Managing Money
Jul. 17th, 2009 01:41 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
ailbheSome people are good at it, some people are ok as long as there's plenty of money, and some people are dreadful at it. I have never really worked out what makes people so. I know people from poor backgrounds and wealthy backgrounds in all categories, as well as people from varying degrees of comfortable backgrounds.
Some people seem to learn to manage money by living in fear of poverty (raises hand) and some people seem to learn by good example (raises hand) and some people seem to learn by being involved in the financial planning and management of their families as they grow up (like good example but more hands-on) (raises hand again) and most people probably have some combination of all three going on.
But the part I can't work out is what makes people who know what bad management does, up to a point (a point between stress and hunger, say) nonetheless continue to manage badly. What do Groups A, B and C learn which group D can't seem to? Let's not assume that group D are delusional, or want to rely on other people in their lives to pick up the pieces - let's assume that their desire and intention is to be able to spend only 252 pence in the guinea and not forever hanker after the half-a-crown that isn't there.
Some people seem to learn to manage money by living in fear of poverty (raises hand) and some people seem to learn by good example (raises hand) and some people seem to learn by being involved in the financial planning and management of their families as they grow up (like good example but more hands-on) (raises hand again) and most people probably have some combination of all three going on.
But the part I can't work out is what makes people who know what bad management does, up to a point (a point between stress and hunger, say) nonetheless continue to manage badly. What do Groups A, B and C learn which group D can't seem to? Let's not assume that group D are delusional, or want to rely on other people in their lives to pick up the pieces - let's assume that their desire and intention is to be able to spend only 252 pence in the guinea and not forever hanker after the half-a-crown that isn't there.
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(no subject)
Date: 2009-07-17 07:39 pm (UTC)If I got it wrong before, I would go hungry. Now, if I get it wrong, it just means I dip into my 'reserve' (not an overdraft, a cushion of money) and have to be less daft to build the reserve back up. I don't overspend, but I don't save much either. The sharp, hungry urgency and threat of brown-rice-or-potatoes just isn't there.
Weirdly, it would cost me less to eat out every night than it does to buy food to cook at home. I *love* my fresh veg and fresh meat and fresh fish all local-bought and fair-trade-where-possible, but it costs.
(no subject)
Date: 2009-07-17 09:48 pm (UTC)(no subject)
Date: 2009-07-18 01:26 pm (UTC)(no subject)
Date: 2009-07-18 08:18 pm (UTC)The basic assumption is that no-one I'm talking about *wants* to be so bad at money that other people bail them out all the time or they get evicted and end up hungry, and that some people are relatively effortlessly quite good at it. I'm aware that there *are* people who are either delusional (don't think real life rules about money apply to them at all) or genuinely happy to have other people dig them out of financial holes of their own making, and I'm not interested in that group, because I've lived with them and life is too short to think about them.
Someone elsewhere made the comment that money and emotions are very linked and I think a hell of a lot of it boils down to that.
(no subject)
Date: 2009-07-17 12:49 pm (UTC)The needs being met by spending the money that doesn't exist, are more overwhelming than the other needs.
(no subject)
Date: 2009-07-17 12:53 pm (UTC)An extension of this is knowing that you get paid some and spend some and shouldn't spend money you haven't got, but being too scared of feeling like you've failed to open some envelopes and read the contents, and not coming to terms with the idea that there's going to be a problem if you don't look sometime soon. I guess that's like somebody who drops the milk, knows they should mop it up but doesn't want to because cleaning dirty things is icky and puts some mental block in front of the idea that if the milk stays there bacteria, fungi and eventually mice will move in and clean it up for you because mice are also icky and oh look an obvious distraction like buying a shiny new car has conveniently become more important.
(no subject)
Date: 2009-07-17 01:00 pm (UTC)I can just about understand that idea, but I think for me I've managed to make the anxiety of not knowing where I stand outweigh much temporary pleasure in impulse purchases. I am surprised by how few of my friends, especially at uni when we talked about money more, didn't track their outgoings e.g. cheques noted once they were written not once they were cashed.
Tony prefers not to have to worry about money, and luckily I am usually able to arrange things so that he doesn't have to.
(no subject)
Date: 2009-07-17 01:11 pm (UTC)My main problem is not wanting to look when I'm very ill, so getting accidentally overdrawn for doing my sums wrong by a couple of pounds.
(no subject)
Date: 2009-07-17 01:35 pm (UTC)(no subject)
Date: 2009-07-17 02:19 pm (UTC)yes; this.
i am quite solidly in group d. i do not much like it here, but i can't figure out how to get out. i mean, yes, yes, write a budget, stick to it. how, precisely, do i write a budget? which things are required and which things are optional and i know i have cable and tivo and those look optional but i never go out to movies (seriously, one so far this year) and i mostly get books from the library and i live alone and shouldn't i get something fun? then, insert the hyperventilation and having to put all matters related to thinking about money away. also, don't even talk to me about whether or not dog related expenses other than food are optional or required.
i very much want someone to just come along, take all my numbers for everything, and make me a budget. so far, hasn't happened.
(no subject)
Date: 2009-07-17 02:24 pm (UTC)As for "how to budget" you might find this useful:
http://www.moneysavingexpert.com/banking/Budget-planning
(no subject)
Date: 2009-07-17 02:50 pm (UTC)Level 1: rent, usual cost of food, utilities, expected vet bills, some movement of money into a savings account that holds enough for a large emergency vet bill, because helping a sick animal is more important than TV.
Level 2: things that aren't required for life but you'd be hard pressed to live without, like cable or seeing friends; other things that regularly come out of your bank account and it is non-trivial to stop, like charity donations.
Then you add up the things in level 1 and 2 per month or week, whichever period of time includes one cycle of whatever incomes you have. Then you take away that total from the amount of money you will get in that period of time. That's how much spare money you have.
Then everything else comes out of the spare money. If you have a negative amount of spare money, take things out of level 2 in the short term and make a plan for how to change things in the long term so that the list of things you can afford to have, includes the list of things you think you should have - preferably not by borrowing a big pile of money that you have to pay back later with masses of added interest.
The key is to put the "but don't I deserve X" thoughts aside and do the sums to find out what you can afford. Then when you have done the sums, you can hand control back to the part of you that decides what you should have, so it can make informed decisions. The world will not arrange itself so that you have enough money to get the things you think you should get; that's your responsibility. Like the kitchen analogy: you deserve chocolate cake, but you are the person who has to make the cake and clean the kitchen.
(no subject)
Date: 2009-07-17 03:21 pm (UTC)I grew up in a family that was poor and didn't manage money well. It's taken me most of my adult life to realize that those two things were not the same.
To me, the good example thing is most important. Some people may grow up in financially crazy households and end up managing their own finances responsibly, but that achievement shouldn't be underestimated.
Personality also plays a role, obviously. Warm-hearted, impulsive, messy, disorganized people have their charms, but good budgeting isn't one of them.
And national culture plays a role. In the US, you're inundated with credit card offers, and living with massive credit card debt has virtually become the norm for a lot of people. Once you've accumulated a certain amount of debt, you start digging yourself in deeper and deeper, and it's awfully hard to get out. Banks don't make it any easier, either, with enormous fees that target the people who are already living on the edge.
Oh dear, this is becoming a rant... I could write a book on the topic.
(no subject)
Date: 2009-07-17 03:25 pm (UTC)Why not? Often they are.
My mother falls firmly into group D, with the result that at 67 she has no job, minimal income (Social Security and a portion of her ex-husband's pension), no savings, quite a lot of debt, and no home of her own (she's living with her gentleman friend, and we are all very glad that he's willing to let her stay there).
She was raised by very well-off parents who met during the Depression and fought their way up the income ladder. They wanted her to never need to worry about money. So... she didn't. Despite aggressive attempts at reality checks from me, my brother, and her brother, despite knowing that getting divorced meant losing her financial safety net, she continued to keep herself in the style to which they had accustomed her, right until she'd blown through hundreds of thousands of dollars* in under ten years and was suddenly unable to pay the usurious rent on her three-bedroom two-kitchen middle-of-posh-neighborhood apartment.
* From the sale of my childhood home, post-divorce, so she could move into someplace a bit smaller and more suited to an older woman living alone. We all supported the theory. The practice was suboptimal.
She's currently compensating by trying to sell an anthology of essays on loss. Her essay is about "How I became my own Bernie Madoff". And yet... I still don't see her actually changing. If she got $500,000 from the money fairies tomorrow, in another ten years she'd be right back where she is. Even now, she handles herself rather like impoverished royalty. As broke as she is, and as much as she hates being broke, she still deep-down believes that she ought to have money, and it's very hard for her that she can no longer behave as though she does.
I'm really glad I grew up knowing emphatically that I had no claim on my stepfather's money**, and being pretty sure that my inheritance from my grandparents was going to be minimal. When I moved to California, I paid for it out of nearly $10,000 that I'd saved up over two years. I got myself into pretty bad debt during the dot-com bust, when living off credit cards seemed like the only way to support a household of four in which we had about two and a half jobs to go around, but I've been paying it off ever since we moved back to New York, and my money management is generally pretty good. Sometimes I'm sad that I sort of missed out on believing myself to be royalty, impoverished or not... but I will take slightly threadbare reality over dangerous delusions any day.
* For example, every Hannukah his mother would send us gift checks. My mother and I received checks of amount $X. My stepfather and half-brother received checks of amount $2X. This wasn't exactly meant as an insult, just as part of How Things Are: men with the last name "Cahn" are part of that family, women with other last names are not.
(no subject)
Date: 2009-07-17 03:27 pm (UTC)Also, I've no idea where you live, but my city has free centers where you can go in and get help with money management, making a budget, etc. It's not quite "someone coming along" because you have to get all your paperwork together and go, but it's help where you most need it. Maybe the place where you live has a similar set-up.
Long comment is long
Date: 2009-07-17 03:58 pm (UTC)When we had no income for six months last year, we got through it with some help from friends but mostly because I have the formerly-poor person's obsession with keeping a long-term supply of food in the house at all times and because I am used to financial crisis and don't go to pieces. James does. Of course, because James is a lot more respectable than me, he got the credit for keeping us going.
I think his respectability and the fact that people never treated him like a scummy near-criminal when he wasn't working for 2 years because he still had a lot of money is part of the reason he never learned to budget properly; nobody judged him or told him he ought to be doing this or that in order to be deserving of help or regard, so he never saw the consequences of, say, booking a fortnight in Japan and ten days in New Zealand when he had no money coming in. He wasn't going into debt (at that point) and everyone assumed he had it under control, and whereas my family would have been screaming WHAT THE HELL DO YOU THINK YOU'RE DOING YOU HAVE NO IDEA WHEN YOU'LL BE IN WORK AGAIN YOU IDIOT CANCEL CANCEL ARGH, his family said nothing.
He has learned a bit from me but mostly leaves me in charge of what happens to our money. I try not to be bitter about the fact that all his idiocy with money is what's led to us being stuck here irrevocably, as HSBC are sending collection agencies after him for £16k in the UK and we'd be in deep trouble trying to pay them back.
One of my best friends works very very hard to stay on top of her finances; she's poor and has never had the chance to be otherwise, and the main reason when she did mad spending was because her mental health had fallen down the loo to a greater extent than ever before. She's got four different accounts and a complicated (to me) system to ensure she doesn't go back into debt, and it doesn't come naturally to her at all.
Interestingly, my mum is crap with maths and I am bordering on dyscalculic, whereas my friend is good at maths and James is a maths and science genius.
(no subject)
Date: 2009-07-17 04:01 pm (UTC)(no subject)
Date: 2009-07-17 04:13 pm (UTC)Others learn by Awful Warning. My beloved and me had totally examples in our parents, but managed to come out with very similar approaches to money. Financially, I would like to be like my parents. He really doesn't want to end up like his.
(no subject)
Date: 2009-07-17 04:35 pm (UTC)My mother does all the money-wrangling in my parents' house; and it was always arranged so that no-one ever said "we can't afford that". Ever (well except in a "LOL, luxury yachts" way; never about something that someone was explicitly asking for). Money just wasn't talked about (obviously there were things that were beyond our means, but we were dissuaded from demanding them with other reasons). So I didn't learn about it.
I'm scared of poverty; but only in an abstract sense, because I've not been there. I very much doubt I would cope at all well with it.
These days I do keep careful *track* of my money; but that's not the same as *budgeting* and *sticking to a budget* - the most I've done there is to save up for very expensive items.
(no subject)
Date: 2009-07-17 05:12 pm (UTC)(no subject)
Date: 2009-07-17 05:19 pm (UTC)(no subject)
Date: 2009-07-17 05:20 pm (UTC)Herewith, Step One:
- Print out your last 6 bank statements. If you've had a very unsettled year (job loss, large expenses like buying a house, moving in with somebody and your spending habits changing suddenly), make that 12.
- Go down the list of debit items in each statement and identify some basic categories. Examples: rent, utility bills, supermarket bills, transport/fuel costs, random cash taken out of cash machine, clothies/books/CDs/other "shopping".
- Carefully add up exactly how much money you have spent on each category each month. This is best done by typing the figures into an Excel spreadsheet.
- Calculate an average per category across all months. This is how much you spend. Added up, these averages are your average monthly outgoings.
- Do the same excercise on the credit side. If the average debit is larger than the average credit, you have a problem that needs addressing.
If the average debit is smaller than the average debit but you are still overdrawn or otherwise in debt, you are doing one of two things: a) leaving shit out, or b) farming it out to credit cards. Start again, this time taking ALL of your expenses into account.
Once you've done this exercise honestly and are sure that you know exactly how much you spend and earn each month, budgeting is a doddle - it's just a case of making sure the former fits into the latter.
(no subject)
Date: 2009-07-17 05:20 pm (UTC)(no subject)
Date: 2009-07-17 05:21 pm (UTC)I'm happy to share my sheet too, if that helps.
(no subject)
Date: 2009-07-17 05:23 pm (UTC)Coo.
That's rare.
(no subject)
Date: 2009-07-17 05:26 pm (UTC)Re: Long comment is long
Date: 2009-07-17 05:33 pm (UTC)Most couples I know divide the money management in such a way that keeping them off the streets is the woman's responsibility.
And don't nobody jump up and say that we all just happen to be "naturally" better at not being idiots who blow money away because we feel like having enough to eat is somebody else's problem: as far as I know there were no Excel spreadsheets on the savannah.
(no subject)
Date: 2009-07-17 05:33 pm (UTC)I was starved, in this situation, by my previous partner, who was seriously bonkers. He was getting more food than me, most of the time, as he was able to leave the bedsit we were living (I wasn't allowed to do so) but he still ended up with no food for substantial periods of time, with me, when his craziness meant it was all gone.
Interestingly, we never came to losing the bedsit, as the rent was always paid. But then, if we'd lost that, he'd have lost control of me.
Of course, running out of money for food wouldn't exist, as there is always more ways to find food. Most people in dire financial straits, can get fed by friends, especially if they are complaining they are in dire financial problems...
But yes. As soon as you posted, I identified in my head, the ones who play fast and loose, and get into trouble a lot... when they do actually have enough to live on... as people who have never known what it is to be hungry. They 'play' at being in trouble, really, as they are always managing to find a way out, usually their well off family.
Real hunger, is a very sharp reality check. Quite a few people I know would benefit from a slight acquaintance with it. Focuses the mind somewhat. Hunger and cold, as they usually go hand in hand.
(no subject)
Date: 2009-07-17 05:38 pm (UTC)Also, I am, in my life, tired of thinking about people who are deluded about money.
Re: Long comment is long
Date: 2009-07-17 06:18 pm (UTC)In every relationship I've been in where money has been a joint responsibility - and one where it wasn't, I was just sick of him moaning about being skint halfway through the month - it's always been me in charge of the money and that's mostly because I don't trust most other people to do it properly. My mum made a point of teaching me and my sister to make sure we never depended on a man for money, and that if we ever had to, we should make sure we at least had enough to leave quickly if we needed to; I don't think she ever taught my brother anything about money management. Presumably his magical penis will sort all that stuff out for him. Or maybe his wife.
as far as I know there were no Excel spreadsheets on the savannah.
I have read a lot of good things today but this is the best.
(no subject)
Date: 2009-07-17 06:21 pm (UTC)Re: Long comment is long
Date: 2009-07-17 06:28 pm (UTC)Do we think that perhaps the difference in education comes from the sex mix in the family?
My mom taught me and my sister exactly the same things that yours taught you, though she glossed over the detail which later became a problem. So we're both reasonably OK with money most of the time, or at least able to take hard knocks and learn to be smarter.
My dad has one brother, and both of them, having grown up in abject poverty, are really, really careful with money.
My ex has one sister, and she is the chalk to his self destructive and profligate cheese. Presumably your brother grew up to be less responsible than you and your sister.
So is it the case that, like housework, when there are girls in the family they get handed down all the home and family making wisdom, but in the abcense of daughters mothers pass on more of their knowledge to their sons?
Re: Long comment is long
Date: 2009-07-17 06:53 pm (UTC)(no subject)
Date: 2009-07-17 07:06 pm (UTC)(no subject)
Date: 2009-07-17 07:07 pm (UTC)(no subject)
Date: 2009-07-18 11:06 am (UTC)I'm thinking of course about sudden illness, unemployment,divorce: should those events occur and they alter the balance of income to outgoings, one's attention might be diverted enough by those issues in themselves - and money management will almost certainly be less than number one on the list, because of the physical and emotional burdens of the life-changing events in themselves taking prior attention.
Does that count as delusional? I think it is entirely understandable financial misprioritisation.
(no subject)
Date: 2009-07-18 11:43 am (UTC)What puzzles me (and I think Ailbhe too) is when people don't make the adjustment, don't seek out new skills to avert financial disaster, or don't learn from their first or second complete financial meltdown to be more attuned to fluctuations in their finances in future.
I think glitzfrau makes a good point about distructive behaviours being adaptive behaviours that are no longer fit for purpose; it's just that I don't see what wilful obliviousness to matters of money is adaptive for. Not saying it isn't, or necessarily judging people who exhibit those behaviours - I'm just literally puzzled as to where their attitudes might have come from and what they used to be good for.
(no subject)
Date: 2009-07-18 11:04 pm (UTC)I used to have to budget every penny, just about.
Now things are easier, I realise I am just coasting along, and I shouldn't be.
I've always been the careful one with money, and Himself varies between unbelievably stingy - refusing to buy lunch out when on holiday, and suddenly splashing out on a new TV. I'm careful with spending, but need to overhaul savings.
(no subject)
Date: 2009-07-20 10:49 am (UTC)(no subject)
Date: 2009-07-21 11:37 am (UTC)