Forest-through-the-trees syndrome is a condition that afflicts us all at some point in our lives: We get so entrenched in what we are doing (the trees) that we cannot see the big picture (the forest). And while this is true in all aspects of life, personal finance is like Patient Zero of forest-through-the-trees syndrome.
One of the things that I find myself repeating over and over again is that a sale is not a sale if you have to pay interest on the item. Stores offer all sorts of incentives to sign up for their credit cards, like offering 10% off of everything you purchase on the day you sign up for the card. But ask yourself: Am I going to pay down the balance right away, or am I going to let this “sale” item accrue interest?
Here are some tips for looking beyond the sales rack:
- Just say “No”: It wouldn’t kill you to stay out of stores altogether.
- If you are unable or unwilling to pay your credit card balance off in full every month, take it out of your wallet.
- Avoid trends and buy high-quality items. Blue jeans were cool, are cool, and will always be cool.
When you think about it, you probably only wear 20% of the clothes in your closet, 80% of the time—so reining in clothes shopping habits will most likely have a 0.16% chance of affecting your day-to-day life.
Of course, this advice is of the easier-said-than-done variety. If willpower is an issue, I’m not ashamed to share the tactics I’ve used: Put your credit card(s) in a large bag of water and freeze it. That way, if you get impulsive, you’ll have to wait a few minutes to get access.
Another mistake people make time and time again is to go about their lives with no concept of their monthly spending. I say monthly because all of the things that really matter—rent, mortgage, phone—are billed in monthly increments. How should you go about it?
- Track your income and expenses using Quicken or other accounting software in order to get a real sense of your situation.
- Sign up for online access to as many things as you can (credit cards, bank accounts, utility bills).
- If you don’t use a computer (no judgment here!), go out and buy yourself some spiral notebooks and write everything down.
Taking those most basic steps to understand the ebb and flow of your finances is vital, but what should you be looking out for once you have all the data? Well, how many of these do you have:
- Memberships on dating apps and websites;
- Subscriptions to magazines and newspapers; or
- Kids who play online games?
I had a client who let her son use her credit card for online games—one of the games that have “in-app purchases” on the App Store. It turns out that her credit card was being charged every time her son played the game—and whenever he wanted to purchase special powers, get to a new level of the game, etc., it was a dollar. This ended up costing her $1,000.
Having the wherewithal to pay for your kids’ college or to build a wheelchair ramp for your dad is important. By looking at the big picture and using that information to inform your choices, you’ll find yourself in a much better position to meet such challenges head-on.
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