Keep a meticulous budget and write your goals down on paper. Make these things tangible. Your brain privileges ideas that are expressed on paper.
• Think about your future self in an empathetic fashion. It may sound rather abstract, but studies have shown that people who have done this (via an age-progressed photo) are more likely to make sound long-term financial decisions.

The Verdict

When it comes to reaching financial goals, we're often our own worst enemy. By recognizing this fact, we can take steps to "outsmart our programming" -- and let the impulse toward sound financial decision-making come out on top.