Don’t Take Financial Advice From Pop Music

February 27, 2015

I was out with friends recently and a new song from Pitbull and NeYo started playing. The song created a rush to the dance floor and given that when I dance, people think I’m either having a seizure or in some sort of pain, I opted to grab beverages for our group instead of risking injury (mostly to others) on the dance floor. As I was waiting for the drinks to be poured, I started listening to the lyrics of the song.

In Time Of Our Lives, the lyrics talk about not being able to pay rent but being able to go out to the club, order shots, party it up and have the time of our lives. As I was hearing this and seeing my friends dance and sing along with the song, all I could think was “This song is promoting fiscal irresponsibility!!!” I shared that sentiment with my friends who told me to think less and dance more or…at least think less!

But me being me, I couldn’t just let the thought pass. The song clearly talks about KNOWING that what you’re doing is probably not the most responsible course of action, but taking that course of action anyway. It’s making a bad decision with the full knowledge that it’s a bad decision.

Everyone at our table had experience with making “iffy” choices while knowing they were making that choice. (I asked each person if they had ever done that.) If I have to be honest, I’ve done that in my life as well. So how can we translate that into a way to make better financial decisions?

That’s when this article from Entrepreneur magazine flashed through my brain. It’s a great article about the science of decision making with some very interesting findings. I highly recommend reading the whole article. Here are some of the quick takeaways that can easily translate into our financial lives.

Plan tomorrow’s day before you go to bed tonight. If you have a sketch of your day, you are far less likely to be distracted and find yourself going out to a pricey dinner because you weren’t thinking about what you could cook when you get home. Simple things like what you’re going to wear, will you hit the gym before or after work, what’s for breakfast, etc. can take minor decisions out of the next day and give you more mental energy the following day since you will be making fewer small decisions. There’s a concept called “decision fatigue” that makes sense. We wear down a little bit after each decision so making fewer decisions during the day keeps you fresher mentally. Financially, this could help you avoid impulse purchases and allow you to make more of your spending “planned spending” so that you maintain better alignment with your budget.

Do the most important thing first. How often has your day spiraled out of control and when you are just about to shut down your computer for the day, you look at your “to do list” and realize that you didn’t check off a single item you had planned to do? For me, sadly, that used to be a relatively common scenario. Pick one task that is important and get it done very early in your day, maybe even before you “officially” start your day. If you get the most important thing done, you set a pattern of accomplishment and create a positive momentum that can carry you throughout the day. Translating this to your financial life, make sure you pay the important bills first (like the rent, Pitbull…) before spending on less important items. Pay the critical bills, set aside money for retirement and emergencies, etc. before having the time of your life. It may allow you to have the time of your life until you’re 110 years old rather than living on just Social Security during your retirement.

Make commitments, not mini decisions. Saying “I’m going to work out more” is a great decision. Putting time to exercise in your calendar is a commitment. The more things you can make commitments and put into your calendar (my iPhone has my work, personal, kids’ and a few other calendars all merged together so I can carve out blocks of time for what’s important), the more likely you are to achieve success. Carve out time to review your budget. Carve out time to look at your 401k and run retirement projections. When you stop making small decisions, you minimize your decision fatigue. Convert decisions to commitments in your financial life and you will see progress rather than hopes of progress.

Simplify things. This is a huge thing that saves time, saves energy and allows you to stay mentally refreshed and avoid the fatigue that clouds decision making. I recently unsubscribed from a huge number of newsletters. I was getting more emails on a daily basis than I could process. So I would either delete everything and not read the newsletter or I’d try to read as much as I could, which took hours. I unsubscribed to all of them and now my inbox is uncluttered and I can start over with only those that I found super helpful. Streamlining my inbox has made my life better. You can automate/simplify your financial life too. You can automate your savings. Sign up for your company’s contribution rate escalator feature in the 401k. Pay the big things (mortgage, car, student loan, etc) with an automated debit. Create a simple financial life and you are on your way to creating a successful financial life.

With a quick re-thinking of how you make decisions on a daily basis, you can prevent yourself from making the same kind of poor choices that Pitbull and NeYo (two guys who probably have multimillion dollar recording contracts and fly on private jets so are they really in touch with not being able to pay the rent?) sing about. When you hear that song, go out and dance! But make sure you have the bills paid before hitting the dance floor.