Why are some people better with money than others?

In My Humble Opinion
41

Of course they aren’t. I spend a lot of time talking to people who are pretty frugal, and I’ve never met any of them that werent capable of meeting their wants sometimes. I’m typing this on an iPad…that I delayed buying for a while to make sure I really wanted one. And we take really nice vacations.

I’m sure the "save to the point of having a psychological problem exist, but thats not what I’m talking about.

I also thin Diossa’s bed story is a good one. When you have a functional mattress, even when it’s sitting on the floor, a new bed is a want, not a need. When you can’t get a good nights sleep in your bed because the mattress is so shot, the new bed becomes a need, but anything over a few hundred dollars is upgrading it from the bed you need to fill its basic function, to what you want…which is fine, if you can meet your needs while getting your wants.

I thin for some people there is a disconnect, either they can’t tell the difference between wants and needs or they have no long term planning ability (I’m fed today, there is a roof over my head today…I think I’ll buy an iPad and worry about rent tomorrow), or because, like Bang’s partners family, there is a magical rescue service.

42

My daughter got interested in behavioral economics when her boyfriend’s father reacted to losing his job by buying a new car. She couldn’t get her head around why anyone would do that.

It is definitely true that mathematical ability is not a guard against bad financial decisions. You might remember the book by a financial writer for the Times who went bankrupt.
Delayed gratification is one important factor. But another is that a lot of people seem to have their self-image tied up with their possessions. I never can quite understand why someone would pay twice the normal price for a luxury car, unless it was job related. I felt just as good about myself in a 14 year old Saturn as I do in a fairly new Prius, and no worse than if I bought a Lexus.
But if everyone were like me the economy would really be in the crapper.

43

That’s me. Plus thinking I was smarter than other people and making bad investment decisions and then finding out I wasn’t.

My seven-month-old daughter is already far wealthier than her parents (i.e. she has savings and no debts), and I’m going to make sure she grows up with the good money sense I never had!

44

I’m not sure about that - a nation of people who use their money wisely sounds like a good thing to me.

45

In my family me and both my brothers are good with money (good implying that we are good at finding deals, prioritizing spending and being frugal). We all have good savings accounts and are paying off major debt (student loans, mortgages, etc) far ahead of time.

At the same time a coworker at my old job made 60k a year and was always broke. Her rent was $400 a month and she split that with her fiancee so her baseline expenses (rent and utilities) were not high. Her sister (and her sister’s husband) made 250k a year with no kids and had no savings.

So no idea. In those two examples all the siblings are the same, either good or bad. But I’m sure there are tons of situations where one sibling is good and the other bad with money.

46

On another note, delaying gratification too much is bad too. The book ‘dough: a memoir’ talks about a couple of brothers who worked 80 hours a week everyday at a bread store, when they died they had a few million in the bank. It all went to their nephew (who wrote the book and was a bit of a jerk in my opinion. Working hard all their lives and leaving him all that money seems wasteful).

A different coworker at my old job is in his early 50s, he has about 700k saved up already plus his job has a pension. So when he retires (assuming he retires at 65 and keeps investing his extra money until that point) in between his pension, social security and savings he will have about 60-80k a year in income. But is he going to spend it? Nope. He isn’t going to blow through that kind of money because I know he is frugal. And he has no kids to leave it to. His wife has kids from a previous marriage, but he isn’t on good terms with them. So he will probably die with a lot of money in the bank.

FWIW, this coworker does take vacations with his wife and enjoy antiques, so he gets some use out of his money. But if he could arrange it to work part time or retire early he’d be better off.

47

Why are some people better with money than others?

To give us to people to look down on, of course.

I agree that it is a balance. I had two great-grandparents. One was a single mother who worked away in the factory all her life, saving nearly every penny. She bought a modest home, and had a modest life. When she retired, she was able to takes ome cruises and be comfortable.

I had another great-grandparent who was a housewife, and never made much money. After her husband passed away, she spent money fairly freely and often had trouble making ends meet.

Both passed away n old age, surrounded by their loving families. The first one left a house packed full of stuff from Costco, fake jewelry and stuff she bought at KMart in the 1970s for free. The other didn’t have much left. But I think it all evened out in the end. It’s all about playing the long game- the really long game.

48

That’s my strategy too! But in that case I’m not using debt, I’m using credit.

49

Simple, he wanted to feel like he was in control of his life. And he wanted to display to others that everything WAS JUST FINE! FINE, I TELL YOU! SEE, I CAN STILL BUY A NEW CAR!

50

Years ago a woman was at my house - the girlfriend of a good friend of my husband’s. She had on a very pretty sparkly crystal bracelet that I complimented her on. She reached out to me by offering to go shopping with me so we could buy pretty sparkly bracelets (she had quite a collection, it was her thing), and I said “no, I like yours, but it really isn’t me.” She asked me what I do go shopping for - maybe we could go out together. “Stocks.”

Your friend probably won’t die with money in the bank - health care when you are older can eat up a lot of assets fast. He doesn’t have enough money to retire now, and still be comfortable if he is lucky enough to be alive at 85. But if he does die with money unspent, what is the difference between dying with a stock portfolio, or dying with 40 pair of really expensive shoes?

I know this seems strange, but I enjoy my collection of stock the way some people like stamps, or some people like purses, or some people like collectible figurines of comic book characters.

51

This is an excellent list. I would add: understanding your priorities. Money going to A means less going to B. if you want to treat yourself to fancy coffee daily, saving for a trip will take longer, for example.

52

Some people like expensive shoes, some do not. However if my coworker could work it out so that he had more free time and didn’t have to spend as much time at work I think he could still make ends meet and fund his retirement while having enough time to pursue his hobbies. But finding a job where he can do that is not easy.

The point was that if there is no point in delaying gratification unless you have a better gratification down the road.

I tend to think he’ll die with money in the bank. Over the next 10+ years his investments will probably reach a million or so. His SS and pension alone will add up to 30k a year. And since his home will be paid off and tax rates are different in retirement I don’t think he will use all his money. I think he lives on about 30-40k right now (pre tax) and invests the rest.

53

FWIW, I’d like to point out that this right here is not at all what I’m taking about in the statement I made. Like I said, I do things like travel and buy stupid purses all the time, so it’s not like I’m Scrooge McDucking my money and swimming in it daily.

The reality is though that we live in a NOW culture. Want a designer purse? You need it NOW. The new video game system? Need it NOW! Like a song on the radio? Buy it on iTunes RIGHT NOW! On and on. I think I can even fairly say that every single person here has been guilty of this at least once in their life (and I know I have- hell, I do this with books all the time). And see, that’s a hard habit to break, particularly when everyone around- media, friends, everything- is all about instant gratification.

Now, that’s not to say you shouldn’t get things for yourself, because there’s value in the enjoyment factor. Rather, that often times a little dough can be saved by delaying that gratification, whether it’s through waiting for a sale, a coupon, or haggling because you’ve got the cash and aren’t having to finance it.

Also: I agree that there are times you can totally manipulate the credit system (whether it’s using your credit card for bonuses or financing something with 0% interest as a credit building tool), but in the two instances I listed, the benefits of either of those things were far outweighed by the additional price.

54

Delaying gratification doesn’t mean not spending money until you are 90 or dead, it means not spending money you don’t have on things. If you don’t spend on crap, you have money for the important things, which may be fun also.

55

But is that what he wants? More free time? And is that available to him in his career? Or is that what you would do if you were him? And, are you completely aware of all the variables in play for him?

Often, folks his age are scared to death of retiring before they need to. I’m scared of it and I’m a lot younger. I’ve watched the market crash three times - and take years to recover - but I’ve seen booms as well. I’ve seen my grandparents get $.30 on the dollar for their pensions when the companies they worked for went under. I’ve seen $1500 a month medication bills after Medicare for my grandfather. I’ve seen my mother return to work in order to be able to afford “luxuries” like visiting my sisters out of state (and because, it turns out, being retired is BORING). And I’ve watched our government demonize Social Security, not do COLAs, and leave Seniors high and dry.

56

Holy smokes! Is this man married? If so, most spouses that had half a brain would have shot him.

Sometimes I scratch my head and wonder how can these people have made it to adulthood being so stupid.

57

I also do this and it is a very good strategy. It also helps that I am extremely lazy.
If I think about this before I purchase something that is two hours of work… sigh… it just isn’t worth it.

58

In my case it was entirely upbringing. I never had to face a bill, and it was considered shameful to discuss salary, so I never even knew what my parents made until very late in life. When I went to college I got hit by about 1000 credit card offers, and, well, no one had ever taught me anything about credit. I mean, seriously - my parents had a credit card, I think, but never used it. So I didn’t know anything about credit records, history, payments, nothing.

So I got into trouble. Thankfully I was not completely crazy and it wasn’t deep trouble. I didn’t buy jewelry or cars or anything. I just bought fun stuff - food, movies, clothes, things like that. Enough to give me seriously bad credit, never thinking about the future.

In my late twenties I realized what was going on, if dimly. So I cut up all of my credit cards and worked on paying my bills. Eventually I did, and as I did, I finally gained financial acumen. I went without a credit card for years and years and years, not trusting myself.

But now I need to buy a car next year, and eventually will want to buy a house or a condo. So about two years ago I got a credit card through my credit union and have been building my credit back up, making small purchases, making payments, and next year when I shall buy my car I’ll go through the union again.

But it entirely comes from my parents never teaching me the least bit of financial acumen. I never even had an allowance, so I never learned to balance even five dollars, and my parents were at times stingy to the point of insanity, so I had so much delay of gratification that that was what made me crazy in college - I could buy things!

59

Teaching your kids critical thinking would be good. Don’t trust what somebody says you should do with your money just because that person is wearing a suit. Just because someone is wearing a suit doesn’t mean they know how to invest, or that they are trustworthy. Suits would cost a lot more than they do if wearing one did automatically confer investment knowledge.

Teach them not to trust “people like them” too much. Just because someone is a member of your family (this is especially true and should be obvious if you have family members who are not good with money), religion, or ethnic group, or because they went to the same college you did, does not mean they can be trusted with your money. Even if these people were all trustworthy (and they’re not), just because someone has your best interests at heart doesn’t mean they know what they are talking about when it comes to money.

Critical thinking and knowing that most things that sound too good to be true actually are too good to be true are powerful weapons in your financial arsenal.

Let the kids see you paying bills and doing taxes when they’re old enough to read, but still at the stage where they want to imitate the things they see adults doing (early elementary school would probably be a good time for this). When they’re teenagers, you’ll have a harder time holding their interest for those things.

Teach them the value of routine maintenance. This is stuff like getting the oil changed in your car regularly, going to the dentist every six months, taking your pets to the vet for checkups, that kind of thing. It’s usually cheaper to fix a problem when it’s still a small problem, or a potential problem, than it is to fix something that has failed catastrophically. Health, teeth, houses, and cars all have a tendency to fail catastrophically and expensively if not checked and maintained. Letting them see you do this kind of thing, and explaining to them why you’re doing it, would be a good way to teach them its value.

Make sure they know that health insurance is a need, not a want, if you’re in the US. Yes, this is true even if you’re young and healthy. The problem is, if you don’t have health insurance, you’re more likely to defer routine health maintenance, and, like other deferred routine maintenance, this often ends in large expenses that are hard to anticipate.

Make sure your kids can talk to you about finances. Don’t refuse to discuss things like credit card debt, even if you think those things are bad. Don’t freak out or go immediately into judgment mode if your kid comes to you and is having some financial problems. That kind of behavior is not going to make them want to talk to you when they have financial problems or questions.

Don’t try to make all your kids’ financial decisions for them. Yes, this will probably result in better decisions in the short term, but the kid is not learning the skills they need to make financial decisions when you’re doing that. You can’t learn to make financial decisions without actually making some financial decisions. They will make some mistakes, but that’s the way you learn.

Know that your kids are separate people, not just reflections of you. If they make bad financial decisions, that is not necessarily a sign that you screwed something up when you were raising them. There are lots of instances where one sibling is good with money and another is not. Accept that there’s nothing you can do to ensure that your kid will be good with money as an adult.

My investment advice, from someone who does not wear a suit: Find an index fund. If possible, get money automatically deducted from your paycheck or bank account every month to invest, so that investing happens without your having to do anything every month. You should do this as early as possible in your life. Index funds tend to have low fees associated with them, and it’s hard, even for professional investors, to beat their performance.

It’s like everything else. If you restrict your kids spending too much, they will go crazy when they finally get to decide on their own. If you don’t teach them delayed gratification at all, they never learn it. You need to strike a balance. You also need to be aware that your kid’s ideal balance may not end up being the same as yours, and respect that.

60

I’m smart - It sounds obvious, but having the ability to apply logic and reason is the first step in not screwing up.

I can do basic (and advanced) math - Being able to calculate a budget or knowing that what you are spending exceeeds what you are earning helps.

I’m educated - Having taken formal classes in accounting, finance and economics makes those sort of things less of a mystery to me. It also qualifies me for jobs that provide more money.

I make good money - It’s easier to be “better with money” when you have more of it to spend.

**I was raised in a household with a healthy attitude towards money **- My parents worked for a living as educated professionals. They instilled a sense of paying bills on time, living within your means and saving for the future.

I don’t have a sense of entitlement - I work for nearly everything I have. I don’t expect people to hand me stuff and I don’t thing I just inherently “deserve” things unless I can pay for them.

I purchase quality over quantity - Is it better to buy a $400 pair of Allen Edmond dress shoes that last forever and can be refurbished good as new for $100 when they wear out? Or to buy $150 Kenneth Cole Reactor shoes that wear out in 6 months? It’s actually a trick question. You don’t land a six figure job wearing a cheap looking pair of shoes a 24 year old would wear clubbing because he
thinks they look fancy. It’s worth it to spend more for something you get greater utility out of over a longer period of time.

**I tend to only buy stuff when I need it **- My SO (who grew up poor) tends to be more taken in by “sales” as if they were a one-time only bargain. Sales are great if I plan to buy something anyway. But I don’t go out of my way to collect shit because it’s a “bargain”. That’s how hoarding happens.

I take advantage of sales - It’s a given I’m going to buy a couple of dress shirts for work every year. I might as well get them from the places I normally shop at when they go on sale.

I pay off my credit card each month - No matter what I purchase, I never carry over a balance on my card so I never incur fees or interest.

I buy low and sell high - When the stock market crashes is the perfect time to buy.

That’s about all I can think of right now.