Why Having a Short-Term Mindset Hurts Your Finances (2024)

This post is by our regular contributor, Erin.

Quick, put yourself in these scenarios and answer honestly: You see thatone thing you’ve been coveting for months, and it’s on sale. You didn’t budget for it, but it’s a steal. Do you buy it, or do you wait?

You’ve been tossing around the idea of buying a house within the next year or two, and you see an amazing property come up for sale in the location you’d love to move to. Do you call up a real estate agent and get the ball rolling, or do you stop and crunch the numbers?

Say you get a job offer with an amazing salary. Do you look at the other benefits provided, see how many hours you’ll have to work, or just accept it based on salary alone?

If you chose to take action immediately, you might have a short-term mindset when it comes to money.

While thinking too far into the future isn’t always beneficial to your situation, having a short-term mindset hurts your finances in more ways than you realize.

How Having a Short-Term Mindset Hurts You Financially

In all of those examples above, having your eyes on the immediate prize is going to leave your wallet hurting. Short-term thinking with your money almost always leaves you in a worse position than you were in before.

I’d go so far as to say one of the biggest reasons people end up in credit card debt is due to short-term thinking.

Well, I don’t have the actual cash right now, but I do have acredit card, so technically I can buy this and worry about it later!

That kind of thinking is never going to get you ahead. You need to strike a balance between considering your present and future needs to avoid buyer’s remorse.

Here are a couple of situations in which it pays to be more forward thinking about the state of your finances.

Buying a House

A lot of people contemplate becoming homeowners once they hit their mid-20s. It’s as though an internal switch goes on inside of them and they want to settle down.

I can’t relate to that (I enjoy my flexibility too much), but a lot of my friends have fallen into this line of thoughtjust because.

The classic American dream is having a nice, big house with a white picket fence and your family playing outside.

While it seems like more and more young adults are fighting this cliche, there are others who go into homeownership thinking it’s something they “have” to do when they “grow up.”

As a result, they don’t go into it with eyes wide open. They may start searching for a home without being super serious, perhaps at the suggestion of their parents or significant other, when they spotthe oneand want to put an offer on it without going through any of the calculations.

Buying a house without running the numbers could leave you house poor or even worse, underwater on your mortgage.

What’s the area like? What’s the condition of the house? What are the school districts like? Does the house leave you room to grow, or is it only good for your current needs?How stable is your job? Does your industry employ a lot of people in your area?

We could go a step further and say you’d be in a semi-serious predicament if you went with an adjustable-rate mortgage for the low interest rate, not realizing how much it would increaseby in five years.

There’s far too much to consider when buying a house for it to be a snap decision. Do yourself a favor and go into it with a clear plan and understanding of the responsibility you’re taking on.

Taking a Job For the Salary

This is one I’m sure almost all of us have been guilty of at one point or another in our lives – especially when we graduated from college.

We want to earn a decent living, and after earning (most likely) less than $15,000 during college, we have our eyes on a new benchmark.

So when we’re offered a job that pays $35,000, $50,000, or maybe even $75,000, we’re over the moon. We don’t even pause to think, we just accept. Something is better than nothing, right?

I learned that lesson the hard way after my first job. It was salaried, but I stayed late to finish projects constantly. The job description wasn’t accurate, and I ended up doing something completely different that I wasn’t happy with.

It absolutely pays to ask questions and review the benefits offered before you accept. There’s much more to a job than just the paycheck you’re taking home. Insurance could be a huge concern, or maybe you just want a job that offers flexible time off.

Either way, think about more than just salary when it comes to your career choices.

Not Reinvesting Your Money

It can be incredibly hard to part with your money, especially if you’re a small business owner. You’ve invested so much time and energy (not to mention money) into your business, and you’re finally starting to see a return.

It doesn’t come as a surprise that you would want to keep the money to yourself after bootstrapping your business. You’ve been living on a bare-bones budget for months and there’s finally a glimmer of hope.

While you need to make ends meet, don’t be so afraid you don’t reinvest any money back into your business. I’ve been there, and each time I’ve (thoughtfully!) reinvested in my business, it has paid off.

Your company shouldn’t remain stagnant, and neither should you. Your business needs to grow, and that usually means making a sacrifice or two along the way.

Avoiding Grad School

Anyone who has looked into attending graduate school knows it’s a costly investment in their future. Some shy away simply because of the price tag.

I did this – after graduating college and realizing how much student loan debt I had, the last thing I wanted to do was spend more on tuition.

However, I also researched the programs available and realized I didn’t want the career path getting a master’sdegree would have provided.

Most people don’t take that second step. You need to consider the return on investment you would get by obtaining a master’sdegree.

Would your job prospects go up? Would you be able to command a higher salary? Could you receive a promotion at your current place of employment?

Don’t let price be the driving factor behind your decisions. Be wise about your spending, of course, but don’t be short-sighted when it comes to investing in yourself and your earning capacity as you may be losing out on money.

Giving Into Instant Gratification

This is the ultimate form of thinking only in the short-term. Not thinking past the current moment of what you want can cause a whole host of problems: debt, things going to waste and clutter gathering in your home, generally feeling unhappy because you have a few money leaks you need to plug, and the list goes on.

Instant gratification is temporary. It feels good in the moment, but we forget about it soon after. Wouldn’t building a lasting financial foundation be better for yourself and your future?

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Don’t make the mistake of making snap decisions when it comes to managing your money. Always think of the repercussions. There’s always a ripple effect whenever you choose to take action. Figure out what those effects will be and how they’ll impact your bottom line before making a decision.

Has there been a time in yourlife when you had a short-term mindset with your finances? Did you realize it beforehand, or did it take a while to figure out? What other situations can you think of that exemplifies short-term thinking with money?