Why You Sabotage Yourself Financially

Self-sabotage occurs when someone’s actions undermine their own goals and well-being. In relationships, self-sabotage may occur when you end a good friendship because of your own demons or personal insecurities, leaving both people feeling upset. In our professional lives, self-sabotage may happen when we procrastinate on a deadline until the last possible hour to start making progress, leading to a suboptimal deliverable.

Self-sabotage can rear its ugly head in many forms. Personal finances are no exception to this rule. We have financial goals that we set and truly want to achieve, yet we fail to accomplish them. Here are four reasons why people may engage in financial self-sabotage.

1. Your Conscious and Subconscious Beliefs

Trap: Our beliefs guide our behaviors. When you believe statements like, “Money is the root of all evil,” you are naturally going to be less likely to meet financial goals because you hold a negative set of beliefs about accumulating money. Saving is often not the default behavior for most consumers, so holding a negative belief about saving money will cause your bank balance to vanish in the blink of an eye.

Fix: Make a deliberate effort to understand your explicit and implicit beliefs about spending and saving money. Understand that saving money can be used for good, such as retiring at an earlier age, passing on wealth to a future generation, or donating to charity.

2. Your Emotions

Trap: Emotions are among the most powerful direct influences on our day-to-day decisions. Fear and anxiety play a critical role in shaping our financial planning. If you are anxious about how high your monthly credit card bill is, this anxiety may cause you to avoid checking the amount of money you own on your credit card to avoid the unpleasant emotion of not being able to cover the monthly charges. Likewise, fear often drives people to avoid learning the complicated lingo associated with stocks and investing. The fear of complicated terms like S&P500, 401k, dividends, or mutual funds leads to avoidance.

Fix: Be willing to accept some short-term negative emotion in exchange for long-term progress. Business titan Peter Drucker once said, “What gets measured gets managed.” Understand that just as for any other goal, you must be willing to map out and track your progress to be successful. Embrace the fear and anxiety upfront, knowing that they will subside over time.

3. You Procrastinate

Trap: Many people put off investing and paying off outstanding debts, just as they put off working on a home improvement project or losing some weight. Just as with health or home improvement projects, the initial effort is unpleasant, which makes it tempting to put off until an indefinite date in the future. However, the only smarter time to start investing than today is yesterday. If you don’t believe me, I put the age Warren Buffet first bought a stock at the bottom of the article (the answer might surprise you).

Fix: Start investing and paying off debts today—no excuses. If your company offers a 401k or IRA, start contributing. Otherwise, open one on your own. Financial problems unfortunately do not disappear over time—they get worse. Take the inconvenient but noble action to nip these problems in the bud so they don’t become a catastrophe later on down the road.

4. Get-Rich-Quick Mindsets

Trap: We fantasize about getting rich overnight by winning the lottery, hitting it big at the casino, winning a 10-way parlay sports bet, or the cryptocurrency we just bought increasing 100X in value this year. These events make for great social media content and news headlines. However, these systems prey on consumers because the house always wins.

Fix: Avoid get-rich-quick mindsets and schemes. An occasional sports bet or weekend at the casino in Vegas is admittedly fun and will not bankrupt you if you bet reasonably. But habitually spending on these get-rich-quick schemes can hurt you.

Conclusion

Assessing your financial mindset, habits, and goals on a monthly basis can go a long way over time. Einstein said the eighth wonder of the world is compound interest, and he was a pretty smart guy. It is easy to procrastinate on learning about and taking action on our financial decisions because of anxiety and fear surrounding the topic. While you may not be able to travel back in time and purchase your first stock at age 11 (as Warren Buffett did), understanding the factors that feed into self-sabotage can help you beat it.