Why are people bad with money?

Something I noticed is that some people manage their money better than others, but it is often independent of actual wealth/background.

My wife is very frugal. She likes dressing well, having cute handbags, girly stuff, etc but always gets amazing deals. She always seems to know how much something is worth, and whether its worth getting or not. She confesses she’s a recovered shopaholic, but in all the time i’ve known her she has been very practical. She paid her way through school and had continuously worked since she was 15.

My friend’s father in law built his business from the ground up. He worked very hard to build it. A while ago he sold his business and retired. Friend’s wife and sisters all grew up watching him grow and develop his business, and he encouraged their education in whatever they wanted to do. From my perspective, there’s no reason why she shouldnt be sucessful, since she had all the tools to be so (and her sisters are independent, ambitious and sucessful).

Earlier this year she inherited her childhood home. I was happy for them (and a touch envious, since It’ll be a few years before my wife and I can afford to buy a house). Recently, talking to my friend, he was lamenting that he was having money problems, worried about losing his job, his wife is ‘in between’ jobs, their house is a mess, etc.

This kind of baffles me. They have every advantage; he makes more money than I do, doesnt have rent/mortgage, in laws are always taking them on nice vacations for free, his job gives him tons of little perks…and his wife, in spite of growing up knowing what it takes to be successful and independent, doesnt seem to do much of anything (when my friend talks on the phone, he implies that he has to do EVERYTHING around the house). When I suggested his wife needs to support him more, he got super defensive about it so I backed off on the issue.

Its kind of surreal; I wouldve assumed things would be the other way around with our wives but they are not. Even though my wife had ZERO family members that helped her financially or academically she managed extremely well. She never could afford many things she wanted and easily couldve been someone who lives outside their means. Friend’s wife in contrast had it much easier, tons of support, knowlege, and a huge head start with a free house, yet they are the ones who struggle. :confused:

Sometimes, you just cannot know what else is going on in a given person’s life. You don’t have enough information to make a firm, concrete statement about who is good or bad with money and or who has “had it easy” or hard in their lives.

Life is nature and nurture. Some of what you are is about what’s happened to you and around you and what you’ve done with it and some is just you.

Impulse control. And the belief that things will always improve. That a slip backwards could never happen to me. That’s basically it.

Yes, I would say self-control is the biggest part of it. Budgeting and frugality is very hard, on par IMO with losing weight and quitting smoking.

I will not let people who I know go to the movies once a week and have new cars every five years (with vanity plates!) bitch to me about how they’re broke all the time. My husband and I make almost six figures, and I sill use the pans I got in a garage sale when I was 19.

But I can contrast the advantages. If both my friend and I each paid $1500/month rent, but now he owns his place and doesnt have to pay, thats $1500 more he has to work with. He could save the money for a rainy day, use it to pay off other debt, blow it on junk, etc. Since he just recently had this happen, he spent much more of his life making due having to set aside money for rent. He has every opportunity to use it productively, especially since his wife doesnt work and his own job situation is iffy.

Some people have the privlege of others learning the hard way for them, vs having to figure it out via trial and error.

These are straight-up advantages some have over others. What I’m trying to understand is why they dont make the most out of them. Theyre not living in the dark- they have friends/family who are making full use of them. Laziness? Denial?

Some people are just really not very good with numbers and/or math.
Unfortunately it translates into them falling victim to bad financing choices.
“Why would I want to pay a higher mortgage when I can just stretch it out over 30 years?”
“Equity in my home? That’s like free money!”
“I had no idea how much car I could afford so I just told the dealer how much I could afford each month.”
“Never thought I could afford that much house, but they found out a way to get me in it. They’re the professioanls, right?”

I think it has more to do day to day spending - eating out, movies, new clothes, etc. Evan a smart person can make what seems like a foolish choice like those you listed above, but with a good budget and some self-denial, things can be fine.

And, I’ll add that refusing to be educated on simple things like how interest works is another symptom of being lazy.

It’s also a bit hard for me to understand because to me, “if I spend more than I make eventually there will be a problem” is an intuitive concept, but apparently to some people it isn’t. Semi-related older thread of mine How do you run up lots of non-emergency consumer debt? Don’t you get concerned when you have a small-moderate amount of consumer debt?.

Answers basically fell into 2 major categories “denial/didn’t keep track” and “emotional purchasing” with a few “took a strategic risk for a very specific reason.” The latter is not “bad with money” per se, but if the risk goes south it can look that way after the fact.

Years ago, my husband worked with a man who found out that his wife had been running up their credit cards to the limit. I have no idea what her earlier life was like and whether she came from money, but I saw an indicator one day when we were at their place for dinner.

Not only were there all sorts of convenience foods and snack foods in big boxes (from warehouse stores) but that woman went thru paper towels like no one I’d ever seen before. As I watched her preparing dinner, I lost count of the times she rinsed off her hands, then unrolled 5 or 6 paper towels to dry them, then threw them out. She pretty much used up an entire roll while I was there.

On one hand, you might think “What’s the big deal?” but unless it’s the only quirk, chances are she’s throwing away a lot of money over the course of a month. Does she use a fresh toothbrush every day? Does she only feed her family convenience foods? How many times does she lather-rinse-repeat? What else is she spending all their income on? As I sat there, I just kept thinking "Don’t you own a dish towel? You know you can dry your hands on those many times, and reuse them for years…

Some years later, she was in an auto accident and got a couple of million from a lawsuit against the guy who hit her. My snarky self wondered how long it took her to spend it - my guess is “not long at all.” I suspect she’s a person who never learned the difference between *want *and need.

Why are people who overspend ‘bad with money’? They’re likely to die in debt some day. Those who die with money left over are ‘bad with money’ in my opinion.

I think this is really about people who have trouble managing money as well as they want to. But the answers to that are boring.

People have emotional wants and needs. Money doesn’t care about your wants and needs. It obeys the cold hard laws of math, accounting and finance.

Why do people do anything stupid? Because they think they either won’t get caught, it won’t apply to them or they’ll just figure something out later (presumably using the same idiot brain that got them into trouble in the first place).

I’ve worked a lot in corporate fraud related stuff in my career. It’s actually a short stone’s throw away from “bad with money” to outright fraud. And it’s actually pretty facinating studying the mentality of some of these people. Whether it’s Bernie Madoff or Incubus’s friend, much of it is derived from an almost sociopathic sense of ‘entitlement’. “I deserve a certain lifestyle and it’s someone elses problem if I have to lie, cheat, steal or go into catastrophic debt to maintain it.”

People who grew up with a comfortable amount of money in the home might not have really ever thought of it. If Dad always gave you $20 to go to the movies or your parents rarely said no to a new toy or if they never discussed money in front of you so it magically comes out of the air you probably don’t know the worth of it. If I didn’t take a personal interest in finding out about money matters, I easily could have regarded money as magic numbers in the ATM.

I think it’s much more a matter of personal choice, refusal to use impulse control or willful ignorance, than upbringing. I can point to many adult siblings that have polar opposite manners of handling money, even though they obviously grew up with the same background.

I’m the youngest of 4 in my family, and the only financially solvent one. As one of my sisters would be quick to point out, I do make a decent living so that makes it a bit easier, sure. But 3 of the 4 of us have had comfortably middle-class incomes for years. Why is it that only one of us has good financial sense? We were raised together, with the same values, our parents struggled and made hard choices, and are doing quite well in their later years.

When you get caught in the trap of paying more for bad choices, late fees or credit card interest or whatever, it becomes harder to get ahead. When you stay there for years, it becomes a lifestyle choice. Obviously, some people are much more comfortable with debt and not having any savings than I am. Those things would cause me great anxiety so I make sure not to put myself in that position.

People have a lot of little foibles. Have enough of the wrong kind, it things go bad for one reason or another.

One interesting classic study is the Stanford Marshmallow Experiment. It’s getting a lot of play in political articles, etc., lately. And it’s not just about kids.

I’d wait and get the 2nd marshmallow (and then not eat them since I don’t like them). But if it was something I liked, it’d still be easy to wait it out.

A Frontline on Consumer Debt showed clearly how much people value internal personal concepts over harsh Mathematical reality. E.g., they had some people who owed X on their credit cards but had much more than X sitting in their savings accounts. Why didn’t they pay off the credit card debt (avoiding high interest, etc.)? Simple, they preferred the idea of having a stash of money available just in case. Never mind that their net stash was far less than it should be since they were wasting money on interest.

And these were the semi-rational people. Never mind the ones who are unable to keep a dime in the bank.

It’s funny because I grew up realtively well off while my SO grew up relatively poor. I never had to worry about money or paying for college while she had to put herself through school. We both work in good paying financial services jobs. But her mentality is still very much like “we can’t afford” or “it’s too much” and she saves stupid shit like aluminum foil or the bags you wrap stuff in. Meanwhile I track like every cent in Quicken. She does her banking in the small-town bank she grew up in 3 hours away while I do everything online.

Like she’ll call me up hysterical like “we can’t invite those extra people to that event we are throwing next month!! It’s an extra $300!!! My parents said they don’t have to come if we can’t afford it!!”

I’m like…I just bought shoes that cost more than that. If your worried about it, maybe we shouldn’t eat at Smith & Wollensky’s tonight?
It’s fucking weird.

It sounds to me like the wife may be suffering from depression or other mental health issues.

How do you know it’s the wife and not your friend who’s causing the money problems?

Its possible. But he’s not exactly frugal, either. With his job, he could’ve bought his own home years ago (though I guess its a moot point since they got one for free). He had a car loan debt and credit card debt going into the marraige, and as a wedding present his father in law wiped the slate clean by paying it off for him.He has a hard time saving money, always goes out to eat, gets into fads, etc. This is also the buddy who splurged on a $5000 wargaming table :smack: Originally his father in law intended to give each daughter $100,000 toward the purchase of a house. Friends wife inherited dads home, but dad intended to give them the money on top of it (lucky them! :eek: ). Before any money changed hands my friend was already running up his credit card again for home improvements like triple ply windows and new furniture (for the promotional points, you see) with the assumption hed get this windfall. But then FiL went koo koo and blew the whole wad on some investment scam.The mom assured them theyd get the money one way or another, but meanwhile my friend is back to being in the hole again.

Again, every advantage, but money is like teflon in his hands apparently. :confused:

Why did your OP focus so much on your friend’s wife’s privileged background when it sounds like it’s your friend himself who’s blowing their money on stupid stuff they don’t need? Her background isn’t going to magically give her husband good money management skills even if she possesses them herself (which she may not). While I personally know at least one couple where the husband is the sole breadwinner but the wife manages the finances, this woman might feel that she doesn’t have any right to tell her husband what to do with his paycheck.

I’m frugal, my wife, not so much. She has what I call a ‘hidden disability’ in that her ‘accumulator’ inside her head, that thing that keeps a running total, is busted. She, an intelligent woman, can go out and spend $50 at 4-5 different stores, and when asked how much she spent, come up with a number between 100-150.
She’s doing better. Soon she’ll go for a walk…