4 Questions That Will Improve Your Financial Awareness

Being smart with money is about increasing financial awareness

We are living out the cautionary tale urging us to live below our means. Consider that some estimate that we make roughly 35,000 decisions per day. A survey conducted by Dan Goldstein and Principal Financial Group indicated that although we make thousands of daily decisions those who lack financial confidence are 64% more likely to postpone major financial decisions- such as managing investment or retirement accounts. 

We live in a consumerist society filled with things we likely do not need to impress people we probably have no business trying to impress. Consider what might happen if you spend a weekend with friends who own a large home and two new cars. Or maybe a long weekend with parents or relatives who own a beach house with a inground swimming pool. How might you feel coming out of that experience? I assure you that this recent experience will have you more likely to spend.

For most, success and failure seems to be judged by material possessions, especially in comparison to others. Worse yet, time spent with friends or family who are spenders subjects us to a psychological theory known as recency bias. This type of bias is an error where we place greater importance on events that occurred more recently compared to events occurring further back in time. That explains why you suddenly want a new car or to upgrade your kitchen after you spent time with anyone who is a big spender concerned with the display of high social status.

Financial Awareness is more elusive that you think!

Taking a moment to stop and assess whether your financial decisions are related to competing with others versus your long-term goals is an enormous step worth taking. Taking that step is more difficult than you might initially think. Remember that we make 35,000 decisions per day, many of which I bet are around finances, or making the decision to further procrastinate finances. Amidst all those decisions, you need to discover a way to consciously address those related to financial decision making.
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This process of becoming aware of your financial situation will bring about many challenges. Admittedly, I have often experienced the strong urges to display my financial status to others by competing with their purchases. Yet I resist because it is in the best interest of my future self to do so.

• To give context, presently I live in the low-income part of town above an old automotive shop and drive a car with over 200,000 miles. I purchase everything I can at discounted rates and have not seen a new pair of shoes in over 8 years. Despite the appearance of struggling financially, my wife and I are rapidly approaching a net worth of half a million dollars- which we aim to attain by early next year.

Given the context above, imagine the frustration of sitting with friends and family who readily assume that we are not "doing well". Imagine the outrage I might have of knowing what real financial strength means, and listening to a dozen people sit around talking about who "has money" and who doesn't. This is a fruitless conversation often coming from those who have no real financial values of their own.

Displaying financial prowess with the purchase of material possessions should not be top priority along your path to financial independence. Very few people around us actually have any idea how much wealth we are actually accumulating. Why? Because we don't buy things that display how much money we have. The reality of the situation is you have to become alright with nobody knowing how much you are worth. You have to realize the only person who needs to know your financial worth is you and a significant other, provided you have one. Living a life of frugality and wealth accumulation is often not very attractive early on in the process. Unless you want to walk around and show people your account balances (I do not recommend this), the only person who really needs to knows how "well" you are doing financially will be you.

4 Questions to develop increased financial awareness

I suggest regularly, perhaps even daily, going through the following reflective steps to incrementally build awareness:

​1. What are you thinking about, or regularly, purchasing? 
Like it or not, purchasing decisions are always near the forefront of our minds. Whenever you see something you like, you immediately picture yourself possessing it, wearing it, driving it. This is just basic human nature and the sooner you realize you are drawn to acquiring more things, the sooner you can begin to break the habit of purchasing needlessly. This is the foundation for developing awareness. You are thinking about either consciously or subconsciously, it's just the nature of our being. 


2. Why are you thinking about, or regularly, purchasing?

• What spurred the decision to purchase this item? Was it out of need/necessity or because I just saw somebody else with one and I have FOMO (fear of missing out for the older folks)?
• Is this purchase something that I need to fulfill my daily duties?
• Will I attain lasting satisfaction from this purchase or will it be likely be fleeting and otherwise not contribute to a lasting memory or experience?
• Do I really need to "treat" myself right now or am I getting a little soft and looking for a pat on the back? If your looking for a "feel good" consider exercise, meditation, aromatherapy, music, or just petting the damn dog instead of attempting to buy your way to happiness. 

3. How much are you currently saving and investing? 

• Figure out exactly how much, each paycheck, you are saving down to the very last dollar.
• What account is it going into?
• What is your present net worth?
• Is your net worth as high as it should be?

4. Why are you saving and investing?

• Why is it important to me to have a high net worth?
• Would I like the option to quit my job at any time if I want?
• What does financial independence provide me that "purchases" cannot?
• What does my ideal day/life look like and am I getting closer to it financially? Some individuals will have lower annual costs than others when it comes to an ideal day/life.

Contemplate these four questions everyday and you will be amazed at how quickly you start to build financial prowess and control over your finances. As the old saying goes "you don't know what you don't know". Walking around on autopilot only knowing how much you have in a checking account to make a small purchasing decision is not the path to financial independence and strength. Take control of your financial future and break the habit of letting finances hide themselves inside of the 35,000 decisions you make everyday.

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