Denial is a powerful force in human nature and a very deeply ingrained component of our character; a psychological defense mechanism that helped our ancestors live long enough to reproduce. Denial allowed humans to ignore imminent threats and focus on attracting a healthy, fertile mate. The fact that denial is still with us means that it had great value as a survival mechanism, though it may serve us less well in the modern world.
The problems begin when the pace of modern life outpaces our ability to affect cognitive change to adapt to our environment. In other words, the mental skills we have today were forged in a world that was very different. Our instinctual skills are mismatched with our current world and qualities that once aided our survival can be our undoing. Denial and personal finance are a deadly combination and how so many people are able to ignore subtle warning signs they’re in the financial danger zone. If any of these describe you, then it’s at least time to admit you might have a problem.
Using Credit Cards As a Payday Bridge
Living paycheck to paycheck is one thing but for a few the paychecks aren’t quite making it and they reach for the plastic to bridge the gap until payday. If that’s you, you’re in financial trouble. Today’s bridge loan is tomorrow’s revolving balance. You’ll never be able to save any money if your income and expenses are in a constant state of precarious balance.
You’re Part Of The 36 Percent
A full third of Americans have no retirement savings, including 14% of those nearing 65. Another 36% couldn’t come up with $2,000 to cover an emergency. That means one in three people are one accident, medical emergency or job loss away from bankruptcy.
You Don’t Have a List Of Expenses
People in denial don’t want to commit their financial life to a spreadsheet because the numbers don’t lie and the glaring reality might mean giving up some treasured expense. When you start listing internet, phone, cable, a gym membership, spa trips, school, hair salon, Netflix and video game subscriptions it starts becoming abundantly clear where the money is going. Since the picture is seldom pretty, those in denial will avoid writing it all down.
Waiting For That Next Raise
Procrastination is another form of denial, usually kind of a stopgap when other other excuses have been exhausted. Many know they should be saving more, so they’ll start when they get their next raise or holiday bonus. When deflection finally fails, delay steps in to take over.
You Avoid Financial Statements
When was the last time you balanced your checking account? If it’s been more than a week or you avoid opening bank statements or credit card statements, it may be because you already know it’s going to be bad news. Denial can only thrive in an environment that’s free of hard numbers and the easiest way to avoid bad news is to just leave bank statements and credit card bills unopened in a big pile on the counter. The longer those statements sit there, the longer reality can be pushed off to a comfortable and distant future.
People who are practicing financial denial already know they have a problem and generally have a pretty good idea of how to solve it. Denial lets the good times roll on a bit longer and puts off painful spending decisions off to a comfortable distance. But it’s like avoiding that knock in your car engine or that painful tooth. The longer you wait, the harder the fix and the more it will cost.