Nowhere does the matter of “shooting yourself in the foot” have such long-lasting and perhaps irretrievable consequences than in financial matters. We have considered self-defeating trends in our personal lives as well as in the workplace, so today let’s think about how getting in your own way can affect us in financial matters.
Let’s focus on the areas of managing spending and assessing ongoing costs of living, and saving for the future. Both of these involve honestly evaluating how much money you can generate and what your living costs will be. It never ceases to amaze me how easy it is to overestimate the one and underestimate the other!
Most of us anticipate enjoying a higher standard of living than our parents lived with, or at least an equal level. Is this a realistic expectation any more? Many economists would say “no”; historically the standard of living that one income could support now requires two incomes in most families. That’s a tough reality to come to grips with, and an easy one to delude oneself about. It’s my personal observation that this difficulty has resulted in the significant levels of credit card debt many folks live with, accompanied by relatively low levels of saving. This is where overestimating comes in – thinking that your income will stretch farther than it reasonably can. When we connect this tendency with underestimating overall costs of living, then we have a recipe for trouble.
Ask yourself, what’s your total available income every year? Break it down to a monthly figure, and then to a weekly amount. For married couples, this will help determine whether or not both partners should be working and generating income. This doesn’t haveto be a difficult exercise, but notice when you’re doing it how much resistance bubbles up inside you as you contemplate really being honest with the numbers. Over the years I’ve consistently found it’s easier for folks to discuss matters involving sex than matters involving money; the concerns about self-esteem, pride in oneself, and self-worth seem to get activated very easily when we start talking about money.
Next, sit down and figure out how many expenses you support every year. Again, break it down to monthly and then weekly amounts. Have you ever made a long list of all the expenses you incur on a yearly basis? This is a great thing to do every January, as the new year begins to unfold. Housing costs, entertainment, food, unavoidable utility expenses, taxes, education, transportation, retirement saving (which should be viewed as a routine monthly expense), healthcare costs, predictable home repair costs, vacations, childcare costs, clothing costs, outdoor maintenance…all these should be included in creating the master list of annual expenses. I’ve noticed that the larger the list, the greater the tendency to become overwhelmed and stressed-out by acknowledging the magnitude of annual expenses…and this opens the door to deluding oneself and underestimating how many expenses we truly have to shoulder each year. See how this happens? We engage in underestimating in the service of managing our anxieties!
It’s natural to want to shy away from realities we perceive as complicated and difficult, or scary and challenging. Granted, it’s normal to lean toward imagining more positive scenarios and wishing things were different, but to actually engage in this is a sure way to get ourselves in trouble. A tremendous example of this is the municipal pension system in our schools and communities. For years the pension fund managers have based fund growth expectations on percentages that were too high to be sustainable. Why? The answer’s simple – because promises of stellar growth rates landed particular funds the contracts to invest the pension funds – with the managers getting rewarded with high fees. This has lead to pension funds being underfunded for the annual rate of withdrawals they’ve been faced with, to meet pensioner’s expectations of returns each year that are simply unsustainable.
Deluding ourselves into believing things that just aren’t accurate can have big and unexpected impacts on our lives and relationships. I hope this input is helpful in sorting out where it is that we’re “shooting ourselves in the foot”.
Chase E. Kneeland, M.Div. LMFT 
What an excellent analysis of today’s mindset. Having survived some tough financial times as a single parent, my children and I learned to evaluate what we needed as opposed to what we wanted. Priceless lessons.