Don’t Be a Financial Jellyfish

Here’s a newsflash for you. Before anyone can expect to successfully manage their household finances, they must be able to exercise self-control.

Self-control requires a backbone.

It demands scruples.

It requires the ability to put off instant gratification.

It means you must have the intestinal fortitude to say “no” to other household members, and handle the inevitable repercussions.

It relies on an ability to recognize personal financial limits and it demands that you stop worrying about the Joneses, who just bought that new BMW the other day.

Unfortunately for many people, asking them to exercise self-control can be akin to waiting for a jellyfish to spontaneously generate a spine.

Every good household CEO understands that the foundation of self-control is personal responsibility.

In my experience I have found this household CEO principle is, without any doubt, the toughest to master. That is because it requires a large amount of sacrifice. The bottom line here is that those who are unwilling to sacrifice short-term satisfaction at the expense of overall long-term stability, will quite simply wither and die on the road to financial stability.

Household CEOs are required to demonstrate self-control on a daily basis, but a lack of self-control is what keeps some of the best-intentioned people I know from running a smooth household operation. The truth is, effective household CEOs realize that there is a limit to the income(s) that make up their budgets and exercising self-control is important for ensuring those finite resources are not unduly strained.

I can hear a lot of you saying, how hard can this be? For many, the decision to uphold a pledge of personal responsibility by exercising self-control is little or no trouble at all. But for others, the urge to experience short-term satisfaction at the expense of overall long-term stability will continue to be a significant challenge.

So are you a financial jellyfish? That is, are you an example of a person who lacks poor financial self-control? Financial jellyfish typically exhibit these four symptoms:

1) impatience

2) buying on impulse

3) an inability to save

4) excessive indebtedness (especially credit card debt)

In the run-up to the financial crisis that started in October 2008, a lack of personal responsibility and the ability to avoid spending money that wasn’t already in hand was a trait that was routinely exhibited by too many people.

It’s still not hard to find examples of people who are running around in expensive designer clothes, driving expensive luxury cars and living in their McMansions, despite working at job’s with average salaries that could never support such a lifestyle without taking on a ridiculous amount of debt. True, some may be getting help from parents, or living off a large inheritance, but most of the time that is the exception rather than the rule.

What I am trying to get across to you is that those who habitually buy on impulse and can’t pay for the stuff they are buying by the end of every month are not financially free — they are indentured servants, forced to work for a good chunk of their futures just to pay off excessive purchases made on impulse.

One way for determining your level of self-control with respect to impulsive purchases is to answer the following questions:

1. Do you set a spending limit before you go shopping?

2. Do you use a shopping list?

3. If you use a list, do you keep non-listed purchases to a minimum?

4. Are you able to pay off your credit cards in full each and every month?

The successful HCEO would answer “yes” to all of those questions. A “no” answer to any of those questions would indicate, to some degree, a bias towards impulsive purchases and a lack of self-control.

Those of you that have answered “no” to any of those questions must modify your behavior if you ever plan on being a successful household CEO, but that is no reason to get discouraged! For although the road ahead may be long and winding, in the end you will find that it will lead to financial freedom.

Indeed, once you’ve finally made the unwavering commitment to personal responsibility that is required from you, once you’ve mastered the art of self-control, once you’ve strengthened your backbone, well, it’s all downhill from that point onward.

Next, I’ll discuss the fourth principle that every household CEO must understand: the power of compound interest and how it can make you rich. All you need is a little patience.

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