A while ago a friend of mine posted this article about personal finance. This is a particular area of interest for me as I have discussed previously. The piece de-constructs 5 money ‘habits’ the author adopted from an early age, growing up with limited means.
I have difficulty characterising how I spent my formative years in terms of where my family were on the fiscal ladder. I didn’t feel we were ‘rich.’ Not by a long shot. Clothes were from charity shops or hand-me-downs from my cousins. My Mum cut my hair and my Dad cut my Mum’s hair and my Dad went to a cheap barber about 6 times a year, or so goes my recollection. We grew our own vegetables in the garden, and I remember my Mum telling me that Dad did the shopping because he would stick to the shopping list and not spend extra money on impulse buys.
On the other hand my parents sent me to a private school for 7 years. They scrimped and saved and somehow got together the school fees, and I simply have no way to adequately thank them for the sacrifices the made to give that start in life.
I was pretty poor compared to some of the kids at school for whose families the fees were pocket change. But I learned a lot about how money works, and the ways in which I was susceptible to losing it. Throughout school and an embarrassingly large part of university I was spending money as a child does; on fripperies and frivolities. But by the time I graduated I was in a committed adult relationship and Terry and I were starting to think seriously about the future. And as the future costs money I realised my attitude to money had to mature.
So here is my take on the 5 habits in the piece:
You get used to shitty food.
I can totally see how this happens, as the author makes a very convincing case. But I think this one is avoidable. Now as I’m in the UK I don’t have the automatic problem of high-fructose corn syrup being in almost every prepared food. But I really think that basic home economics comes in here. Fresh food might ‘take ages to prepare’ but it can be frozen as well as the calorific ready-meal filth he refers to. You just need to know what you are doing. Furthermore given that the author is in the US there are 2 other important factors to consider. 1) Being severally overweight can cause lots of health problems so if you can avoid getting overweight in the first place that’s preferable 2) the US health care ‘system’ is all kinds of crazy. If you’re not eating right because you can’t afford to, chances are you haven’t got insurance either. So spending a little bit more to avoid taking on more calories than an Olympian could get through in a day could save a lot more money later on.
Extra Money Has to Be Spent Right Goddamn Now! & You Want to Go Overboard on Gift-Giving
Again I can see how these 2 can happen, but this really is bad financial management, and needs discipline and education to beat. I wrote earlier this month about how I tend to rhapsodise about teaching logic in schools when under the influence of port. In more sober moments I am rather more concerned with the teaching of personal finance . How do credit ratings work? What do APR and AER mean and why does that matter? Why might payday loans and weekly payment rental shops be a really bad idea. Why should you bother with a pension? How do tax and government credits work? How do you design and stick to a sensible, realistic budget? All of these are complicated but important, and learning how to navigate the scary world of finance is to my mind the kind of essential information that no child should leave school without. And once you understand just how important getting it right will be, I think it’s easier to motivate yourself into making sound decisions in the first place.
You Become an Obsessive Bean-Counter
This was the one which really pricked my interest. Because this is what I do. Around the point that we were thinking about getting our first mortgage I actually got pretty neurotic about checking our balance every day. These days it’s a bit more under control, but my behaviour would probably still come across as obsessive to most people. I have a spreadsheet with every regular monthly payment, which gets marked off as it goes out of our account. To the penny, if at all possible.
You Only Spend with the Short Term in Mind
Related to the above I have spreadsheets relating to short, medium and long term planning. When Terry came into an unexpected windfall a couple of years ago in the guise of his redundancy payment the bulk went straight into a pension. These days we’re focussed on the medium term paying off of our mortgage. I worked out a while ago that while I am extremely mercenary, I’m really not very materialistic. I don’t enjoy shopping, because I don’t enjoy spending money. I like money to be sat in my bank account, not exhausted on stuff. Interestingly the author talks about how this mindset led him to make bad decisions concerning potential savings, like the buy 2 deodorants for $5 instead of 1 for $3. Now if you have space to store stuff and you are sure you will use it eventually, the deal makes sense. But it’s worth bearing in mind that actually a lot of those types of deals are designed to separate you from your money quicker than if you just bought what you actually need. If you use them well they can save you money in the long term, but capitalists tend not to design pricing systems that put their consumers’ interests above their own.
Caring about money is, like everything else, a balancing act. As I was growing up the ‘Greed is Good’ faction were laying the groundwork to bring the world to its economic knees yet again. I was taught that caring about money too much was evil; a sentiment echoed by vast swathes of popular culture from The Muppets to Francis McDormand’s cop in Fargo. But not caring enough about money is terribly irresponsible, and I don’t think that was emphasised nearly enough in books and TV. Sure – you don’t want to breed a generation of Gordon Geckos, but given how common is the plight described in the 5 stupid habits article, I think we do need to imbue everyone with a stronger sense of financial planning and discipline.