We all wish that we could live in a perfect world—a world where we could determine exactly how our stories are written. I’m sure it’d be one of bliss and happiness. Although living a fantasy sounds like euphoria, it can do more harm than good—especially when it comes to your finances.
It’s important to take a realistic look at your finances if you want to be successful with money. If you find yourself struggling to get a grasp on your financial situation, perhaps you may be living a fantasy when it comes to your finances.
What living a fantasy means
Living a fantasy means that you disregard what’s actually happening in reality. Though it sounds great to take a break from the real world and live in perfect bliss, it’s not realistic. Living in a fantasy world is great for things like fantasy football—where you get to pick the perfect team of star players for an inconsequential wager.
But in real life, it causes you to make poor decisions with no regard to the real-life consequences. You begin to believe in unrealistic results and are often left in a worse position than before. We’ve all had moments where we’ve imagined ourselves in perfect scenarios, and everything just worked out. Well, that’s not reality. Every decision we make has consequences, especially with our finances.
6 Ways you’re living in a fantasy world financially
When it comes to your money, the last thing you want to do is live in a fantasy world. Maybe you are and just don’t know it. Here are some ways that you might be living in a fantasy world with your finances.
1. You believe your debt will be miraculously forgiven
Though loan forgiveness does exist, it’s the exception, not the rule. In particular, only about 1% of those who apply for Public Service Loan Forgiveness actually get approved. With these statistics, believing that you shouldn’t worry about your debt is definitely a fantasy. You must have a plan to pay back what you owe.
Unfortunately, lenders don’t just sweep your debt under the rug and allow it to be forgotten. There are consequences to avoiding your financial obligations. Failure to pay your debt in hopes that it’ll be forgiven will negatively impact your credit score.
This can cause issues with getting a new job, buying or renting a home, and your ability to access future financial capital. Facing your debt can seem overwhelming, so just take it one step at a time. In fact, you can leverage these tips for reducing your debt at your own pace.
2. You spend on credit without a plan
Using credit cards can have some advantages if you use them wisely and with discipline. However, you’re living a fantasy if you spend without a plan. In this case, you may tell yourself that you’ll pay your credit card bill off at the end of each month, even though you have no idea how you'll pay the bill.
If you’re going to use credit, you should have a plan on how you’ll pay it back. Otherwise, your debt will accumulate exponentially due to interest. With average credit card interest rates as high at 25%, depending on your credit score, your debt can accumulate quickly!
Instead of spending without regard to your ability to pay it back, only spend what you can afford. Limit your credit spending to what you actually have in cash to pay back so that you aren’t getting into debt.
3. You say you’ll save money, but don’t have a plan
It’s always great to have a goal to save money. After all, you want to be prepared for emergencies and have cash on hand for large purchases. But saying that you’re going to save money without a plan to actually do it is living a fantasy.
Here are a few questions that you need to ask yourself when creating a savings plan:
- What are you saving for?
- How much do you need to save each month?
- Where will you keep your money?
This is the start of creating a plan for saving money. Once you have a plan in place, you need to execute it. Open those savings accounts that you’ve included in your plan. Then, automatically transfer money into your accounts so that you don’t have to think about it. That’s how you turn your savings goals into reality.
4. You’re “on a budget,” but don’t actually have one
Saying you’re on a budget but not actually having one is another financial fantasy that you may be living. A budget helps you proactively plan your money. So without having a plan, you’re not actually budgeting.
If you’re on a budget, you’ll actually need to have a written out plan for how you’re going to allocate your money. Remember, a budget doesn’t mean that you don’t spend money. It means that you have a plan for where it will go. Not sure how to budget? You can use this budgeting example to get started.
5. You want to build wealth, but you’re not investing
For most people, the ultimate financial goal is to build wealth. Not just wealth that you can enjoy now, but generational wealth for your future family. Though you can become wealthy without investing, you limit your ability to exponentially grow that wealth when you don’t invest.
Investing is the vehicle for building wealth. It allows your money to work for you. This means that you can earn money passively and not have to trade your time for income. There are many ways that you can invest, including investing in securities or real estate investing.
Even if you don’t have a lot of money, you can begin investing. Start small and build your investment portfolio as you go. You can learn more about investing in our book, Clever Girl Finance: Learn How Investing Works, Grow Your Money.
6. You believe that marrying rich or winning the lottery is your ticket to financial freedom
Although we’d all love to win the lottery or marry rich, it’s not quite a realistic financial plan. In fact, you’re much more likely to get struck by lightning than your chances of winning the lottery.
Instead of spending all of your time swiping left or scratching to find your financial savior, do the work to create your own financial freedom. This includes getting out of debt, investing, and becoming a better steward of your money overall.
Stop living a fantasy with your money
As you can see, living in a fantasy world with your money may be an easier trap to fall into than you probably thought. Perhaps you’ve even done some of the aforementioned. But now that you know the harm it can cause to your finances, it’s not too late to make a change.
The best way to make sure you’re handling your finances in a realistic way is to create a plan and adopt systems. This includes creating your own financial plan, using a budget, and even automating your finances. Make it a priority to continue educating yourself about best money practices with our completely free courses and worksheets!