Today, I’ve partnered with Shannon from The Heavy Purse and a fantastic group of bloggers to discuss getting serious about your finances. You can check out other posts on The Heavy Purse.

I know many people live in denial about their financial situations. This might mean knowing you need to earn more to maintain your lifestyle, yet still charging more to your credit cards each month. Or it could be buying things you can’t really afford, like a new car on credit, a house bigger than you need, or an expensive dress, hoping it will all work out somehow. Personally, I’ve never been an optimist when it comes to finances. I had to work my way through college, doing various odd jobs to pay rent, always worried something might go wrong, so I saved for emergencies.

As my financial situation improved, I realized I could always find a way to cover my basic expenses. I became comfortable. Things improved so much that I lost track of how much I was making. I had income from a day job, side jobs, freelancing, and selling stuff in storage. I also didn’t know how much I was spending. Although I wasn’t a big spender on unnecessary items, I thought my desires were reasonable and justified buying what I wanted since my needs were few. But if I wanted to plan for my future, the numbers were vague.

I realized I was going about it the wrong way. I was earning well but justifying every expense because I wanted it. “I work so hard, I deserve holidays four times a year.” “I shouldn’t think twice about buying that $500 gadget because there’s money in the bank, and it won’t affect my budget.” Just staying in the green every month doesn’t mean you’re handling your finances correctly.

You may be better off than those who live beyond their means, but reaching a big goal like financial independence requires more effort. You need to be realistic about your situation. Set a target amount you can comfortably live on for the rest of your life. Determine a safe withdrawal rate, usually under 4% per year, ensuring your investments will sustain you indefinitely.

For instance, if you want to live on $30,000 a year, you need a $750,000 nest egg. This translates to living on $2,500 a month, where every $85 you spend is pushing your financial independence back by one day. Suddenly, that fancy dinner, dress, or gadget needs to be reconsidered. You can choose to spend if you’re doing well, or you can choose to save and reach your goal sooner. Although a day might not seem like much, those days add up quickly, leading to a month or even a year of delay.

For me, getting financially real meant evaluating every expense and questioning if it was worth working another day. Would skipping a trip to Europe be worth a couple of months of freedom? If it meant staying with friends and family, probably. If it was just for sightseeing that I could do a few years later when financially independent, then probably not.

You may think you’re doing well, but only by crunching the numbers will you see if you’re just getting by or excelling. Every financial decision should be made thoughtfully, ensuring it aligns with your principles and goals. Otherwise, spur-of-the-moment decisions can delay your progress.

When did you get financially real?