I Almost Made a Horrible Mess With My Money

What to do when you’re on the brink of a dumb money decision

I just transferred $2,000 to my investment account.

However, it almost didn’t happen this way. I was close to making a mistake that could have rendered me financially impotent. This would not have been one of those good mistakes you learn from. It would have crushed me.

In what I thankfully can look back on as a moment of temporary financial insanity, I was only a step away from jacking up my monthly expenses by more than $1,000. I would have cut into my savings, pressured my monthly cash flow, and put unnecessary stress on myself.

What was I thinking?

I made one rationalization after another

You make one seemingly logical rationalization and it triggers a vicious cycle where rationalization upon rationalization triggers erratic financial behavior you suddenly lack the capacity to recognize.

It’s the psycho-emotional dynamic of placing emphasis on what you think you want over what you actually need and should be doing. You see a hole in your plan and come up with remedies steeped in desire rather than sound personal finance to suppress your doubt. You want what you want and you want it now. This can happen when you’re out shopping or in other variations of the day-to-day, like with what happened to me.

Longish story, short. I live in Hollywood. My daughter and ex-wife (who, thankfully, I get along super well with) live, in Los Angeles traffic, about 45 minutes away. Without traffic, it’s a 20-minute ride. I make this commute most days of the week, particularly during pandemic times.

Even though my kid is on the verge of the high school-to-college transition, I thought it might make sense to move back to the neighborhood where she lives. If I did this, however, it would have increased my rent by at least $1,000 a month. In fact, I was close to signing a lease that would have taken my rent from its current $1,342 to — I’m ashamed to disclose — $2,661 a month.

I rationalized repeatedly:

• I won’t need my car. I can get rid of it and save $500 a month.
• I won’t commute. Increased productivity will lead to increased income!
• It’s a nicer apartment.
• It’s a renter’s market so I would have received something like 10 weeks free, plus free rent in December and two weeks free after six months (yep, you can get these incentives in Southern California now).

Even with the breaks, my first-year rent worked out to roughly $2300 a month.

For someone who maintains, advocates, and borderline preaches an insanely low cost of living, I’m embarrassed. If you were here with me, I’d let you punch me.

On the bright side, I caught myself.

The leasing office moved slowly. This gave me time to rethink. Rationality — not rationalization — got the better of me and I backed out. I’m not moving. I’m sticking to my monthly outlay of $2,500 a month — total — as opposed to spending that on rent alone.

The things I can do with that $1,000 a month — mainly save and invest it — will benefit me and my daughter more than a half hour’s worth of mainly symbolic proximity ever could.

It sounds too obvious to even repeat, but when you’re about to spend a life-changing amount of money, give yourself a 24-to-48 hour cooling off period. For all intents and purposes, I did this. The result — $2,000 about to go into a handful of my favorite dividend-paying stocks. And, at minimum, $1,000 a month going forward to fuel my saving, investing, and kid’s bright future.

Rethink and re-imagine your present situation when you’re on the verge of making wholesale, costly changes to it. I took a look around my apartment. It’s small — call it cozy — but it’s a nice space with original hardwood floors in a classic 1930s building. I only have myself to blame for what I don’t like about it. I’m visioning how I can make the space more my own. This is far more fun than the expense and hassle of moving.

Run the numbers before you commit to excess spending. Pull up a financial calculator. Estimate hypothetical returns on, say, $1,000 a month. Heck, at zero interest, $1,000 a month morphs into $120,000 in ten years, without factoring in inflation.

Think about your mental health. I’m lucky because the more I work, the more I tend to make. I rationalized on this point as well. I could work harder and easily earn that extra $1,000 a month.

But this defeats the entire purpose of working for myself amid an insanely low cost of living. I like to put pressure on myself. Just not undue pressure. I’m way better off mentally when I’m coming up on the end of the month far ahead of my expenses. I give myself the luxury of deciding how to allocate my surplus to saving and investing. The inverse sucks.

Had I moved and taken on that enormous rent payment, I would have probably spent most of the month chasing that big number. I’d work more worried about running a deficit than considering how to direct a surplus. That type of stress and anxiety tends to make me less productive, resulting in lower earnings.

I’m glad I almost made this mistake. Honestly, I started shaking when I wrote this article. I was nervous about telling you this story. But then I remembered what I wrote about the other day.

We’re not here to judge. We’re here to help and empower one another as our personal relationships with money continue to ebb, flow, and evolve.

This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.