Or more accurately, quantitative reasoning.
“Buying Coffee Everyday Isn’t Why You’re in Debt” by Helaine Olen.
Or more accurately, quantitative reasoning.
“Buying Coffee Everyday Isn’t Why You’re in Debt” by Helaine Olen.
Thanks to Brown and Grable by way of Horkey for this description of how birth order affects the way we spend money.
Was blind, but now I see. By “trenchant” I mean amazingly facile.
First born. My oldest brother. The best editor I’ve ever had:
The oldest child in the family tends to be mature, confident and, more often than not, a perfectionist. As a result of the responsibilities and expectations placed on them by parents at an early age, older siblings are well organized and generally in control of their lives.
‘Firstborns handle money differently. I see a pattern in a lot of people that I know. They are viciously protective of making sure bills are paid on time and living within their means, which includes building savings and investments.’
Middle child(ren). My sissy and older brother. The best middle siblings I’ve ever had:
“While the oldest child is often given the lion’s share of attention from parents, and the youngest can typically do no wrong, the middle child might feel lost in the shuffle.
Middle children are resigned to the fact that someone is always both ahead of and behind them in terms of familial structure. As a result, they are often found to be naturally gifted problem solvers with excellent negotiation skills. And when it comes to financial habits, the middle child is a born saver, with nearly 65 percent of the group contributing money to their savings accounts each month.'”
The youngest. Myself. Such a perfect, little, Idaho potato that my parents immediately decided to procreate no more:
“More often than not, this person is. . . the life of the party.
While the youngest children might seem charming and fun to be around, they also tend to demonstrate bad spending habits and are typically the least financially responsible of their siblings. It doesn’t help that parents have often become more lenient about discipline by the time the second or third child is born.
Parents have a habit of overindulging and spoiling the youngest children in families. Ultimately, this desire to protect the baby of the family can backfire, causing the individual to spend rather than save for a rainy day.”
Thanks to these poignant insights, I’m going to start trying to save more money. All while remaining true to my life of the party, charming, fun to be around self.
Every spring a friend in North Carolina and I have a NCAA college basketball tournament bet. He takes the teams representing the Atlantic Coast Conference and I get those representing the Pacific-12. If his teams win more games, I send him a t-shirt, if mine win more, I anxiously await my cotton trophy. This year, neither conference did well, but I barely won a stylish long sleeve Guilford College tee*.
We met teaching and playing noon basketball at Guilford College in Greensboro, North Carolina, in the 90s. This year, along with the shirt(s—one for the Good Wife too, and a coffee mug, Christmas in April), he included four copies of recent Guilfordians, the liberal, liberal arts school’s student paper.
Reading them made it seem like time had stood still. Faculty salaries were still the lowest among a large comparison group of peers. Enrollment was down. Faculty morale was flagging. Some well-liked faculty were leaving to the disappointment of students. Students were protesting the administration’s salaries, which had increased markedly, and were at least average among the same comparison group. Tucked in one of the articles was a devastating detail that will make the new president’s job especially difficult. The small Quaker school has $16m in deferred maintenance. They budget $1.8m a year for continuing maintenance, meaning they’re eight years behind. Some students complained about mold in the dorms.
Colleges on the financial edge routinely defer maintenance. “Let’s delay the roof on the science lab another year.” Eventually, the quality of life for students and faculty suffers, and as with mounting credit card debt, the financial challenges multiply and trustees fret they’ll never catch up. Public schools, churches, and city council’s everywhere face the exact same challenge. Can we manage our finite revenue—whether bonds or levees, charitable contributions, or taxes—well enough to maintain our existing buildings, roadways, and parks? If you want to assess the health of a school district, church, or city, find out how much maintenance they have deferred.
We’re fortunate that our Washington State home backs up to beautiful woods that we’ve enjoyed for sixteen years. In the woods there are hiking and running trails, deer, owls, and a path to a nice city park. Now the woods are for sale and three different developers are interested. Many in our community who have organized to save the woods from being turned into another housing development attended the City Council meeting last week to implore the Council to follow through on their own five-year plan for creating more park space.
The organizing committee has done great work thinking creatively about grants and related funding that makes the purchase seem feasible. But the city has been deferring maintenance on our existing parks. One includes a nice boardwalk along the Puget Sound, a walkway so neglected, parts of it will be closed to the public this summer. While sympathetic to our arguments, the city manager and council both regretted that the city can’t afford to purchase and preserve the woods because they’ve deferred far too much maintenance.
It’s human nature to put off saving for future expenses. Just like colleges, school districts, and churches, I do it all the time too. I replace my nicked up bicycle tires after flatting a few times. I get my lawn mower tuned up when it won’t start. I go to the doctor when I’m near death.
I talked to the college senior recently about car ownership. Most twenty-one year olds think exclusively about the purchase price, “If I can just save $5k for that $5k car.” I impressed on her the need for a “cushion” for additional costs like insurance, gas, and regular maintenance including oil changes, the battery, and tires. In an ideal world, she’d also factor in replacement costs, but that’s pie in the sky. Once I broadened her thinking about car ownership, she realized it’s not financially feasible yet.**
Most financial literacy talk is seriously flawed. Everyone overemphasizes technical knowledge. Do you know the “rule of 72”? Do you understand the power of compounding interest? Do you understand asset allocation, mutual funds, investing costs, dollar cost averaging, and taxes impact on your returns?
People think if schools just taught that knowledge all would be well, but it’s not that people don’t know enough about personal finance, it’s that they lack the self-discipline to spend less than they earn. Including legions of college educated people who would pass a personal finance multiple-choice test.
Schools can’t teach young people to defer purchases, to set aside money to adequately maintain and eventually replace possessions, to live within one’s means. The only way to teach anyone the limits of consumerism, to delay gratification, the importance of savings, and how to live within one’s means, is to model it for them over time.
Fortunately, my parents, especially my dad, taught me those habits without ever sitting me down for any sort of money talk. For colleges, churches, cities, and families, “deferred maintenance” means “We’re in the habit of spending more than we have.” Like mounting interest charges, it ties the hands of college administrators, church councils, city councils, and families.
We are extremely fortunate to be able to meet our family’s basic needs each month with some money left over. We can do one of three things with our surplus. 1) Succumb to status anxiety and buy unnecessary luxury items; 2) Keep existential questions about life’s larger purposes at bay through mindless consumerism; or 3) Set some of the surplus aside for anticipated future expenses.
* During graduate school, my friend was a UC Santa Cruz hippie. The UC Santa Cruz mascot is the banana slug. Second Born and I had lunch in downtown Santa Cruz in late January. After lunch we found a must have t-shirt that featured a large banana slug with the caption “SLUG LIFE”. The perfect gift for my next loss. So good in fact we decided I had to send it this year win or lose. He was very grateful and assured us he’ll get a lot of grief for it from his Geezer basketball pals. That, of course, was our hope.
** Odd to me that she’s not more motivated to make it financially feasible. At eighteen, I couldn’t wait to own my own car. So I parked golf carts and picked up range balls for a few years and bought a VW Bug for $1,500. Most gratifying purchase of all time. For the time being at least, in keeping with her peers, she’s perfectly content to bicycle, use public transportation, or, and maybe this is the problem, use her parents spare car.
The things I don’t know how to do dwarf the things I do. It’s sad really. Altogether, my incompetence is pretty staggering. I can’t speak any foreign languages. I can’t play any instruments or sing. I can’t listen patiently. I’m hopeless when it comes to plumbing, electrical work, bicycle and car repair. I don’t know how to sew and I can’t do my own taxes. I don’t know how to garden, bake bread, make beer, or fix the ice maker in our fridge. I can’t keep pocket gophers from tunneling all over our backyard. I don’t know how to backstroke underwater and html baffles me. I could go on and on, but you get the drift.
Despite this pathetic reality, I went against type recently and taught myself two things, how to create excel documents and how to prepare a Starbucks-like green tea latte. Life is especially good now that I don’t have to spend my weekends adding numbers or pay $4 for my daily kickstarter of choice.
Few people know how to manage money well so they turn to financial planners for help. Gail MarksJarvis ask whether there’s any value in financial advisors who get it wrong.* She points out that:
. . . the recently released 2008 Federal Reserve transcripts showed that even economists of the world’s most powerful economy didn’t have a clue. Even as Lehman Brothers collapsed, they expected the economy to grow, not go into the worst recession since the Great Depression.
That, she adds, should. . .
pierce an illusion many individuals embrace as they pour trillions of dollars into the hands of financial advisers they think can read the future and thereby deliver riches and safety.
Individuals, she says, entrusted about $13 trillion to advisers, ranging from financial planners to brokers and insurance salespeople, through the end of 2012.
Ed Gjertsen II, president of the Financial Planning Association admits, “We do not have a crystal ball. We make guesses.”
Clients demand: Give me a hot tip so I can spend whatever I want. But the truth is, the individuals have more control over the outcome based on what they spend than the adviser has with investments.
Even economists are more fallible than people might believe. The transcripts of the Federal Reserve in 2008 showed it relying on faulty models that didn’t take into account unique circumstances of the banking crisis. Based on little knowledge, they give very firm opinions.
In my early 30’s I taught myself how to manage money when it became apparent that the financial planner I hired didn’t really give a damn about my family’s future. Over time, I realized that he recommended investments that paid him generous commissions. Investments that not only took time and money to undue, but ones that performed worse than bond and stock index funds.
There are two types of financial planners—commission based and fee based. Fee based planners who charge by the hour are far better than commission based ones who are prone to recommend investments that enrich them more than their clients. What people really need are skilled financial teachers who can help people learn to manage their money themselves because of the lesson I learned the hard way two decades ago, no one cares about you or your family’s future nearly as much as you. But where are the financial teachers?
13 trillion dollars! Much of that spent on investment strategies that underperform market averages. What a travesty.
If the world’s most incompetent person learned to manage money, odds are you can too. Start with The Elements of Investing by Burton Malkiel. But don’t succumb to the widely held view that technical knowledge is the key to personal financial success. The key is defining “success” yourself and developing a complimentary mix of technical knowledge; self discipline; and dare I say, spiritual depth; to create the future you want for your loved ones and you.
* Thanks to the best ex-mill hunky for this reference.
Off to Canada for a little swimming, cycling, and running this weekend. One loyal Pressing Pauser asked if I was going to tweet or blog the event. No plans to blog until returning next week. Tweeting is a good idea. Better start following me on twitter to see if I survive the day. Then again, the social media adverse can just wait to see if any new posts begin appearing here next week.
Now, back to regular programming. Miscellaneous ways we’ve recently reduced our overhead.
1A-1E are biggies because auto insurance is a recurring payment. 1A. Cancelled comprehensive and collision insurance on our 2006 car with 86,000 miles on it. 1B. Took an online driver safety course. 1C. Faxed daughter’s driver training completion certificate to insurance agent. 1D. Faxed academic transcripts for good grade discounts. 1E. Informed auto insurance agency that I’ve gone half time at work and therefore will be commuting only half as much.
2. Charge daughters for portion of cell phone service, Netflix streaming, and car use. Shrewd readers may protest this is less about “savings” and more about “redistribution”.
3. We’ve been eating out less. Maybe once a week at nice, moderately priced restaurants.
4A. Betrothed had to form a small business back in the day when she started teaching Spanish to elementaries in a before-school program. Biz license cost something like 25-30 dollars. Then we got a Costco business American Express card. Meaning a 4% discount on gas. 4B. Use the simple, free, and excellent “GasBuddy” app to find the cheapest gas around. Here’s the web-based version. We have two Costcos within ten miles and I was perplexed at why their prices varied by 14 cents recently until a friend informed me that they are committed to being the cheapest within a five mile radius.
5. Buy movie tickets in advance at Costco. Ocho dollares per. And NEVER buy popcorn, candy, or coke at the theatre. Scratch that. Never say never. Bought some very lightly buttered organic popcorn at the hippie theatre awhile back. Thought my wallet and ticker could handle that. Even went crazy and splurged on a coke for my date. Yes, of course that turned her on (even more than normal).
6. Except for Sunset magazine (promotion price was $10 or 12/year), we’ve let most of our subscriptions expire. Tend to read on-line periodicals and papers.
7. My running shoes cost $130, but I hunt for previous models (all that’s different is the color) on-line and can usually find them for 50% off. I recently bought six pairs for $65/per. No taxes and free shipping. I’m covered for a few years even in the case of economic apocalypse.
8. GalPal has a garden with beans, lettuce, and we have lots of wild strawbs around the yard. Haven’t taken the time to calculate the cost of seeds, soil, etc. Labor is free because she enjoys it.
9. I use a few coupons at the grocery store. Takes almond milk from sup expensive to just plain expensive. Used a Fred Meyer coup. yesterday. Two half gallons of Dreyers ice cream for $5. I had planned to wait til after Iron-person Canada to dive into those babies, but you know what they say about the best plans.
10. Decided not to buy the new Lebron James shoes even though I could probably slam dunk in them, catch the eye of an NBA general manager, and make a little more than I do teaching.
• My new personal favorite money blog—Mr. Money Mustache. MMM started in April 2011 and he’s killing it. The DIY (Do It Yourself) Colorado bicycle riding blogger writes well and employs a nice mix of confidence, humor, disgust at the status quo, and personal finance insight. His alternative approach to life is resonating with lots of readers. Recently he’s added case studies based upon readers’ lives. Check this recent one out. Favorite excerpt, “Every young adult should be able to comfortably sleep on somebody’s floor, drive an old manual-transmission car with rust holes to a concert, and eat leftover pizza for breakfast. Without complaining.”
• Provocative and timely essay on Chronic Traumatic Encephalopathy (CTE) and what the end of football might look like.
• “Glee is an Immoral Television Show and It’s Time to Stop Watching It.” Trenchant critique by a young, smart, prolific blogger.
• Errol Morris documentary film, Tabloid, about Joyce McKinney, an unstable woman with a criminal disposition. Sex, religion, crime, all mixed together. The one Netflix viewer who wrote, ” She does not need a movie made about her. She needs some real help” is correct. On the other hand, deviance is often interesting because it provides contrast. See Grizzly Man and Take Shelter. I found the most fascinating character to be a minor one, a British tabloid journalist whose total lack of conscience was harrowing.
• Badass video—6 minutes.