Managing Your Money

Lesson 3: Money Troubles: Looking for New Directions

Say No, Not Today

Our habits tell the world what we really are because what we do shows what we believe. A person who doesn’t exercise or eat right is showing that they don’t value their body, and a person who doesn’t balance their checkbook is showing that they don’t take care of their finances. You need to be willing to look at the truth about how much money you spend.

I have said “I can’t spend any money this week” but I have walked into a Barnes and Noble and seen the latest bestseller just sitting on the shelf waiting to live on my bookshelf. So I give in, close my eyes and hand over my ATM card. It is embarrassing to admit, but I developed a habit of not facing reality so I didn’t face the fact that my monthly obligations outweighed my income as a graduate student. One night of balancing my checkbook would have highlighted that sad reality.

I remember the time I logged in to my online banking account and saw my account was -$648.78. I was so devastated that I closed the internet and had to log back in to AOL. As it turns out, I was overcharged by a hotel I had recently stayed in. Nonetheless, this discovery occurred on a weekend and I wasn’t able to resolve the situation until Monday. Until then, I couldn’t withdraw any money from the ATM and I only had $.47 cents in my savings account.

Another problem was my habit of not communicating with myself. I mean talking to yourself is not overrated, it can keep you sane. I had no idea how much I was spending and I had no idea how a $40 meal would end up costing me $300 after all the compound interest and even more if I incurred late payments. Paul Lim’s book "Money Mistakes You Can’t Afford to Make," talks about the virtual reality we enter into when we use credit cards like their cash.

Lim gives an analogy where tickets to a Boston Celtics game were auctioned off. Those who made bids for the tickets via credit card bid much higher than those who bid using cash. The ability to ignore reality and not care how much you’re spending when using a credit card is trouble. When you won’t face reality, it will introduce itself to you and in my case it was a rude introduction. Let’s go on an expedition to find our hidden habits. Ask yourself some tough questions and don’t let yourself off the hook til you get an answer that helps you learn something new.

Do you ever get tired of driving the same route to work every day? I do. Are you always running around in the same circle? I have at times thought I was on this neverending treadmill that goes nowhere, but it's fast enough to fool me into believing I am making progress. If you are like me you can look up and realize you spent a year thinking about saving money but having nothing in your bank account to show for your thoughts. Do you face the same problem continuously?

As I write, I realize I had an opportunity to go back to old behavior patterns that caused my financial downfall. With a little extra money, I was tempted to do more for a family member than I really could afford. I wanted to bring them joy, but it would cost me because it was not in my budget. In the past, I would be happy to give away my last dime to make someone I love happy but it led me down the road to bankruptcy.

In "Money Drunk Money Sober," Julia Cameron says “money drunks expect money to do something more than pay their bills.”

Look at what you are creating, every decision you make, every time you decide to buy something or every time you decide to avoid saving money or planning for the future. You are building something you may like or you may not. Even the tendency to avoid asking for help or advice from a knowledgeable person will cause you to craft a pattern of financial downfalls, disasters and disappointments. If you have a family and you are making foolish financial choices and it’s not just you who is suffering.

According to Elizabeth Warren, this year an estimated 1.6 million children will go along for the ride when their parents file bankruptcy. That means that more kids will be listed in their parent’s bankruptcies than will sign up for Little League or adopt a dog from the humane society, or get braces on their teeth.” According to Warren, if current trends continue, by the end of the decade one of every seven children in the United States will have lived through their parent’s bankruptcy.

Here is your assignment:

Add up your credit card debt. Look at it and name 3 major things you bought that were absolutely necessary for your well being. Can you point to something that you purchased and say it was worth the thousands of dollars worth of compound interest? If you don’t have money to make a purchase you really want, what do you do? Do you know how much your apr is on all your credit cards? Try not creating any new debt for 2 months. Pay cash for everything you purchase for 2 months.

Bibliography

Money Drunk Money Sober - Julia Cameron and Mark Bryan

Credit After Bankruptcy - Stephen Snyder

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