Why Is It So Hard to Make Money and Keep Money? (2024)

Many people struggle to make enough money to meet their financial obligations. Many people also find it incredibly difficult to stick to a budget. Why is this? It is just simple math, right? Is it really that hard to add and subtract?

Human Psychology Makes it Hard to Make Money

If successful money management were as simple as being able to add, subtract, multiply and divide numbers, everyone who could perform these basic calculations would be financially secure. Unfortunately, financial problems stem from much more complex issues than math problems. They are rooted in psychological and behavioral deficiencies, such as lack of work ethic, lack of faith, lack of discipline, over-spending, excessive risk-taking in investments, greed, pride, and an insatiable desire to impress others.

These issues are common to the human race and are much more difficult to master than math problems. My hope is that as we address these issues,you will recognize which ones you suffer from so you can be more fully empowered to overcome them.

What Is the Biggest Threat to Making and Keeping Money?

The biggest threat to financial security is the desire to impress others. Of all the psychological and behavioral deficiencies mentioned above, one especially curious phenomenon deeply impacts the financial decisions we make. We are all affected by it. No one is immune to it, including myself. It is commonly known as “keeping up with the Joneses.”

We enter dangerous ground when we care more about what others think of us than we care about doing what is right for ourselves and our families. This is a slippery slope that can ruin us financially because we can never be completely satisfied that we are impressing everyone around us. We will always be able to find someone who has more and better things than we do.

Why do We Try so Hard to Impress Other People?

The sad news is that even if we spend every last penny to impress others, most of the people we are trying to impress may never even notice. Most people do not care about our image as much as we think they do. Think about it. How much time do you spend thinking about how idiotic someone is because they drive a junky old car or how awesome another person is because they live in a mansion? If you notice at all, I suspect you may give it a fleeting thought for a few seconds, and then you move on to focus on what you are trying to accomplish.

No one is really paying much attention to our possessions. They are all too busy worrying about themselves. If we do have friends who make fun of us for not buying all the expensive toys they have, maybe we shouldn’t hang out with them so much. Many reckless spenders poke at frugal people because deep down they envy their stronger financial position. They put others down to elevate themselves and to justify their own wasteful splurges.

The Key to Earning Wealth: Manage Your Spending

I have been practicing financial planning long enough to realize that many, if not most, of the people who flaunt an aura of success actually have very little wealth and a lot of debt. Those who can see the truth behind the façade are not so envious of their glamorous image because they know that it comes at a hefty price, often in the form of high stress, depression, failed marriages, or poor health.

I also have observed that many of those who appear to be poor are actually the ones with all the money, no debt, and much less stress. They figured out a long time ago that they did not want to be like the Joneses at all.

The Difference Between Wealth and Owning Stuff

Many years ago I met a young couple who lived a very nice lifestyle spending more each month than they were making. They had a sizeable mountain of debt, no savings, and very little insurance. They said, “We just realized the other day that we have already accomplished all of our goals in life and we are not even thirty yet. We have the home of our dreams, a pool, a boat, and our dream cars. What do we do now?”

I was dumbfounded by their perspective and thought to myself, “How about starting to pay for it!” Unfortunately, within a year the husband was seriously injured so he was not able to work for a while, then his company let him go when the economy turned south. Needless to say, they lost everything—or at least that is what they would tell you. In reality, they did not really lose anything, except maybe their pride and their credit, because none of it was legitimately theirs to begin with. They were only living an illusion of wealth. They are the Joneses that we are all trying to keep up with.

How the Fear of Criticism Leads us to Make Poor Financial Decisions

The temptation to “keep up with the Joneses” may be the single biggest threat to our financial security, both now and in the future. It stems from one of the most common and powerful fears from which people suffer: the fear of criticism. If we can overcome the fear of criticism, we will be well on our way to overcoming this tendency. To borrow from the wisdom of Benjamin Franklin, “The eyes of other people are the eyes that ruin us. If all but myself were blind, I should want neither fine clothes, fine houses, nor fine furniture.”

When we live joyfully within our means without worrying about what other people have or what other people think of us, we break free from being slaves to our possessions and income. This freedom allows us to pursue meaningful work that we enjoy, where we can make the biggest possible difference for good in the world.

Advantages of Living Modestly

By living modestly, we also set a conservative standard for our children and grandchildren that may give them greater freedom to pursue their dreams. Otherwise, they might feel pressured to take a high-paying job that they hate, just to support an extravagant lifestyle they were raised to expect.

How many people are trying to keep up with us although we are totally unaware of it? By living well below our means, we may be granting permission to others to do the same by placing less pressure on them to keep up with us.

As we pursue the acquisition of money, let us always remember what it is really for so we will maintain proper balance in our lives and use it for the greatest possible good.

Adam Dawson, CFP® is a Principal at Capstone Capitaland the author of Timeless Principles of Financial Security.