How to fix your worst money mistakes


October 2, 2014
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In his late 20s, Jason Hull found himself stuck $300,000 in debt. He admits that, after graduating with an engineering degree from West Point, he’d used the relative riches of his first real job to enjoy the consumption-driven good life, blinders up to potential consequence.

“We’re such a consumer-based culture that we see fancy clothes, cars, and we think, I have to be like that,” Jason says. “It’s easy to fall into this trap of keeping up appearances, especially when you’re comparing yourself to your peer group. You buy things to impress that person on the street you’ll never see again. Things that will have no impact on your happiness or career.”

His moment of reckoning came when he realized that his relationship with the woman he wanted to marry could be jeopardized by how much he owed. She, after all, was debt-free. It filled him with shame that he wasn’t and, for the sake of kicking off their new life with maximum trust and possibility, he came clean. His honesty was rewarded with understanding, and together the pair came up with a game plan. Through persistence, discipline, and teamwork, Jason paid off a staggering combination of debt from credit cards, graduate school loans, and a mortgage in five years. He’s stayed in the clear ever since.

Now a Fort Worth–based financial planner and personal finance blogger at outlets such as U.S. News, Jason helps others make good decisions to keep out of the red. And because he knows that the urge to define happiness and success through shopping can trip up the best of us, he offers simple advice to reset both our thinking and our bank balance.

In short, he says, when we align our goals with our spending, money becomes a tool to help us achieve our heart’s desires, instead of a jailer who holds our happiness hostage. With Jason’s help, we’ve put together a printable worksheet Reset Your Money Habits to help you prioritize what’s important to you and tweak your spending accordingly. Whether your goal is to pay off debt, own a home, or travel the world, this worksheet will help you get on track.

DEFEAT THE BIG 3 FINANCIAL STUCK MOMENTS
We also asked Jason for advice on the three major ways we get stuck financially. His primary counsel is to focus on the person you want to be going forward.

“Being in debt was like giving up part of my soul,” he says, “like being in prison. I never want to go back there.” So he uses that as an anti-motivation strategy.

“You have control,” he says. “You have the ability to choose to make good decisions. Feeling that empowerment as you go forward is important. A lot of people don’t think that have that power but they do.”

Now let’s gather that inner strength and tackle those stuck moments.

* * *

Debt stuck moment: I can’t deal with my debts. I feel overwhelmed whenever I start thinking about it, so I end up doing nothing.

How you’re feeling: “You’re going to feel shame that you’re not in control. But this doesn’t make you a bad person; you just made poor choices. Look at your past self like a younger sibling who didn’t know any better, forgive that younger sibling, acknowledge what you’ve learned, and move forward.” 

What to do: “The first thing is to stop doing what it is that’s getting you into debt in the first place. You’re not going to pay it all off tomorrow. Set your expectations realistically.”

Here’s how:
 Start modestly. “Ask yourself, What can I pay today, and how can I get to the point where I can pay more in three months? Then more in six months? In nine months?

Get an accountability buddy. “People with some kind of regular check-in are better at saving money or getting out of debt. Check-in with your support system by sending a text about how much you paid off this week.”

 Get competitive. “If you’ve paid off $75 and your friend has paid $100, you can create a mutually supportive competition to help you pay off the debt.”

Create little milestones. “Say you’re $5,000 in debt. Figure out a small celebration to reward yourself for each thousand you pay off. You want a little carrot, not just a stick.”

Stop debt from wreaking havoc with your financial goals by figuring out what you can do without. Get the exercise.

* * * 

Overspending stuck moment: I don’t have anything leftover from my paycheck at the end of the month. I know I’m overextended, but I can’t seem to resist the online flash sales. I’m saving money in the long run, right? 

How you’re feeling: “You’re on the hedonic treadmill, defining your happiness in terms of what you have versus what you are. So you have to continually ramp up what you’re getting to get the same level of happiness. And you keep trading up, and up, and up…”

What to do first: “Go to the park and play Frisbee. Play with someone’s dog. Give small amounts to your favorite charity, but do it in person and connect it with time that you’re volunteering. This creates a sense of fulfillment, enrichment, and purpose.” 

Practice purging:
• Dial down your lifestyle.
“Cancel subscriptions, gym memberships, cable TV. It’s amazing how quickly you can learn to do without.”

• Reduce your spending baseline, bit by bit. “Take away $50 from your weekly budget, and you’ll figure out ways to cut your spending a little. You won’t notice that it’s missing. Then do it again.”

• Put away the plastic. “Use cash, and only take a small amount wherever you go. If you use credit cards, only use ones with an exceptionally low credit limit.”

Question your purchases. When you’re tempted to buy something, ask yourself, “Do I need this or do I want it?” If you think you need it, ask yourself why you need it. Then, if you find you’re keeping up with the Joneses or trying to soothe a hurt, decide that you don’t need it.

Save for what you really, really by want by reorganizing your spending around your goals. Get the exercise.

* * * 

Taxes stuck moment: I haven’t paid my taxes, and I just got hit with penalties, which is going to make it even harder to clear up. 

How you’re feeling: “Doing your taxes can be such an overwhelming process when it’s 15 hours of work you have to put in right now. Fear prevents people from getting started.”

What to do first: “Make it a project. Break it into subtasks.”

Try this:
• Work with the IRS.
“If you don’t have the money now, you can work out a payment plan. And, if you haven’t paid taxes or your other debt, pay taxes first because the penalties are greater.”

• Use an anti-motivation strategy. “

Do something to prevent a bad outcome from happening. For example, pledge to give $500 to a charity that you hate (like Cat Lovers of America if you’re a dog lover) if you don’t file your taxes by April 15.”

• Spread out the pain. “In the future, put reminders in your calendar: January 1, start collecting paperwork; Feb 1, see a tax preparer. If there are 10 sections in a 1040, do one section at a time until it’s done.”

Avoid the pain of tax penalties by building habits that help you put money aside. Get the exercise.

DOWNLOAD THIS PRINTABLE WORKSHEET: RESET YOUR MONEY HABITS 

Jason Hull is the CTO of myfinancialanswers.com. He is a graduate of the United States Military Academy at West Point and of the Darden Graduate School of Business at the University of Virginia. He appeared on the show Who Wants to Be a Millionaire in 2014, where he walked away with $12,500 in the bank. He took home half and donated the other half to the Wounded Warrior Project

Next week: How to deal with change you didn’t ask for
Last week: Empathy: The single best way to get unstuck

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