The word addiction is not something I’m attempting to throw around lightly, so I want to tread carefully here. Drug and substance abuse is very real, and not something I’m trying to diminish by using the same phrase when discussing finances.
That said – I think it’s wise to consider what financial addictions we might have in our lives.
A little bit of context: a few months ago I realized I was addicted to caffeine. Actually, that’s not entirely true. I’ve realized this years ago, but never really thought much beyond it. Caffeine seems to be the American approved addiction drug of choice. I’m not alone, as around two-third of Americans drink at least one cup o’ joe a day.
I didn’t do anything crazy – but I did drop down to only drinking one cup a day. And even that drop of caffeine intake gave me a headache for a few days. Addiction. Maybe minor and inconsequential, but an addiction.
This led me to really think about what addiction is, and what it isn’t. I’d say I’m “addicted” to loving my wife – is that wrong? Also “addicted” to solitude time – is that wrong? Also “addicted” to dopamine hits – is that wrong? Truthful answer: I don’t know. (This sounds familiar. Is there an echo?).
Or maybe I have an idea if I do know – read on.
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What is addiction?
Merriam-Webster defines addiction as “a compulsive, chronic, physiological or psychological need for a habit-forming substance, behavior, or activity having harmful physical, psychological, or social effects and typically causing well-defined symptoms (such as anxiety, irritability, tremors, or nausea) upon withdrawal or abstinence.”
Or: something you can’t stop doing or being without bad things happening to you.
Which led me to think about financial addictions. I think these exist, and aren’t really talked about much. I’m not going to pretend to be able to provide an exhaustive list, but here are some that I have been thinking about.
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Addiction to a specific expense
This is probably the least-abstract of these, and perhaps the easiest to identify. We all have the guilty pleasures – sometimes small, sometimes large, expenses that we don’t truly NEED, but just really enjoy. They’re fine, I have no problem with that assuming you’re not sacrificing other things. But what happens if you were to NOT buy them anymore? Or maybe not a specific expense, but a category. Shopping, or vacations, or vehicles. What happens if they go away?
Addiction to net worth growth
I don’t think there’s anything wrong with wanting to grow your net worth. I’m personally a believer that you should tie that growth of net worth into some specific goal or value, and use that net worth to fulfill those things – but a growing balance sheet is oftentimes a sign of good financial health. And yet – what happens if it doesn’t grow? Maybe the stock market takes a plunge. Or a business investment goes sour. Or divorce happens. Or the housing market tanks. What happens to our mind if the personal balance sheet is decreasing?
Addiction to security
Oftentimes with clients, we’ll talk about an appropriate amount of money to have in the bank. An emergency fund of 3-6 months of expense, or specified amount of savings for upcoming purchases. And then I’ll ask what’s their personal “low-water mental accounting” number – a number that if the bank account drops beneath is going to cause them anxiety. These two calculations don’t always align. An uncomfortable truth is that Uncertainty = Reality (props to Carl Richards), and no matter what levels of cash (or other means of wealth) we have, true financial independence is a myth.
Addiction to intentional lifestyle inflation
Unintentional lifestyle creep is one thing, a whole separate topic. Intentional lifestyle inflation is another – this is where we consistently raise our level of living (the house we live in, the cars we drive, the vacations we take) to match our level of income. I’m not saying enjoying ourselves more as our income allows us to is inherently wrong – but what happens to us if we expect this, year in and year out, to be the case?
Addiction to scarcity
This is something that I’m sure can have a better phrase – but it’s something I’ve noticed in my own life and in some of my clients lives over the years. Even when we live in general abundance, we operate as though we live in general scarcity. There’s never enough – we’re just waiting for everything to disappear or to be taken from us, and we think this is healthy … maybe we even give it a clever sounding, ill-fitting term like being “frugal.”
Addiction to out-performing the Jones family
Out-performance should never be a goal itself, but how many times do we still do it anyway? We want to do better in our investments – not so that we can meet our goals, but so that we can humble brag to our friends about it. Or we want to take a nicer vacation than our friends on Instagram. Or we overextend ourselves buying a nicer vehicle because a family member just upgraded their own.
Addiction to goals
As much of a believer in goal-setting that I am, I realize (sometimes painfully) that sometimes we hold onto them too tightly. We start charging too hard, or taking on too much risk, or forfeiting other values in the pursuit of accomplishing them when we want to. We easily justify bad behavior for the sake of accomplishing something, even if we deem it an admirable achievement.
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I’m sure there are more – and I’m sure I’m wrong in some of these. What I really want to do is just cause myself – and others – to think “What am I financially addicted to?”
I think a way we can determine if we’re addicted to something is to ask “What would happen if this goes away?” Would there be “anxiety, irritability, tremors, or nausea”? Or would it simply be disappointment, but not devastation?
That last phrase is what I believe is the key – disappointment vs devastation. We can enjoy something, and if it goes away be disappointed – and not be addicted. But if we enjoy something that goes away and we are devastated, I think addiction comes into play.
So ask yourself – are there things in your financial life you’re addicted to?