Everyone knows a perfectionist. They’re that friend who obsesses about succeeding in everything they do, fears making even the smallest mistakes, and berates himself at the first sign of failure.
American culture tends to reward those who relentlessly pursue high standards, and many perfectionists even claim the anxiety that motivates them to get things done is helpful. However, numerous studies support the opposite: perfectionism can be an extremely harmful personality trait that can lead to anxiety, depression, or self-harm.
Trying to maintain your finances perfectly comes at a price, too. If you’re demonstrating any of the following traits of financial perfectionism, you could be harming your financial future.
You’re waiting to focus on your finances until you’ve learned everything there is to know about money first
Financial perfectionists fear making mistakes with their money. They may put off investing, for example, until they feel they can do it perfectly and with consistent success.
“Fear of making the wrong decisions is a powerful thing and oftentimes keeps people from making decisions at all,” says Overland Park, Kan.-based certified financial planner Patrick Amey.
Time is money. If you’re waiting to know everything about money to start working on your finances, you might waste valuable time and miss out on potential income from investment. In the worst-case scenario, you could never start building wealth because you don’t make the time to educate yourself on financial matters.
For example, there is no perfect time to enter the market. As Knoxville, Tenn.-based certified financial planner Rose Swanger puts it, “we all experience the perfect hindsight effect.” Swanger says she often hears people speak of the returns they would have reaped if they had invested during the financial crisis. In reality, she adds, no one could have predicted how long or how well the market would recover.
The key is to start investing now and stick with it for the long term. Rather than obsessively tracking stocks and trying to pick the best investments, Swanger encourages her clients to practice systematic investing. They invest an equal amount of money every week or month (for example, automatically contributing 10% of their paycheck to their retirement fund).
They key to investing isn’t to be perfect — it’s to start as early as possible. Case in point: according to JP Morgan’s 2017 Guide to Retirement, a person who invests $5,000 a year starting at age 22 would have more than $820,000 saved by the time they are 65 years old. If they had waited until age 35 and invested the same amount, they would have saved only half as much, $419,000.
The market will have its ups and downs. Don’t let that deter you from investing because you think it reflects poorly on your ability. Nobody can predict the market, not even the professionals paid to try. Aim to keep your investments diversified with broad exposure to the market (like you would get with a target-date fund) and try not to get spooked if the market starts to look shaky.
It can be as easy as enrolling in your employer’s retirement plan if you have access to one. If not, you can set up an investment account with most banks or a mutual fund company like Fidelity or Vanguard.
You give up on your budget too easily
Budgets are especially susceptible to a perfectionist’s all-or-nothing approach to situations. For example, you could be following your budget religiously for weeks, then you receive one unexpected bill that skews your spending for the month. Rather than make adjustments to your budget to accommodate the unexpected, you might give up on the entire plan until you can get it just right.
“I’ve seen budgets for groceries down to the penny. While I appreciate this hard work, it is very rare that the exact same amount can be spent on groceries each month, and determining the right amount can be painstaking,” Amey says.
Amey advises creating a cash flow system that allows for flexibility so you won’t feel as guilty when you can’t follow your budget down to the last penny. Random expenses are a fact of life, but they are difficult to predict. Leave room in your budget for wedding gifts, birthdays, or even emergencies, so they won’t throw you off and leave you feeling discouraged at the end of the month.
If your budget doesn’t work out, don’t beat yourself up for it. Forgive yourself and try to adjust accordingly.
You’re desperate to achieve the “perfect” credit score
While it’s nice to brag about maxing out your credit score, having a perfect 850 is not only almost impossible, it’s also completely unnecessary.
No lender requires you to have an 850 to get approved or be offered the best terms. According to Informa Research, which tracks interest rates by credit scores, the ideal FICO credit score for the best credit offers is 760, not 850. In fact, you’ll still have a good shot at getting approved for the best deals with a credit score 90 to 130 points off the maximum.
So, if you already have a score in the mid-700s, your efforts to increase your score could be pointless. If you’re not quite at a 760 yet, try these strategies to help build your score.
Depriving yourself of simple pleasures can lead to “binging”
Much like the dieter who finally snaps from starvation and eats a tub of ice cream, trying to adhere to an inflexible budget could make you more prone to sudden “binge” attacks.
After months of depriving yourself of small creature comforts like a daily coffee or a cab ride home after a long night, you might decide to reward yourself with a night out. And because it’s been so long since you’ve enjoyed spending money, you might go overboard, ordering way more than you might on a normal day, offering to pay for your friends’ tabs, etc. And once you’ve blown your budget, you might consider it a total loss and toss it out the window altogether.
If that sounds like you, it’s a sign you might be too hard on yourself. When you deprive yourself to follow an extremely strict budget you’re depleting your self-control.
If this happens to you, try to modify your budget and focus your mind on your overarching goal of financial freedom instead of financial perfection.
Whatever you do, Melville, N.Y.- based certified financial planner David Frisch says to try not to get frustrated with the short-term deviations, or mistakes, and keep the long-term goals in mind. He adds to remember in these situations that no one is perfect, and so expecting to handle your finances perfectly can’t be realistic either.