Do not make decisions with a “hot head”, go on a trip or buy a new car when your economy does not allow it is not something that will make you look better.
11 min read
The opinions expressed by collaborators are personal.
So it happens; you leave home to take an Uber because you fell asleep again and today you can no longer afford to save money and take the subway. While you're waiting, your neighbor, the one who lives in the four-bedroom apartment, goes out at full speed in his brand-new new van, so 2020 model that you swear that, even if you are meters away, you can smell that wonderful smell of car leather latest model.
So you decide, while waiting for your vehicle, to stalk the neighbor on Instagram, where you realize that he just returned from a vacation in Hawaii and that on Sunday he made a roast beef on his balcony, which, by the way, you did not go invited.
Then you make one of the worst decisions for your finances; your wallet screams no !, but you still do it: you decide that you are going to be “cool”, whatever the cost.
The danger of hot-headed decisions
It has happened to all of us; We decided to make an unnecessary expense that throws away our future plans. To do this we often take into account the economic situation in which we think others are.
We thought: “If the neighbor went on a tour of Europe, it must be that he has a lot of money” or “if my best friend bought a new car, it means that I must do it too”; But making these kinds of guesses is the most dangerous thing for your pocket. What if the neighbor received an inheritance or if his parents gave him the trip? Or, worse, how about you are up to your neck in debt?
Each person's financial circumstances are like fingerprints: unique. It is not the same to have than not to have children, to be married than to be single, to have student debt than not to have it. Each circumstance is different and each one gives importance to different things.
So the first thing you should do to clean up your finances and sleep peacefully at night is to stop asking yourself, why can they and can't I? You will never know, because it is not your life, you, start to notice yours.
What is to be “cool”
The very definition of being “cool” implies not being concerned about payments and not being afraid of the card statement. For example, for anyone who aspires to have their finances in top shape, the first requirement would be to have zero credit card debt. So being cool means never having to worry about finances or how basic needs will be met this month.
Also, the concept changes over the years. When you were 19, the cool thing was having money for a party and beers, and for inviting someone out on a date from time to time. When you were 25, the cool thing was to go backpacking in the United States or Europe or South America and live exciting adventures.
But, when you are 35, what makes you feel good is having a roof over your head, being able to invite your friends over the weekend and don't be ashamed of your house, take a vacation on the beach, go to the doctor without staying bankrupt and, perhaps, not miss the movie premieres.
Obviously, when you are 40, things change radically: what matters to you is the future, even more if you have children or dependents, and this is where the concept of not wasting money really matters.
If you are between 20 to 30 years old, I am going to give you an irrefutable clue about your future: the decisions you make today will impact your 40-year-old self (and beyond); Your priorities and interests will change, and what you stop saving today will be needed later. Nobody wants to be in their fifties who still pay rent or who have roomies, and (although you may not be able to imagine it) all people who have children want to give them the best education and the best experiences.
In summary: Being cool is not living thinking that your neighbor's grass is greener, going into debt to buy things and then living daily. Being cool is feeling satisfied with what you have.
So let's start with this list of 4 things you think is worth spending the money on, but for which your future self will come to claim you.
No one has died for not having the latest iPad. If the device is completely necessary for you and your work, its purchase should be an informed decision and you should choose the best one for your particular needs. If you have young children, I understand you and I will not judge you: the iPad is essential for your peace of mind, but you do not need to change the model every year or buy an iPad for each of your children just to play Angry Birds and watch YouTube. The same applies to cell phones: it is not worth buying your new phone if the only thing that changed is the camera.
On the other hand, there is a more dangerous category of gadget, both costly and useless; I mean the one where all the artifacts that stay in a drawer enter, collecting dust, like the Lance Armstrong bicycle that stays in the parking lot for years, but that cost 200,000 pesos; the electric scooter that your son could not enjoy on vacation because they do not let you take him on the plane (to the skate), the 8K TV that you have never been able to take full advantage of because there is not enough 8K content.
Other useless purchases include the pen that sends everything to your phone, when you never write; the fitness watch when you never go to the gym; the ball that is handled with the cell phone when you do not have time or watch sports; the drone to take panoramic photos, when you never leave the city; that electronic toy that you knew your child would not use more than once; Go Pro if your favorite plan is to watch Netflix … the list is endless.
In this section I will include cars. There are people who change cars like changing clothes, think do you really need to change your car every 4 years if you only use it to get to and from the office? Keep in mind that cars are designed to last much longer and also never retain their value.
If something is a priority for you, for God's sake, buy it, if your finances support it, and be happy, but make sure you put it to good use. Why do you want a Ferrari if your child's chair doesn't fit and if it scratches all the stops in the city? In conclusion, a “cool” purchase is one that brings you closer to your dreams without affecting your finances to the point of not letting you sleep.
2. Clothing, shoes and accessories
Once in a while, if you save for something specific, you can buy these things, but what is not cool is that you get into debt and walk like a dessert, showing off on the streets of Polanco with your Gucci sneakers and your Brooks Brothers shirts (which You didn't even buy in promotion), but then you don't even have to pay for the card. And, worst of all, there are other people who spend all their money and it is not even in good or quality things, but in clothes that in one month will increase the pollution of the planet.
We all look great in a new outfit, but wonder if it's really necessary; And consider dry cleaning expenses: nice things always require maintenance.
In the end, choose a style of your own that involves zero credit card debt, or at least have a clear payment plan. It will not be cool to be paying for the “chunky sneakers” in two years, when no one remembers them anymore and you have given them to someone else.
On the other hand, I am not saying that you should never buy expensive clothing or accessories, as some are actually smart expenses. For example, it is wise to buy good shoes for your children's school uniform; A quality bag or fine luggage if you travel a lot or the best tennis shoes if you love to go for a run every morning.
Find what is really important to you and then make decisions about it.
3. Fashionable restaurants
If you need to be one of those millionaires you see on television drinking 100-year-old whiskey and smoking cigars, you must first earn it.
These millionaires are probably paying those bills with the interest of the money they have invested, while you are paying it with a credit card for months. That is definitely not cool.
We're not saying don't drink your favorite cocktail on your birthday, but stick with the beers until you've generated enough money or investments.
Today, they make you believe that being cool is visiting all the hot spots. Keep in mind that the essence of going to eat at a restaurant is enjoying its atmosphere and really trying the food, not posting the best photos.
Make them how you really like them and not how you would like them to look on Instagram. Yes it's cool to take a vacation once in a while. It's not cool to keep paying them when you take the following.
Taking photos on the beach at sunset will make your Instagram photos have many likes, but it is very sad if what you really like is the mountain or if you really spent stress with your partner the whole trip by the costs.
Remember that vacations are to satisfy a very personal need; If they don't fill you up, don't go.
Set priorities according to your needs and then get comfortable with them. For example, you can set up a scale system to get to the lifestyle you want to lead.
First, basic needs such as shelter and food must be ensured; Second, when you have these two covered, look at other needs that provide security for you and your family, such as transportation, better education, insurance, health, clothing and work supplies.
Next, establish your emergency fund and your savings.
When you have all of this covered, you can consider those tastes that really matter to you; for example, if you love to read, set a budget for reading; If your family loves to eat delicious, set a budget so they can go somewhere that meets these expectations. You should aim at that you can allocate at least 10% of your income to those things that make you happy, without getting into debt.
However, the conclusion is obvious: investing is “cool”, unnecessary expenses are not. Everything that takes you away from your goals and dreams, and your tranquility, should be removed from your lifestyle.
What is the use of having the last phone or going on a trip to Bali and then not having anything to pay for your children's rent or school.