The Motley Fool

Is personal finance all about willpower?

Is the idea of being successful with your personal finances just about willpower?

I’ll start by acknowledging that everyone earns a different amount of money. If someone earns the minimum wage and that only just covers their basic living expenses then I don’t think you can say that’s about willpower.

But for most of us we have/had the flexibility with our finances to decide many of the things that influence our personal finances.

Should we buy most discretionary items like clothes, holidays etc with buy now, pay later providers like Afterpay Touch Group Ltd (ASX: APT)? Or do we save up the money ourselves, earn a bit of interest too, then pay for it outright upfront in cash?

Do we buy that amazing German or Italian car for over $75,000 (paid with debt of course) or do we go for the quite-modern second-hand Asian car that only costs $12,000 (or less) which is pretty much just as safe and efficient – it just doesn’t look as impressive to our family, friends or work colleagues.

Will you choose that property that’s a bit more modern and 15 minutes closer to the city? Or will you pick the property that’s a little older in a less sought after suburb?

Can you muster up the motivation to cook a good meal rather than resorting to Uber Eats or Menulog for dinner?

No-one is perfect with their money choices. But to do better with your personal finances than most other people, or better than yourself in an alternate reality, you need to do some things where you’re ‘sacrificing’ today for future enjoyment.

Debt is the embodiment of impatience in financial form. There’s a reason why businesses like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) are doing so well – Australians are pretty impatient, you can see that with how strongly buy now pay later operators are growing here.

Foolish takeaway

Don’t get me wrong, you should aim to spend some of your money so that you do things you enjoy. Or else what is money for?

But, if a person doesn’t use willpower to spend less than they earn then their personal wealth isn’t going to get very far. It’s our willpower with the big choices (like property and cars) and frequent smaller choices we make that dictate how our personal finances will go.

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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.