We all wish that we could live in a perfect world—a world where we could determine exactly how our stories are written. I’m sure it’d be one of bliss and happiness.

Although living a fantasy life may sound fun, it can do more harm than good—especially when it comes to your finances.

It’s important to take a realistic look at your finances if you want to be successful with money. If you find yourself thinking, “I am broke”, and struggling to get a grasp on your financial situation, even while overspending, you may be living a fantasy when it comes to your finances.

What living a fantasy life means

Living a fantasy life means that you disregard what’s actually happening in reality. Though it sounds great to take a break from the real world and live in perfect bliss, it’s not realistic.

Living in a fantasy world is great for things like fantasy football—where you get to pick the perfect team of star players for an inconsequential wager. It’s also fine if you’re in the middle of a good book or movie and want to ignore the outside world for an hour or two. But for the rest of the time, it’s not good to live this way.

In real life, it causes you to make poor financial decisions with no regard to the real-life consequences. You begin to believe in unrealistic results and are often left in a worse position than before.

We’ve all had moments where we’ve imagined our fantasy selves in perfect scenarios, and everything just worked out. But that’s not reality. Every decision we make has consequences, especially with our finances.

6 Ways you’re living a fantasy life when it comes to your finances

When it comes to your money, the last thing you want to do is live in a fantasy world. Maybe you are fantasizing about your finances and just don’t know it. Here are some ways that you might be living in a fantasy world with your money.

1. Believing your debt will be miraculously forgiven

Though loan forgiveness does exist, it’s the exception, not the rule. In particular, only about 1% of those who apply for Public Service Loan Forgiveness actually get approved.

With these statistics, believing that you shouldn’t pay off your debt is definitely more of a daydream than a reality. You must have a plan to pay back what you owe.

Unfortunately, lenders don’t just sweep your debt under the rug and allow it to be forgotten. There are consequences to avoiding your financial obligations. Failure to pay your debt in hopes that it’ll be forgiven will negatively impact your credit score and may leave you wondering, “Why did my credit score drop?”.

It can cause issues if you need to find a new job, buy or rent a home, or access future financial capital. Facing your debt can seem overwhelming, so just take it one step at a time. In fact, you can leverage these tips for a debt reduction strategy.

2. Spending on credit without a plan

Using credit cards can have some advantages if you know how to use credit cards wisely and with discipline.

However, you’re living a fantasy life if you make a habit of spending without a plan. In this case, you may think you’ll pay your credit card bill off at the end of each month, even though you have no idea how you’ll pay the bill.

If you’re going to use credit, you should have a plan on how you’ll pay it back. Otherwise, your debt will accumulate exponentially due to interest. With average credit card interest rates as high as 26%, depending on your credit score, your debt can accumulate quickly!

Instead of spending without regard to your ability to pay it back, only spend what you can afford by living below your means. Limit your credit spending to what you actually have in cash to pay back so that you aren’t getting into debt.

3. Saying you’ll save money but living paycheck to paycheck

It’s always great to have a goal to save money. After all, you want to be prepared by having an emergency fund and cash on hand for large purchases. But saying that you’re going to save money without a plan to actually do it is living a fantasy life.

Here are a few questions that you need to ask yourself when creating a savings plan:

What are you saving for? Where will you keep your money? Also, ask yourself, “How much should I save each month?”

This is the start of creating a plan for saving money. Once you have a plan in place, you need to execute it. Open those savings accounts that you’ve included in your plan.

Then, automatically transfer money into your accounts so that you don’t have to think about it. That’s how you turn your savings goals into reality.

4. Saying you’re “on a budget” but never making one

Saying you’re on a budget but not actually having one is another financial fantasy that you may be living. A budget helps you proactively plan your money.

So without having a plan, you’re not actually budgeting.

If you’re on a budget, you’ll actually need to have a written out plan for how you’re going to allocate your money. You can use some of the best budget templates to do this.

Remember, a budget doesn’t mean that you don’t spend money. It means that you have a plan for where it will go.

Not sure how to budget? You can use this example of a budget to get started.

5. Wanting to build wealth but not investing

For most people, the ultimate financial goal is to build wealth. Not just wealth that you can enjoy now but generational wealth for your future family. Though you can become wealthy without investing, you limit your ability to exponentially grow that wealth when you don’t invest.

Investing is the vehicle for wealth accumulation. It allows your money to work for you. This means that you can earn money passively and not have to trade your time for income.

There are many ways that you can invest, including investing in securities or real estate investing.

Even if you don’t have a lot of money, you can learn how to start investing. Start small and build your investment portfolio as you go. You can learn more about investing in our book, Clever Girl Finance: Learn How Investing Works, Grow Your Money.

6. Believing that marrying rich or winning the lottery is your ticket to financial freedom

Although we’d all love to win the lottery or marry rich, it’s not quite a realistic financial plan. In fact, you’re much more likely to get struck by lightning than your chances of winning the lottery.

Instead of spending all of your time swiping left or scratching to find your financial savior, do the work to create your own financial freedom. That includes learning the best way to get out of debt, investing, and becoming a better steward of your money overall. Don’t let your fantasy self decide your financial situation.

Expert tip

Whenever you find yourself avoiding thinking about your finances or believing things about your money that are likely not true, you are probably living a fantasy life financially. When this happens, it’s important to evaluate your situation honestly and find ways to improve it instead of continuing to ignore it.

How to stop living a fantasy life with your finances

Living a financial fantasy can lead to frustration when reality doesn’t match your expectations. Now that you know the signs of living a fantasy life with your money, you can take steps to change how you view your finances.

Be honest with yourself about debt and your budget

Take a look at how much debt you owe on credit cards and loans, as well as any budgets you’ve created. Are you paying off debt? Are you sticking to your budget?

If you answer no, it’s time to figure out how to do things differently. Consider the steps you can take in your daily life to follow your budget. Make it realistic, pay your bills on time, and give yourself some fun money, too.

As for debt, once you know what you owe, start paying it off by paying more than the minimum amount necessary. There are a few different plans for debt payoff, like the avalanche method and the debt snowball worksheet method. Choose the one that’s best for you.

Create some goals and a plan

If you’ve been living a financial fantasy, chances are, you already know what you want to achieve with money, you just haven’t made a plan to get there.

Take the time to consider how money might create a better life for you. Then make a few goals that you can stick to, like building an emergency fund or debt payoff.

Finally, make a plan that helps you to make your financial goals happen. For example, setting aside $200 extra a month for savings. Use creativity to make goals and a plan that you’re excited about.

Be consistent in your decisions

Now that you’ve decided not to live in an imaginary world with your money, it’s important to follow through consistently with your plans. Ask yourself each day what needs to be done to make progress, and consider these 5 ways to achieve your goals.

Though it may feel tedious sometimes, reminding yourself of the reason why you’re budgeting, saving money, or working extra hours, is sure to help you keep a good perspective.

Notice if you start living in a fantasy world with money again

If, at any point in your financial journey, you find that you’ve slipped out of the present moment and back towards a financial fantasy, remind yourself of your goals.

It’s important to acknowledge what’s true about your money. Perhaps your fantasy self would like to think that debt is no big deal. But you can remind yourself that your debt won’t go away if you ignore it.

You can also start changing your perception of money. For instance, even if you have debt, remind yourself that if you stick to your plan, you’ll pay it off soon. That’s an optimistic way to think but also a realistic one.

Can you become smarter with money?

Yes, you can absolutely increase your financial literacy and learn how to handle money well. Start reading books about money mindset, gathering information, and applying it to your finances.

How do you get your finances under control?

If you feel like your finances aren’t where you want them to be, you can learn to make better decisions. Start with a budget, begin to save money, and make plans about investing and debt payoff.

What’s the best way to avoid living a fantasy life with money?

A smart way to avoid this is to understand what you wish was true about your money and what is actually true. Then you can make goals to improve your finances based on your actual savings, budget, and debt.

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Create a better financial reality instead of living a fantasy life

As you can see, living in a fantasy world with your money may be an easier trap to fall into than you probably thought. Perhaps you’ve even done some of the aforementioned. But now that you know the harm it can cause to your finances, it’s not too late to make a change.

It may be difficult to stop living a fantasy life with money. Maybe you even feel shame or depression about your money situation. But there is hope for your finances!

The best way to make sure you’re handling your finances in a realistic way is to create a plan and adopt systems.

This includes creating your own financial planning process, using a budget, and even learning how to automate your finances. Make it a priority to continue educating yourself about best money practices with our completely free courses and worksheets!