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Ending Financial Self-Sabotage

financial self-sabotage

❝Our brains haven't received an operating system update in 150,000 years.❞ -Ted Klontz

I stroll out of bed on January 1st, 2001, after a late night at a New Year's Eve party. I'm slightly hungover, but I'm excited because it's now the first of the year. The start of every new year is when I start to anxiously await my W2 from work. As soon as I get my W2, I can file my taxes. I've heard that many people seem to dislike filing taxes, and I can't understand it. Filing taxes, to me, means that a large check is coming. Every year it's the same. I fill out my tax form, send it in, and wait for my refund check.

As soon as my check arrives, I start thinking about ways to spend my newfound windfall. This isn't actually true; I start thinking about ways I can spend this money long before my check arrives. I love getting a big fat chunk of money all at one time. In previous years, I've used this to buy stereo equipment for my apartment, car stereo equipment, furniture for my apartment, and weekend getaways. Arguably, most of the purchases I use my tax refund on are things that are outside of my means. Somebody working as a part-time fry cook doesn't necessarily need to have thousands of dollars worth of home theater equipment in an apartment. This year, I have my heart set on a new computer. There are these things called laptop computers that are pretty expensive, but they've come down in price a little bit in recent years.

A short time later, I'm required to get an internship for my drafting program at technical school. I live in Moorhead, Minnesota, and I find a job in Moorhead's sister city across the river of Fargo, North Dakota. It's at a small ten-person company whose employees are all North Dakota residents. They aren't equipped to work with a Minnesota guy. My limited understanding of the matter is that I shouldn't be paying North Dakota taxes, therefore no North Dakota taxes should be coming out of my check. Instead, I should be paying into Minnesota. Because they don't know how to deal with me, I end up in some kind of loophole. Except for Social Security and Medicare, my checks don't have any taxes taken out of them. This is a fascinating opportunity for me, I think. Instead of lending my money to the government for no interest, only to get it back after I file my taxes, I can save this money, earn interest, and then pay my bill when it comes due and pocket the interest.

Except it doesn't end up working that way. I do a good job of saving what should be my withholdings for a couple of months, but it doesn't take long before the entire check gets absorbed by my day-to-day spending. Come tax time, I have a gigantic tax bill that I don't have any money to pay for.

It didn't matter whether or not taxes were taken out of my check. If taxes were taken out of my check, I wasted my money after getting a tax refund. If taxes weren't taken out of my check, I spent the money I wouldn't otherwise have, thereby wasting it. In both cases, I chose temporary satisfaction over my long-term wellbeing. In both cases, I financially sabotaged myself.

seeking temporary satisfaction instead of long-term wellbeing


Given a choice, most of us will choose immediate, temporary satisfaction at the expense of our long-term wellbeing. It's very easy for us to focus on how it will feel if we spend money now. Many of us believe that spending money will bring us some sort of joy or happiness, and we prefer this now rather than later.

If you could go back 10 years and talk to yourself back then, what would you tell yourself? Do you feel as though you did things 10 years ago that could be considered sabotaging yourself today?

By that same reasoning, are there any things you are doing today that jeopardize yourself 10 years from now? Placing too much emphasis on the present with our money is effectively stealing from our future selves.

many people rob their future selves


This is not to say that we do this on purpose. The conscious part of our brain is relatively new in the grand scheme of things. Our subconscious brain is much more primitive and a lot older. You can think of the conscious and subconscious brains as a rider on top of an elephant. The rider represents our conscious brain. The elephant, on the other hand, represents the subconscious part of our brain. The elephant wants to survive and meet our basic needs. The rider may have other objectives, but the elephant is ultimately in control. In times of low stress, it can feel as though the rider has control of the elephant. In stressful situations, when the elephant is afraid or nervous, then the rider has no control over the elephant.

Technological progress has accelerated exponentially over the last several decades. We now have supercomputers in our pockets and movie theaters in our homes. Those developments are only a dozen years old. We have computers, televisions, radios, airplanes, and automobiles that have been developed in the last 100 or so years. Our brains have not been able to keep up with this progress. So, while the rider is busy checking social media, the elephant is trying to survive, completely unaware of what social media is. Remembering that the elephant is in control and focused on survival, it makes sense why we gravitate towards immediate gratification over future planning. Our caveman ancestors did not have to worry about planning for anything three decades from now - and it's their brains that we inherited.

elephant and rider drawing


We are bad at predicting how we will feel in the future. There's an old saying in the world of personal finance that says a bird in the hand is worth two in the bush. This is a statement about the time value of money, which ties together money, time, and interest rates. The basic idea is that we would prefer to have money now than in the future. To the extent we have to wait until the future for our money, we should earn interest to compensate us. To relate this to the bird analogy, we would prefer to have one bird in our hand rather than two birds in some bush somewhere.

The way most people operate, however, is that we misjudge this paradigm. We don't want two birds in the bush, or even three. We want our bird now. No matter how much money we would get in the future, we prefer to have it now.

We have to consciously invoke thoughts of the future in order to overcome this.

bird in hand versus many in bush


The antidote, then, is to understand what money needs to do for you, both now and in the future. And by you, I mean all versions of you; present you and every future version of you. Once you know what money's purpose is in your life is, you can begin to consciously ask yourself, before you make spending decisions, whether or not you are about to partake in an action that is consistent with money's purpose in your life.

Running your financial decisions through the filter of your financial purpose helps you make more intentional financial decisions. It helps guide you away from impulsivity and towards intentionality.

follow your purpose


Another clever way to bypass our tendency to put too much emphasis on the present is to connect to Future You. In the same way that it would be helpful for you to go talk to past versions of you, you can tap into the same process by "talking" to Future You.

I actually mean this. Spent 30 minutes a few times a year and have conversations with Future You. For the first 10 minutes, have a conversation with you from next year. For the next 10 minutes, have a conversation with you from five years from now. And for the last 10 minutes, have a conversation with you from 10 years from now. In all cases, simply ask Future You what you can be doing right now to make their life better.

account for both present you and future you

It's far too easy for us to place too much emphasis on the present. Doing so sabotages our future selves. In many ways, this is not our fault; it's how we are programmed. We can, however, overcome the genetic predisposition towards ignoring our future selves.

You only have one life; live intentionally.

With gratitude,


If you know someone else who would benefit from reading this, please share it with them. Spread the word, if you think there's a word to spread.

Related Money Health® Reading
References and Influences

Ariely, Dan & Jeff Kreisler: Dollars and Sense

Clear, James: Atomic Habits

Kahneman: Daniel: Thinking Fast and Slow

Klontz, Brad, Edward Horwitz & Ted Klontz: Money Mammoth

Klontz, Brad & Ted Klontz: Mind Over Money

Newcomb, Sarah: Loaded

Note: Above is a list of references that I intentionally looked at while writing this post. It is not meant to be a definitive list of everything that influenced by thinking and writing. It's very likely that I left something out. If you notice something that you think I left out, please let me know; I will be happy to update the list.



About the Author

Derek Hagen, CFA, CFP, FBS, CFT-I, CIPM is a speaker, writer, and coach specializing in financial psychology, meaning and valued living, resilience, and mindfulness.


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