Financial decisions can be tricky. Some people buy whatever they want no matter what the consequences. Others won't spend on anything unless they need it, even if they have the funds. Other people feel like they should do certain things and follow an invisible unwritten rulebook. Other people reward themselves whenever they need a little boost, even if their hard work or exhaustion isn't correlated with the purchase, reward, or the funds to pay for it.
The above behaviors fall into one of four buckets that drive financial decisions. Some people fall into one or the other. Some people may be a combination. Things can get confusing when one spouse is one, and the other spouse is a different one. James breaks down these four categories and how they drive our financial decisions. Then he shares ways to look at things differently to have a more balanced outlook and decision-making process.
Episode Highlights:
[02:52] Frugal people often draw the line at needs. If they don't need it, they're not going to get it. This teaches ourselves that wanting things isn't allowed and is somehow selfish and reckless.
[04:02] Living at this level is restrictive and resentment can build up. People get stuck in avoiding expenses that could be looked at as frivolous. People at this level also have to make the argument that what they want is something they need to justify the expense.
[06:29] There's anxiety around justifying a want as a need.
[06:59] The disconnect creates a sense of discomfort. People stuck in this story have to make everything a need.
[07:38] Closely related to the need story is the should story. We get stuck feeling like we have to live according to a manual. We should buy this type of house or give to this type of organization. We have a sense of obligation to a set of predetermined roles.
[08:33] These people are constantly feeling like they don't have a choice, because they're choosing what they're told they should be choosing.
[09:04] They are stuck in the shoulds with rules that are really hard to follow. The rulebook says that you're not allowed.
[13:31] People driven by the want story have a want driven response. They are the ones that end up spending money they don't have or get buyer's remorse.
[13:59] They medicate the buyer's remorse with more wants and get stuck in the cycle.
[15:28] Related to the want is the deserve bucket. We tell ourselves that the want is okay. I've been working hard, I deserve this huge vacation.
[16:15] A lot of times the sacrifice isn't saving or earning, it's just a form of exhaustion. It's not untrue, but it doesn't change the fact that you haven't done the work to be ready to purchase whatever you want to get.
[19:13] We are either in trouble or have overworked and over committed when stuck in the deserve cycle.
[19:44] Need-driven: acknowledge that we all have wants. We're allowed to acknowledge a want.
[21:19] The should-driven people need to question where this rule came from. Is this rule for the life that I want to lead or the life that someone else is telling me I should lead?
[21:36] We really want to move away from rules and on to family values. Values will give us a framework to make decisions.
[22:36] Want oriented people need to get out of the emotional response cycle. They need to get to a place where they have thought ahead of time. Be intentional and have a plan.
[24:13] People driven by deserve need to change the cycle. Instead of being exhausted and spending to soothe yourself, get to a place where you don't get over exhausted in the first place.
[25:07] Stop justifying your story, because you earned it. Stop earning it. Stop giving yourself that story by having more balance.
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