What’s the first thing that comes to mind when you hear “personal finance?” I bet it’s “balancing a checkbook.”



Young people are spending more than their entire paycheck each month.

Do you know anyone who does it? I don’t. Like most people under the age of 40, the only checks I ever write are to the government – to pay for taxes and speeding tickets. Everyone else has moved on. Like most Americans who don’t live in a log cabin in the backwoods, I use a bank account and credit cards that keep a record of all my transactions.

No doubt a written record of transactions was essential during the first five thousand or so years of civilization – until we got online bank accounts and apps with bots who know how to navigate the archaic interfaces of the banking websites and automatically compile an intuitive real-time infographic of your financial status. There’s a category of thousands of apps now in the Android and Apple app stores.

In 2016, I re-integrated into the Western financial system after half a decade in cash-only China. As soon as my plane landed, my feed was flooded with ads for apps promising to budget my spending, repair my credit, and invest for retirement. Popular gimmicks include redirecting the spare change from purchases into savings, safe-keeping a few dollars each month for a big purchase, and keeping certain categories of spending to a monthly budget.

Apps Won't Cure Your Affluenza

The sense that emerges from these apps, as well as surveys of spending habits, is that Americans have lost self-control over their wallets. Young people are spending more than their entire paycheck each month (the millennial savings rate is negative 2%), and only by various means of self-deception and outside intervention (via hidden or protected savings accounts) can they ever save a few pennies for anything beyond momentary whims.

Instead of driving up your blood sugar and destroying your arteries, you are driving up your debt and destroying your retirement prospects.

For those afflicted by a lack of good finance habits, I have news:

The whole concept of “budgeting” as we know it is flawed and counterproductive. Financial responsibility and abundance requires developing good habits and a healthy relationship with material possessions.

Suppose that you were overweight because your diet was mostly junk food. What if I asked you to start following a “calorie budget?” Eating a bunch of carbs will cause your blood sugar to spike. When you suddenly cut off their source, your blood sugar will drop and you will get tired, moody, and develop an insatiable craving for more sugar. Failure is inevitable.

Bad spending habits work the same way: you buy whatever fills your craving at the moment. The sugar high is replaced by the rush of getting a shiny new thing. Soon after, the high wears off, and the craving for more stuff returns. Instead of driving up your blood sugar and destroying your arteries, you are driving up your debt and destroying your retirement prospects.

We’re Addicted to Junk

It’s no coincidence that modern Western societies are the first to have a large portion of the population addicted to both things and food – for the first time in history, we have the wealth (and credit) to buy a near-unlimited supply of both stuff and food. Something similar has happened with our sleep: artificial lightning plus the ever-present Internet divorced sleep from daylight, causing an epidemic of both sleep deprivation and insomnia. People stay up late seeking cheap stimulation, drug themselves with coffee in the morning, and stumble through their lives.

Focus your energy on things that make you a happier and healthier person, not distractions and momentary pleasures.

I often see people buy a thing as a substitute for the experience the object provides. For example, many people will buy a gym membership because they want to get in shape. But having bought the membership, they make no effort to use it, because they act as if the purchase itself will achieve their goal. Likewise, people buy books they never read as if owning the book itself will bring knowledge.

Our addiction for stuff does not only affect our credit cards. Like the fat we accumulate from a bad diet, our stuff accumulates and becomes an anchor which ties us down. The 21st century demands that work be nimble and mobile – seizing opportunities whenever they may be. I followed opportunities across states, countries, and then continents during my brief career. This is impossible to do with a house, the stuff filling it, and the debt to pay for it all weigh you down. When I got an offer to work in Asia, my wife and I packed two suitcases each and got on a flight. Five years later, we flew back with the same four suitcases.

Develop an abundance mindset

Don’t budget. Don’t save the spare change from every transaction, or hide it in a hidden bank account. Beware the scarcity mindset — saving is not an act of suffering and denial, but an act of exchanging a momentary pleasure for a longer-term value: the big-ticket item you are saving up to buy, such as a house or retirement. $1 saved and invested today becomes $10 in 30 years if you invest in the market.

Three Steps to Responsible Spending Habits

1: Monitor and reflect on every transaction. Use Personal Capital or Mint to track every transaction across all your accounts and cards. Instead of reviewing your credit card statement once a month, set up push notifications for every transaction. Develop an intuition for how much you spend for every category. At first, you won’t have the self-control to stop yourself before you buy stuff. Reflect on every purchase and think about whether the pleasure of spending money now is worth delaying a life of financial success and independence.

2: Discover what makes you happy. Focus your energy on things that make you a happier and healthier person, not distractions and momentary pleasures. I save a fortune each year by biking to work, bringing my lunch to work, and living in a small apartment. At the same time, I’m not afraid to invest time, money, and energy into hobbies that I’m passionate about.

3: Make your money work for you. There is only so much you can save every month. Long-term financial success requires investing in yourself by increasing your income and making your money work for you while you enjoy life. Develop your career, and make your money work for you through smart investments.

Republished from DavidVeksler.com