Why you shouldn’t over-optimize your finances
Photo by William Warby on Unsplash
Last time, we focused on what to do if you’ve been ignoring your finances. Today, let’s address the opposite end of the spectrum, which is over-optimizing your finances.
Now you may already be asking yourself, “Is it really possible to over-optimize my finances and, if so, what’s the harm in that?”
Great question. Here’s my answer:
Over–optimizing your finances can prevent you from living your best life.
And much like Robin Williams said to Matt Damon in Good Will Hunting, it helps to start by remembering:
“It’s not your fault.”
Over-optimizing your finances is often an ingrained behavior based on how you grew up or a response to a financial situation that you previously experienced. Whatever the reason, you have probably paid A LOT of attention to your finances and that’s put you in pretty good overall financial shape. But here’s the rub…
The financial optimization you used to get yourself to this point can also prevent you from living your best life if left unchecked.
Here are some examples of what I mean by unchecked financial optimization:
Adding a third or fourth bank account to take advantage of a slightly better but not financially meaningful interest rate on your cash cushion.
Using multiple investments that require you to rebalance just to save a couple of basis points when one investment could accomplish the same thing.
Tracking your cell phone data usage so you can stick with a “by the gig” plan instead of coughing up the whopping $30 a month to go to the unlimited plan.
Now I’m not suggesting that these behaviors aren’t financially beneficial. Rather, I’m suggesting you need to ask yourself…
Are these optimizations really moving my financial needle anymore?
The good habits that allowed you to build financial well-being aren’t the same ones that will allow you to enjoy that well-being once you have the financial means.
That’s why it might be time to shift from your current “maximization” mindset to more of a “maintain and enjoy” mindset.
Adopting the “maintain and enjoy” mindset is often the first step in letting yourself off the optimization hook. When a financial action is not going to move the financial needle in a meaningful way anymore, that’s time better spent doing something you enjoy with the people you care about the most.
So while over-optimizing your finances might be the very definition of a first world problem, make no mistake that it can get in the way of you living your best life. And after all, isn’t that what your financial optimization was meant to enable in the first place?