Like water, money slips through my fingers...
February 18, 2012 8:26 AM Subscribe
Mid-40's father having nervous breakdown over money woes and long standing relationship to money.
As long as I can remember, I've always had issues with money. I've never felt I was going to be without. Maybe that's the issue? I've lived paycheck to paycheck for a majority of my life. I have nothing substantial to show for my spending. My family lives modestly and don't spend extravagently. I just waste money.
I'm in the midst of a six month work contract that will go permanent in May (but, you never know). I'm making the most money I've made, ever! In the past 3 years, I've been unemployed for a total of 8 months. This has been part of the spending, but not all. Now, when I look at the monthly fixed costs numbers, they're over what I make. My wife works freelance and has some income, but I'm the major breadwinner. We send our son to private school due to our school district's bad reputation.
I've spent all of February tracking my spending (yay me!)...now what!? How do I come to grips with my mental relationship with money and right the ship, so to speak? In the past years, I've wasted an inheritance, a lump sum payment from a layoff and re-ran up a credit card that was paid off with a refinance. HELP ME!!! I'm just south of $40K in debt and need workable suggestions on how to see this through. How do I budget for quaterly stuff? How do I budget for stuff that's going away (car payment in October, insurance payments when I go perm...)? How do I trust myself with money in one account to cover all my expenses? Envelopes? I know it's not as simple as 'spend less than you make'...but, it has to be close!! Maybe flat out save 10% out of each paycheck? How do you save for the big,big stuff like kitchen remodels and repais around the house, new washer...etc. I'm freaking out over here!!! Talk me off the ledge. Suggestions on books, blogs, etc...are welcome. I've probably seen them all but nothing's getting through my thick skull!
As long as I can remember, I've always had issues with money. I've never felt I was going to be without. Maybe that's the issue? I've lived paycheck to paycheck for a majority of my life. I have nothing substantial to show for my spending. My family lives modestly and don't spend extravagently. I just waste money.
I'm in the midst of a six month work contract that will go permanent in May (but, you never know). I'm making the most money I've made, ever! In the past 3 years, I've been unemployed for a total of 8 months. This has been part of the spending, but not all. Now, when I look at the monthly fixed costs numbers, they're over what I make. My wife works freelance and has some income, but I'm the major breadwinner. We send our son to private school due to our school district's bad reputation.
I've spent all of February tracking my spending (yay me!)...now what!? How do I come to grips with my mental relationship with money and right the ship, so to speak? In the past years, I've wasted an inheritance, a lump sum payment from a layoff and re-ran up a credit card that was paid off with a refinance. HELP ME!!! I'm just south of $40K in debt and need workable suggestions on how to see this through. How do I budget for quaterly stuff? How do I budget for stuff that's going away (car payment in October, insurance payments when I go perm...)? How do I trust myself with money in one account to cover all my expenses? Envelopes? I know it's not as simple as 'spend less than you make'...but, it has to be close!! Maybe flat out save 10% out of each paycheck? How do you save for the big,big stuff like kitchen remodels and repais around the house, new washer...etc. I'm freaking out over here!!! Talk me off the ledge. Suggestions on books, blogs, etc...are welcome. I've probably seen them all but nothing's getting through my thick skull!
Seconding the automation. When I recieved paychecks via direct deposit, the form allowed me to specify how much to which account so I automated 10% of each paycheck direct to savings and never noticed it (except as teh windfall when the statements arrived).
posted by infini at 8:48 AM on February 18, 2012 [1 favorite]
posted by infini at 8:48 AM on February 18, 2012 [1 favorite]
Best answer: As long as I can remember, I've always had issues with money. I've never felt I was going to be without. Maybe that's the issue?
Is this the first time you've attempted to deal with your situation? I imagine it's not. I suspect that you generally don't like the feelings associated with facing your financial condition so after a brief period of concern (like this one) you retreat from those feeling back to denial.
If you really want to change your situation, you need to integrate your feelings about needing to budget into your life in a way that you can tolerate them--you need to be able to deny yourself things and make financial decisions without feeling horrible about being in such a position. You need to normalize it and feel OK with it.
posted by Obscure Reference at 8:51 AM on February 18, 2012 [3 favorites]
Is this the first time you've attempted to deal with your situation? I imagine it's not. I suspect that you generally don't like the feelings associated with facing your financial condition so after a brief period of concern (like this one) you retreat from those feeling back to denial.
If you really want to change your situation, you need to integrate your feelings about needing to budget into your life in a way that you can tolerate them--you need to be able to deny yourself things and make financial decisions without feeling horrible about being in such a position. You need to normalize it and feel OK with it.
posted by Obscure Reference at 8:51 AM on February 18, 2012 [3 favorites]
Best answer: Dave Ramsey--you can skip the religious stuff pretty easily. His advice and systems are very doable. While therapy can help you with why you do this, I think that starting a program to fix the problems you have with spending and money eventually will help you change your thinking and feeling about money.
I used to be irresponsible with money and finally figured it out.
posted by Ideefixe at 8:59 AM on February 18, 2012 [4 favorites]
I used to be irresponsible with money and finally figured it out.
posted by Ideefixe at 8:59 AM on February 18, 2012 [4 favorites]
First suggestion is to continue tracking your spending for a few more months so that you have a general baseline for quarterly spending. Seasons can change spending substantially.
Automation may help, but the first goal is to get very clear on what you spend money on. Then prioritise into three categories: 1) Required, 2) Preferred, 3) Discretionary.
For example: Rent and such things are required. Cable TV is preferred. Nights at the bar are discretionary.
Also, try not to make your categories too granular, else it becomes and exercise in data collection rather then the general development of awareness of spending.
A game I was taught to play by a financial advisor is to go to the grocery store, and before you check out, estimate how much the basket will be. This is an indication of your awareness of spending.
The second step of that is to then tabulate things you buy as you put them in the cart. To make it easy, round up/down to the nearest whole integer. This sensitises you to where the money is going. After 15 years of doing that, I am within a dollar or two almost every time.
Finally, be very easy on yourself in this process. It takes time to change habits, and it's been proven (in money, energy, weight, etc.) that simply having an awareness will make you more discriminating.
posted by nickrussell at 9:04 AM on February 18, 2012 [1 favorite]
Automation may help, but the first goal is to get very clear on what you spend money on. Then prioritise into three categories: 1) Required, 2) Preferred, 3) Discretionary.
For example: Rent and such things are required. Cable TV is preferred. Nights at the bar are discretionary.
Also, try not to make your categories too granular, else it becomes and exercise in data collection rather then the general development of awareness of spending.
A game I was taught to play by a financial advisor is to go to the grocery store, and before you check out, estimate how much the basket will be. This is an indication of your awareness of spending.
The second step of that is to then tabulate things you buy as you put them in the cart. To make it easy, round up/down to the nearest whole integer. This sensitises you to where the money is going. After 15 years of doing that, I am within a dollar or two almost every time.
Finally, be very easy on yourself in this process. It takes time to change habits, and it's been proven (in money, energy, weight, etc.) that simply having an awareness will make you more discriminating.
posted by nickrussell at 9:04 AM on February 18, 2012 [1 favorite]
Best answer: Three statements stuck out here:
- "I just waste money."
- "This has been part of the spending, but not all."
- "In the past years, I've wasted an inheritance, a lump sum payment from a layoff and re-ran up a credit card that was paid off with a refinance."
You have no idea what you're spending money on. You need to track the money that's going out to stem the bleeding. Go back and look over your records, receipts, and credit card statements for the last month. This may sound daunting, but do it simply. You don't need exact numbers, just estimates in your spending in broad categories like "housing", "insurance", "food", "car", "entertainment", etc. You need numbers so that you can do something about what you do, so you can cook at home more if you spend too much at restaurants, cancel subscriptions that you don't need, etc.
posted by Mercaptan at 9:09 AM on February 18, 2012
- "I just waste money."
- "This has been part of the spending, but not all."
- "In the past years, I've wasted an inheritance, a lump sum payment from a layoff and re-ran up a credit card that was paid off with a refinance."
You have no idea what you're spending money on. You need to track the money that's going out to stem the bleeding. Go back and look over your records, receipts, and credit card statements for the last month. This may sound daunting, but do it simply. You don't need exact numbers, just estimates in your spending in broad categories like "housing", "insurance", "food", "car", "entertainment", etc. You need numbers so that you can do something about what you do, so you can cook at home more if you spend too much at restaurants, cancel subscriptions that you don't need, etc.
posted by Mercaptan at 9:09 AM on February 18, 2012
[i]when I look at the monthly fixed costs numbers, they're over what I make[/i] if this is really the case the you need to talk with your wife and family and make some life changes. Do fixed costs as you've listed them here include things you could do without or less of, such as a big cable bill? You mention your car payment going away, so that will be a help. But, I'd suspect a lot of fixed costs are tied up in where you live, along with the additional schooling cost that incurs. The primary way to address that is by a change in homes, which is not a major decision to rush into.
On the other hand, if you mean that your total costs are more than you make, it is quite possible you could cut back on purchases such as trips, eating out, buying games, etc. and address your budget. Given that you've also said you are now making more than ever, this seems likely to me. In this case, having 10% automatically pulled out of your account for a rainy day fund is a great way to hide the money from yourself. Another is to have a "fun and eating out" account that you put a defined amount in each month and only use that account for spending you otherwise feel gets out of control. Find a local credit union or bank that won't ding you for small balances.
posted by meinvt at 9:15 AM on February 18, 2012
On the other hand, if you mean that your total costs are more than you make, it is quite possible you could cut back on purchases such as trips, eating out, buying games, etc. and address your budget. Given that you've also said you are now making more than ever, this seems likely to me. In this case, having 10% automatically pulled out of your account for a rainy day fund is a great way to hide the money from yourself. Another is to have a "fun and eating out" account that you put a defined amount in each month and only use that account for spending you otherwise feel gets out of control. Find a local credit union or bank that won't ding you for small balances.
posted by meinvt at 9:15 AM on February 18, 2012
Response by poster: Obscure Reference...no, I've been in the black MULTIPLE times in my life....thanks for the guidance!!!
posted by littleredwagon at 9:22 AM on February 18, 2012
posted by littleredwagon at 9:22 AM on February 18, 2012
Response by poster: Thanks for all the information, folks...I'm taking it in!!!
posted by littleredwagon at 9:22 AM on February 18, 2012
posted by littleredwagon at 9:22 AM on February 18, 2012
Response by poster: meinvt, I'm guessing I may be exaggerating, but it's close. Some payments will be less next month, etc.
posted by littleredwagon at 9:23 AM on February 18, 2012
posted by littleredwagon at 9:23 AM on February 18, 2012
Best answer: 1. Knowing the difference between which recurring expense is fixed, and which is adjustable. For example car insurance is a fixed expense, but a percentage of the amount allocated to gasoline is adjustable. Same for food and utilities: part fixed, part adjustable.
2. Save a reasonable amount every paycheck, before you even deposit your paycheck.
3. Determine before each paycheck where the money is going to go, and how much you can waste.
4. Forgive your occasional relapses and be good to yourself.
posted by francesca too at 9:36 AM on February 18, 2012 [2 favorites]
2. Save a reasonable amount every paycheck, before you even deposit your paycheck.
3. Determine before each paycheck where the money is going to go, and how much you can waste.
4. Forgive your occasional relapses and be good to yourself.
posted by francesca too at 9:36 AM on February 18, 2012 [2 favorites]
Seconding Dave Ramsey. You can start with his book, The Total Money Makeover.
posted by BurntHombre at 9:37 AM on February 18, 2012 [2 favorites]
posted by BurntHombre at 9:37 AM on February 18, 2012 [2 favorites]
Best answer: Dave Ramsey, Dave Ramsey, Dave Ramsey! Plus, he learned what he knows from going through severe financial problems in the past, so he isn't condemning. And he has a great sense of humor, which helps.
posted by St. Alia of the Bunnies at 9:38 AM on February 18, 2012
posted by St. Alia of the Bunnies at 9:38 AM on February 18, 2012
Response by poster: I'll get back on Dave Ramsey....looked it over a couple times....need to do it again, for real this time!
posted by littleredwagon at 10:04 AM on February 18, 2012
posted by littleredwagon at 10:04 AM on February 18, 2012
Mint has its flaws, but one useful feature is its "Goals" section. You can specify how much you want to save for that kitchen remodel, how much you can put away per month, what your interest rate is, and it will tell you when you'll have that amount saved. Same thing with debt. I also use CNN Money's credit card payoff calculator. It will give you a detailed plan of how much to put on which card per month. Set up those payments automatically through online banking, and relax. If you have an unexpected few hundred dollars, put that towards the highest interest credit card first. Knowing you'll be debt-free in month/year is really freeing.
posted by desjardins at 10:33 AM on February 18, 2012 [2 favorites]
posted by desjardins at 10:33 AM on February 18, 2012 [2 favorites]
Nthing Dave Ramsey - I'm a "reformed orthodox" Daver, and despite being religious find his brand of religious proof-texting about money a little annoying sometimes (and for God's sake don't pay to get into his forums, where some of the most judgmental people in the world... but I won't go there). However, if you can get into a Financial Peace University group locally, it's probably worth it. People are just nicer about this sort of thing face to face.
The positive thing about DR is that I think it's a good combination of concrete, goal-directed behavior with a way to psychologically get your head on straight about priorities. Our society encourages over-spending so thoroughly that living in or below your means makes people think you're crazy. Just trying to live a simple life, regardless of your means, makes people think you're crazy.
You could have been me in 2009 - I'd just received a settlement from an accident that was a substantial amount, but not enough to be "set for life." Rather, it was enough to kick-start an effort to right the ship, but I knew if I didn't do some careful planning I'd be right back where I started (or worse) - in too much credit card, second mortgage, and car debt.
posted by randomkeystrike at 11:40 AM on February 18, 2012 [1 favorite]
The positive thing about DR is that I think it's a good combination of concrete, goal-directed behavior with a way to psychologically get your head on straight about priorities. Our society encourages over-spending so thoroughly that living in or below your means makes people think you're crazy. Just trying to live a simple life, regardless of your means, makes people think you're crazy.
You could have been me in 2009 - I'd just received a settlement from an accident that was a substantial amount, but not enough to be "set for life." Rather, it was enough to kick-start an effort to right the ship, but I knew if I didn't do some careful planning I'd be right back where I started (or worse) - in too much credit card, second mortgage, and car debt.
posted by randomkeystrike at 11:40 AM on February 18, 2012 [1 favorite]
The Simple Dollar is no-nonsense, down to earth, and right on target most of the time. It's a blog written by a guy who turned his (somewhat disastrous) financial life around. Here's his story. Take what you will from his advice, but I've never met someone who hasn't walked away from that site with some ideas and renewed impetus for personal financial management.
posted by idlethink at 12:09 PM on February 18, 2012
posted by idlethink at 12:09 PM on February 18, 2012
The Motley Fool's Credit Card & Consumer Debt board is an incredible resource. Spend time reading, especially the most highly recommended posts, before posting yourself. There can be some tough love from the regular posters (they'll ask you to post your budget and will offer ideas about where you can cut out unnecessary spending and/or boost income), but most of the advice you get will be excellent. I paid off about $30,000 in debt relying mainly on strategies gleaned from that board.
posted by southern_sky at 12:56 PM on February 18, 2012 [1 favorite]
posted by southern_sky at 12:56 PM on February 18, 2012 [1 favorite]
Best answer: What does your wife think? You are a team and if you aren't both on board with the same values and goals for your financial health any plan you come up with will be ineffective. There are counsellors that work on resolving money issues, maybe look for an appointment for yourself and your wife?
posted by saucysault at 1:10 PM on February 18, 2012
posted by saucysault at 1:10 PM on February 18, 2012
I grew up a somewhat spoiled Orange County girl, yet my dad grew up in post-war England and my Mom was the child of Swedish Great Depression immigrants... A very weird mix... Everyone around me seemed to be able to have everything, yet MY parents were "just weird". We could have easily afforded a lot of things, but they always seemed to "think" about everything.
Now- I'm 31 and have been in 2 relationships where my SO's have been terrible with money. I was never amazing, mind you, but I always made life work in a way that they couldn't. I think the main thing was deeply knowing that a "want" isn't a "need"... and that money is numbers...and I know what things should cost- and what we should spend- in relation to our life and don't spend more...
posted by misspony at 1:14 PM on February 18, 2012 [1 favorite]
Now- I'm 31 and have been in 2 relationships where my SO's have been terrible with money. I was never amazing, mind you, but I always made life work in a way that they couldn't. I think the main thing was deeply knowing that a "want" isn't a "need"... and that money is numbers...and I know what things should cost- and what we should spend- in relation to our life and don't spend more...
posted by misspony at 1:14 PM on February 18, 2012 [1 favorite]
Have you considered Debtors Anonymous? Sounds a lot like another post today about drinking causing problems. This time it's compulsive spending/debting.
posted by cairnoflore at 2:40 PM on February 18, 2012
posted by cairnoflore at 2:40 PM on February 18, 2012
Response by poster: Thank you ALL for your suggestions! I'm feeling MUCH better! My wife is aware we have a problem and it's severity, but not the amount. She uses her own account, but that will change once we get this under control. Thanks for the DA suggestion. I've been there before and need to get back.
As you can tell, I haven't learned my lesson NOR how to have money and have it work for me. I'll get this. I HAVE to. This feeling sucks.
posted by littleredwagon at 5:43 PM on February 18, 2012
As you can tell, I haven't learned my lesson NOR how to have money and have it work for me. I'll get this. I HAVE to. This feeling sucks.
posted by littleredwagon at 5:43 PM on February 18, 2012
You Need A Budget might help you. The software takes a bit of a time investment but it's worth it. They also have great forums with tons of friendly people - some in the same boat as you, and others who have made it to the other side.
posted by rouftop at 8:02 PM on February 18, 2012
posted by rouftop at 8:02 PM on February 18, 2012
Best answer: Beth Kobliner's book Get a Financial Life is worth a look, too.
As for some of the specific questions:
1. Quarterly/semiannual/annual expenses: figure out the monthly cost and include that in your monthly budget. I.e. a $500 semiannual insurance payment should be entered as $83.33 in your monthly budget. A budget isn't a list of what you *actually spend* in any given month; it's a plan to make sure that, at the very least, you follow the Micawber principle ("Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery").
2. Budgeting for expenses that will go away, like car payments and insurance payments: you need to revise your budget when there are major changes. My usual approach to things like that, though, is to treat them as new opportunities to save. You stopped paying $250 (or whatever) each month on the car? Great, now put that $250/month into savings. You can even earmark it as savings for the down payment on the next car, and for maintenance on the current car, since you know that the longer you keep the same car, the more it will cost in maintenance.
3. Nthing the suggestion of automated savings. I'd go even further, though, and do two things: (1) Set up an account with another bank (I use ING Direct) that removes money from your checking account and puts it somewhere that takes an extra step to retrieve. (2) Set up another account for your spending money, such as a savings account associated with your checking account. Use checking only for budgeted expenses, and include "discretionary spending" as a budget item. Each month or paycheck, transfer that budgeted discretionary spending amount to the discretionary account. Use this for all your personal discretionary spending. If at all possible, do this in cash; lots of research shows that the typical person spends less when paying cash than when using plastic. If you look in your wallet and see that you've blown through half your monthly discretionary allowance in a week, you'll be much more inclined to husband the rest.
The basic idea behind the scheme in the last paragraph is that it's much easier to trick yourself into thinking you have less to spend, by putting it in a separate account, than it is to develop the will power to take only what you should spend out of a big pot. It's like serving yourself a small bowl of popcorn while watching a movie instead of taking the whole container into the living room.
posted by brianogilvie at 2:02 AM on February 19, 2012 [3 favorites]
As for some of the specific questions:
1. Quarterly/semiannual/annual expenses: figure out the monthly cost and include that in your monthly budget. I.e. a $500 semiannual insurance payment should be entered as $83.33 in your monthly budget. A budget isn't a list of what you *actually spend* in any given month; it's a plan to make sure that, at the very least, you follow the Micawber principle ("Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery").
2. Budgeting for expenses that will go away, like car payments and insurance payments: you need to revise your budget when there are major changes. My usual approach to things like that, though, is to treat them as new opportunities to save. You stopped paying $250 (or whatever) each month on the car? Great, now put that $250/month into savings. You can even earmark it as savings for the down payment on the next car, and for maintenance on the current car, since you know that the longer you keep the same car, the more it will cost in maintenance.
3. Nthing the suggestion of automated savings. I'd go even further, though, and do two things: (1) Set up an account with another bank (I use ING Direct) that removes money from your checking account and puts it somewhere that takes an extra step to retrieve. (2) Set up another account for your spending money, such as a savings account associated with your checking account. Use checking only for budgeted expenses, and include "discretionary spending" as a budget item. Each month or paycheck, transfer that budgeted discretionary spending amount to the discretionary account. Use this for all your personal discretionary spending. If at all possible, do this in cash; lots of research shows that the typical person spends less when paying cash than when using plastic. If you look in your wallet and see that you've blown through half your monthly discretionary allowance in a week, you'll be much more inclined to husband the rest.
The basic idea behind the scheme in the last paragraph is that it's much easier to trick yourself into thinking you have less to spend, by putting it in a separate account, than it is to develop the will power to take only what you should spend out of a big pot. It's like serving yourself a small bowl of popcorn while watching a movie instead of taking the whole container into the living room.
posted by brianogilvie at 2:02 AM on February 19, 2012 [3 favorites]
Response by poster: Thanks, everyone for all the comments!!! This means A LOT!
posted by littleredwagon at 10:48 AM on February 19, 2012
posted by littleredwagon at 10:48 AM on February 19, 2012
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Also : have a "have fun" allowance too - this means put some money around for gifts, going out etc - it doesn't have to be much, but that way you know you're taking it from this sub-account, and not from "the next car payment" or something.
Good luck
posted by motdiem2 at 8:35 AM on February 18, 2012 [3 favorites]