Have you ever noticed at a gym that there are three types of people? There’s the person who is self motivated and can push themselves on their own. Second, there’s the person that needs constant positive reinforcement, ie “You’re doing a great job, awesome, keep it up!” Third, there’s the person who is extremely motivated by negative reinforcement, ie “You call that boxing? You’re hitting that bag like a girl.” Oh, and I guess there’s that 4th person too. It’s that annoying meat head who has to grunt and scream when they are lifting weights. (He’s my least favorite, especially when you’re at a tiny hotel gym and it’s just the two of you in there). Awkward!
Debt: the Ultimate Motivator
I’m convinced that one of the many reasons that so many people are in debt is not only because of the instant gratification, but also the instantaneous life purpose that “Pay off debt” brings. It is the simplest thing in the world to work for the sake of paying the bills and paying down debt.
For as long as I can remember, I’ve always had some kind of loan that I was working on repaying. I never really had consumer debt, but I did have student loans, car loans, multiple mortgages. I had plenty of mortgage advice from friends who bought before us and/or mortgage brokers, so securing a loan at a good rate was always pretty simple. Paying debt was completely brainless and easy. I payed my bills and put a little away for retirement and whatever was leftover went to debt. Aside from making a budget, it requires little to no planning and really no strategy whatsoever. I don’t have to worry about asset allocation or long term plans. All I had to do was just write a check once a month and everything else was figured out for me.
I’ll also tell you a nerdy fact about myself. I loved opening that loan bill the following month and looking at that balance go down. I specifically looked forward to little milestones on my mortgage like the point where I started paying more principal than interest every month, or the 1/2 way point to payoff, and then had little goals in increments of $10,000. Whenever I’d hit one of these mini-goals, I’d be like “We’re down to $80,000 on mortgage 1, woo hoo” and my husband would be like “so?” He just didn’t get why I would get all jazzed up about that stuff. We’re always going to have monthly expenses, so what’s the big deal?
Then I realized I was one of those people who was motivated by negative reinforcement. In a nutshell, I suck because I’m in debt and I want to suck less.
Savings: Not as easy or fun
Back in 2008 when I was about to pop out my second child, I was in the middle of an expensive kitchen remodel, I was in the hospital, my kitchen was totally gutted, and so were 2 rooms in my mom’s house and my company had massive layoffs. I was still in the hospital when it happened. My husband and I work at the same company, so there was a chance that both of us would be impacted. I cursed myself for being so spendy and focusing too much on fixing up our houses vs paying them off. Although we bought our home based on one income, when we bought my mom’s house and then had children, suddenly our expenses more than tripled and that one income safety net was suddenly gone. We needed those 2 incomes. Luckily for us, we were not impacted by the layoffs but it was a real wake up call. After the kitchen was done, I stopped all spending on home improvements and focused on rebuilding our emergency fund and paying down our 2 mortgages (Babci’s and ours).
After 15 years of working full time and scrimping and saving, for the first time in my life, I actually have money leftover at the end of the month. Unlike before, we don’t have 3 money pits to put the excess into. (for a while we also had my mom’s apartments to take care of and those were a huge cash drain as well. Thank god we sold that headache of a 3-Decker).
Then I realized saving is hard. If you invest in the market, you have to watch things go up and down all the time and you really don’t know day to day what your net worth is and how much could evaporate overnight from a market correction. If you go the more conservative route, you’re always wondering about about losing money because it’s not growing as fast as the rate of inflation. The whole time, one way or another you obsess about losing the money you set aside.
I like Money Reason’s Dividend Investing Strategy because his goal is about generating passive income through stock dividends which sort of takes out the variability in the stock market ups and downs. He ignores the value of the stock itself and just focuses on the return. The stock is almost like a sunk cost to get a consistent revenue stream in return.
I’m really having a tough time measuring progress and setting goals with savings. I really don’t feel like I can pat myself on the back at the end of a month when the stock market surges and I made an extra 5 or 10% in a month. Similarly, I don’t beat myself up if I lose that in a month either. It doesn’t feel like real money to me, and in fact it’s not real until you sell and have cash in hand. Babci never invested in anything but CD’s. She felt like anything else was like gambling. That was all fine and good in the 80s when CD’s were making 11% but nowadays it’s not such a black and white decision.
What do you think, am I just warped or is there something to my theory that debt is a handy motivator to progress in your career and work hard? If you have savings, what motivates you to save? How do you measure milestones? What do you do for giant goals like retirement or college funds? Do you make annual milestones for yourself? Especially with retirement, it’s always hard to figure out how much is enough. I think I need to explore this topic further. Readers, I’d love to hear your perspective. I’m treading on uncharted territory here and I’d love some help.