Financial abundance is something we all aspire to have. We all dream about the potential benefits buckets of money might bring: the freedom, the items we can buy, or the things we can do for our friends and family.
However, as Brent Esplin writes about in his recent blog post, earning all the money in the world is not going to solve your financial problems if you cannot control your spending. He cites examples of lottery winners that become bankrupt within 3-5 years, the rate of which is almost 4x as much as the general population. Or millionaire athletes that again quickly become under financial stress after they stop playing.
What strikes us whenever we read examples of these “boom and bust” stories is that the destructive habits of these individuals may also be a manifestation of something else – the individual’s personal beliefs about money which may cause cognitive dissonance. This can be a strong internal conflict in people if left unresolved and explain people’s sometimes conflicting or self-destructive behaviours.
The deeper psychological explanation of these spending habits is not within the scope of Esplin’s post but it does give us a bit of advice that we definitely agree with: having a healthy financial outcome is both about increasing your income and also about controlling and managing your expenses (i.e budgeting). As self-hackers, we are interested in giving us the best probabilities possible to achieve our goals. So good habits like budgeting obviously gives you a HIGHER PROBABILITY of growing your wealth and we can then look at ways of doing this such as building up assets and taking advantage of the most powerful money building mechanism out there: compound interest. But these are topics for another day.
Source: Micawber Principle