I think it’s more insidious than that: it’s not the $1000 handbags that get people in trouble, it’s the $1.25 sodas that everyone else seems to buy, the $300 swim lessons that everyone else on the street seems to put their kid in, using the tolltag every day the way every one else seems to, the basic cable everyone else has. It’s these fundamental things that seem universal that really get people in trouble.
Say there are a 4 basic things. Everyone at a given income level can afford 3 of them. That means that each of the 4 things is used by 75% of the population. That looks like every single thing is used by almost everyone, and it’s easy to then think that means that you can have all of them, since everyone else does. But all of them–a lifestyle that superficially matches your same-income peers–will drive you into debt.
And the other part that we don’t see is the debt that the people who do all these things have - we don’t see that they buy the houseful of gorgeous furniture and owe $20,000 on their credit cards for it - all we see is the houseful of gorgeous furniture. If people are making similar money to you, chances are VERY good that they can’t afford more than you can - they’re buying things on credit.
The reality tv shows are terrible for showing people with entitled attitudes - “I just deserve the best, all the time. I never settle for anything less.” Well, in the real world, we all settle, all the time, or we pay the price in debt load.
I wholeheartedly and without reservations recommend You Need a Budget. It makes this stuff easy, as long as you take the time to learn to use it correctly. I can’t even tell you how much better I am with managing money because of this piece of software.
Concepts are one thing, methods that actually work for the flakey individual are another thing entirely. The concept of dieting is simple: eat healthy stuff and exercise. Someone who is bad at controlling their portions and eating choices may understand this perfectly well in theory, yet still benefit from strategies to keep from overeating at restaurants or tricking themselves into thinking they’re being healthy when they’re not (e.g. consuming sugary energy drinks and granola bars after every workout.)
Just like crash diets end up being poor long-term solutions for most people, detailed budgeting and money management strategies don’t work for financially-flakey people: at some point they’re simply going to stop doing what feels like constant tedious work and fall back into their default habits. Success comes from finding ways of simplifying the tracking and decision-making processes so they feel natural and can be maintained.
I hear what you are saying, but I think the head game matters, too. As I said right at the start, no matter what system you choose it’s going to take some time, and accepting that is essential. You can’t manage money intuitively, or on autopilot.
Two more “head game” things I think are important, and that are closely related:
You’ve got to learn to like having a pile of money for its own sake. If money only thrills you because it represents the stuff you can buy, you have little incentive to save. You really want to get to a place where having a pile of money feels like an accomplishment in and of itself.
The act of spending money makes some people feel rich and other people feel poor. The former tend to be the people with money problems, because when they feel bad about their financial situation, they spend to fix the feeling, which creates a terrible cycle. I am one of these people, and I’ve really worked to overcome it. Once I got to a place where not spending money made me feel smug and satisfied, instead of the opposite, everything went much better.
Yup. This is exactly why I’m a fan of the direct-deposit into a savings account strategy - it takes no effort and, psychologically, it decreases the means within which to live.
Ye-es…but you do need to be taught, or to learn, proper discipline. It just doesn’t happen magically.
My parents were extremely frugal. I mean, I remember going to the grocery store and not being allowed to buy fruit, or a treat, or anything…I’d want something new and everything was balanced and weighed to see if I could afford it. But this didn’t teach me common sense when it came to money, because they never explained any of it or showed me the other end.
I wasn’t allowed to get a job. I had no way to actually learn money management. When money came into my hands, I spent it, becuase it was so rare for me to get money.
When I grew up and got a job, it was the same thing. I’d never even had a bank account of my own. I’d never balanced a checkbook. I’d never had a credit card.
Worse, I’d never been shown bill paying or checkbook balancing or been explained where money comes from or where it goes or how to maintain it. In every way possible my parents deliberately kept me a child. They expected me to go straight from the parental home to the marital home. What need did I have for all of that stuff?
It wasn’t until my mid twenties that I began to realize the hole I had dug myself in. I had credit card debt and bad credit, and I was not making enough money.
Thankfully I never made any really big mistakes. None of the debt was so much I couldn’t pay off, I didn’t have children, or get married to someone I shouldn’t have, or buy a house from those crazy loan officers. So I cut up all the credit cards, and literally stopped buying anything. I had a very sensible, financially savvy boyfriend, so for literally years I wouldn’t buy anything without asking him first. I never told anyone - I knew they would think I was being controlled - when I knew it was what I needed to do.
Years went by and I paid my debts and cleared my credit. Then I had no credit. I went like that for some years, but now I had learned money management and responsibility. A couple of years ago I got a credit card again after some years and now I am back to excellent credit; credit offers come home, I just bought a car, and in a few years, I plan to buy a house.
But these things take time, and you have to learn them. The biggest habit I had to unlearn was that of procrastination - even if it’s bad news. To knuckle down and do something, that’s a wonderful skill, and one I finally have.
I’d never thought about it that way, but I agree. The turning point for me came when I got some investments (401K, a small mutual fund account). Then I realized that money makes more money. In spite of myself, I learned about managing money, with the ultimate goal being to have enough money stockpiled that I can live off the gains without touching the principle. That’s unlikely to happen, but the closer it gets, the more financially secure I feel: less worried about retirement, less concerned about unexpected unemployment or disability, hopeful about leaving something for the next generation so that they can have an easier time than I did.
Pay yourself first. If you don’t have automatic savings deposit, get it. You should be putting back something for your retirement and also for shorter term needs.
Get online access to your financial accounts and check them at least once a week.
Keep your checkbook balanced. I use an Excel spreadsheet.
**Pay your bills as soon as the statements arrive. ** Don’t procrastinate or you’re more likely to forget them.
Before you make a purchase, ask yourself if you REALLY need it. Can you make it yourself? Could you refurbish something you already have? Have you looked for the best possible price? Could you get it used?
If you can’t afford to pay cash for something you want, save up for it and then buy it. Use credit cards for emergencies only.
HeyHomie, you aren’t that specific about the various parts of your problem, but if you hate paying bills in terms of writing out the checks and mailing them, I would suggest having most or all of your bills paid electronically if that option is available to you, either taken out automatically each month or you pay the bills online. I would 2nd or 3rd having your paycheck done via Direct Deposit.
I think there are also some charity organizations that will help you figure out a budget and help you figure out how to manage your money. Your local community college might offer some classes.