There is a surprising trend amongst people who would otherwise consider themselves to have their lives in control. If they were asked how much debt they owe, or what their interest rate is, or even what they plan to do to finance their retirement… there’d be silence.
Financial Realities: Reasons To Get Your Head Out Of The Sand
There are certain financial questions that most of us just don’t like to answer. Well, it’s not even about not wanting to answer them – it’s about not even wanting to think about them. They’re things that hang around at the back of our minds. We know they’re there, lurking merrily, but we don’t want to think about them. Retirement. Interest rates. Debt. Account fees.
No matter how financially savvy you think you are, you too probably have a predilection for trying to keep the realities of your financial matters safe from yourself. If you don’t know about it – one can childishly think – then it can’t really hurt you. So long as you’re not in obvious trouble – i.e. the bills are paid and you seem to be in control – then it’s easy to just cruise along instead of confronting the reality.
You Can’t Save If You Don’t Know Where You Stand
It’s not very realistic though, is it? The truth is, if you’re going to go to the bother of living frugally, focusing on your finances with savings goals in mind, then you need to know the real state of play.
You need to know, to a penny, how much money you owe. You need to know your interest rates; your fees; what you’re being charged on your insurance policies. You need to know an endless list of facts and figures that might make your head spin.
Not convinced? Okay, maybe it’s time to just throw the cards on the table – here’s why you have to confront your financial reality over and over again…
Things Can Escalate – Quickly
If you have a tight month and use the credit card to cover yourself, then that’s fine. It happens. But what if you forget you did that, until you get the bill…and you don’t have the cash to pay it off? So you just pay the minimum payment for the moment. Then later the same month, you run short of cash again or need money at short notice. Onto the credit card it goes…
And everything spirals from there. It’s not just debt, either. You can think you’ve followed all the right retirement planning advice or scrutinised all the details of every insurance document to ever cross your path, but the moment you take your eye off the ball, it can unravel.
Your retirement plans can be hit by economic changes or you could miss a cheaper insurance quote through lack of comparison. So even if your finances were fine six months ago, they might not be today – so why not check and reassure yourself everything is as it should be?
Knowledge Is Power
If you know where you are financially, then you are far better equipped to know where you’re going to be able to go. By keeping an eye on all of the different threads that weave into a financial plan, you’re able to ensure that everything fits with the pattern you intend.
If you close your eyes, all you’re doing is avoiding an unfortunate conversation. Burying your head in the sand isn’t going to fix any of the problems that might be lurking in your finances – it’s just delaying the point at which you need to deal with them.
If you take steps to live an affordable life, then it’s also nice to be able to look at the overall financial picture and see that it’s actually working. If you see debt coming down; credit cards not being used; extra money being stashed in a pension pot, it makes you feel good. It makes you feel like all of your effort is going to be worth something. It’s a reward to see the numbers looking healthier and healthier, which in and of itself might be enough motivation to continue.
Ignorance Will Cost You
So while it’s tempting to occasionally avoid looking at your balance or scrutinising your spending, ultimately, this habit is going to cost you. It might take some practice to get used to scanning all of your financial information on a regular basis, especially if the first few times you try you’re not exactly delighted by what you see. Over time, you will begin to see an improvement. Check in with your finances at least once a month to ensure there’s nothing you’ve missed and you’re moving along to the future that you want.