Rethinking Finance: Entitlement and Magical Thinking in Finance

As we continue down the path of financial overhaul, my wife and I have come to realize two major fallacies in our thinking that has consistently gotten us into financial trouble (and maybe other trouble too, but let’s stick to the finances for this one):  Entitlement and Magical Thinking.


The first “nice” car my wife bought after graduating college was a fancy-pants VW Passat.  To hear her tell the story, she felt like here she was- with a college degree, a job, and at least she could treat herself to a nice car.  After all, she worked hard for that, right?  She owed it to herself, didn’t she?  Never mind the mountain of student loan debt lurking, or the exorbitant cost of living in the area she was living at the time.  So, she did it.  She bought a lovely VW Passat with leather interior, and all the bells and whistles.  And it was a nice car.  On the outside.  Within 5 years we were paying $500 bucks a month on top of the car payment for everything that was going wrong with it.  Eventually, we sold it and tell everyone we knew never to purchase that type of car.  But the bigger lesson she learned from that time was that she didn’t “deserve” anything.  She wasn’t “entitled” to any kind of lifestyle.  Instead, she has to live within her means.  To think about big purchases, and to be smart with her money.  Even now, we have to fight against that entitlement feeling at times.  “We deserve X, Y, and Z, don’t we?”  Well, no, we actually don’t.  Yes, we work hard. Yes, we make sacrifices.  But that doesn’t mean we are owed anything.  We have to plan carefully, spend wisely, and live appropriately.  If you can afford a nicer thing, or a better quality of life- well, no one is stopping you.  But don’t live beyond what you can simply because you think you deserve it.  Instead, learn the joy of living within your means.

Magical Thinking:

If you are not familiar with this term, it is the psychological belief that one’s thoughts by themselves can bring about effects in the world or that thinking something corresponds with doing it.  I confess, this probably encapsulates best my student loan payoff plan over the past few years.  As I noted in previous posts, we did have a strong run there where we paid quite a bit down on my student loans- but life quickly sidetracked us and it took a good three to four years to find our footing again.  I found myself over those three or four years thinking quite magically that my student loans would perhaps take care of themselves.  “Maybe Congress will pass a bill that cancels all student loan debt!”  “Maybe I will get a big bonus at work!”  “Maybe I will win the lottery!”  You name it, I probably thought it and would have a quick fantasy of the debt shackles being released, like the candlesticks being handed to Jean Valjean in Les Miserables- “With these candlesticks, Jean Valjean my brother, I have purchased your soul.”  Sweet release.

But it never happened.  I never got a big enough bonus.  I never won the lottery.   And surprise of surprises, Congress never canceled my student loan debt.

Nope.  It’s all me.  It is my responsibility.  My life is my own, and I am “entitled” to roll up my shirt sleeves, tighten my belt, and make my student loan debt disappear “magically” on my own.

And somehow, it feels really good to realize this.



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