This guest article is from Golbguru over at Money, Matter and More Musings. Over there, you’ll find some thought provoking writing, such as this post about if it’s easier to be frugal when you are single. So far, it has 17 comments and I’m sure it will get more. Feel free to head over there and give your two cents.
It’s one of those “deep-thought” days when I switch myself into a philosophical mode. Sometimes, this results in some extreme contemplation about the things I have been generally doing in my life. Today it was all about financial contemplation. The choice of the title is obviously inspired by the book “Zen and The Art of Motorcycle Maintenance” by Robert Pirsig. In the following, the words I, you, we, and they are all synonymous [come on, it’s about the Zen, what are you expecting 🙂 ]
Before I start my rant, let me give you a very brief summary of what is the concept of Zen. It essentially means going back to the basic fundamentals, starting from zero, and building your way up (Robert Pirsig’s Zen, not the original Zen). This much knowledge is sufficient for the purpose of this article. If you want to read more about this concept click here and here.
Your financial life is a big machine with a lot of odds and ends thrown into it. To maintain this beast, you require some kind of financial prudence. Now, if there is a problem with this machine, the *Zen* way is to start looking at some fundamental issues. To do that, you have to take it apart and try to put it back together. In doing so, you will realize the significance of each component. This is exactly what I will attempt to do in the following.
I have listed some potential fundamental roadblocks that defeat financial prudence. Along each factor, there is a short line of description that sort of adds financial relevance (it’s deep…you could apply this to many other issues in life). Please note that these are from my personal experiences. I will encourage readers to find some peaceful time and do this exercise for themselves at least once.
- Greed: This is foremost cause of most financial troubles. We want more, and we just don’t want to stop.
- Lack of self-control: Sometimes we acknowledge our greed, but we just can’t stop spending any how. Credit cards don’t swipe themselves, we swipe them.
- Lack of foresight: Greed also blinds our foresight. We buy stuff, but we simply fail to estimate how much it is going to cost us in the long run.
- Underestimation of consequences: Sometimes, we have all of the above, but we grossly underestimate the financial repercussions of our decisions. You can also term this as too much optimism or lack of judgement.
- Ignorance: Ok, people don’t like to acknowledge this, but this is true. How many of us really know how credit card payments are calculated? Whether your card is a charge card or a credit card? Whether not paying telephone bills affect your credit score? What is the grace period on your credit cards?
- Inability to recognize a problem: Sometimes we don’t realize that we have a problem. At times we don’t recognize the *right* problem. If you earn $120K a year and still live paycheck-to-paycheck, low income is not your problem, it is something else.
- Inability to learn from previous mistakes: Ok we made that late payment once and paid for it with heavy fines and increased APR. What did we do about it? did we make changes to the way we do things to avoid making the same mistake again?
- Lack of organization: Oh ! I forgot to make the minimum payment. Oh ! forgot to mail in the rebate. Oh! I thought this due date was for the other card that I have.
- Sheer laziness: Ah!..what’s the hurry, I will do it later. 🙂 I have seen countless people not willing to check out more than one store for some of their large purchases…the reason: “I am bored already”
- Overconfidence: This is really dangerous when coupled with ignorance. Leads to situations like “I can make this mess and then I will easily bluff my way out of it”
- Circumstances: This one is tricky. There are two types of circumstances. Type 1: self-inflicted; these are due to some or all of the above reasons. Type 2: sheer bad luck; these are just out of your control: medical expenses, car trouble, job loss, etc.,
Except “Type 2” circumstances, there is a scope for improvement in all of the above. We just need to look into ourselves before pointing fingers for our financial mess. Once you do that, you will be an expert in the art of financial prudence, and hopefully stay out of trouble for a long time to come. This is more philosophy than practicality, but you can give it a try..it may work for some of you.
Thanks Golbguru for the article! 🙂