Personal Finance

Coping with Financial Fear

In my last post, I briefly touched on our past feelings of anxiety over finances. I mentioned that family history played a role in my approach to finances, and in a past post, I mentioned that I had struggled with a fear of money and feeling like it was running my life vs. the other way around. I thought today I would expound on where that financial fear comes from in the first place.

I grew up in a home where money management wasn’t taught. My parents were constantly struggling to make ends meet. Most of their fights were about finances and work or lack of it. I vividly remember when, in the first grade, my dad lost his job. That event is my earliest memory of anything to do with finances. Over the years, my dad changed jobs approximately every two years. Sometimes, he would work somewhere for a longer stretch of time if he liked the job, but generally he would find a new job and quit or get laid off every couple of years.

Until I was in the fourth grade, my mother worked as a nurse at a Dallas hospital. She made good money and stayed at her job at the hospital for 15 years. The story goes that a marriage counselor informed her that by working, she was enabling my dad not to hold down a job, so she quit when I was 10 years old.

All through my growing up years, finances were the biggest challenge facing our family. I remember our electricity, water and phone being shut off. I remember hot check notices arriving in the mail regularly. I remember my dad getting arrested for writing hot checks. And all the while, my dad continued to try one thing after another to make money quickly. Like many in the 1980s and 1990s, my parents gave Amway a try. We owned stacks of cassette tapes of lectures from successful Amway distributors sharing their secrets to wealth and prosperity. Self-actualization was taught on the regular. My dad plastered our refrigerator with magazine clippings of expensive cars and hotels in exotic destinations. If you can dream it, you can achieve it. For me, success and financial stability were defined by the things you had. In the affluent Dallas suburb where I grew up, wealth was seemingly all around me. We knew people who lived in incredibly beautiful and extravagant homes, drove luxury vehicles which they replaced every couple years and who took regular trips to exotic destinations. These people were well off. We were not, and I knew it.

After high school, I went off to college at a small, Christian liberal arts college. As college goes, it was pricy. As private colleges go, it was reasonable. Thanks to the wisdom and foresight of members of my mother’s family, my college degree was entirely paid for. My mother inherited substantial sums of money from her brother and her parents and discretely used it to pay for college for both my sister and me. The money ran out part way through my sister’s senior year of college, and my sister had to take out a small student loan. However, neither of us are saddled with the level of student debt many people graduate with. A friend of mine graduated with a journalism degree from SMU with $100K in student loan debt. Needless to say, I recognize that it is an incredible privilege to not be burdened with student loans.

In a sophomore basic economics class I learned principals that now inform how I approach money. The class was taught like a personal finance class. We read “The Richest Man in Babylon,” a classic of finance literature. The premise of the class was based around a game in which we as students had to establish and participate in a theoretical civil society. We learned things like the 10/10/80 rule. We came to understand the nature of money. The professor taught us how to buy a car without ever taking on a loan. The class was an interesting combination of economic principals (like what makes something become money) and principals of stewardship. Over the course of the semester, I had this sense that the professor was a little off his rocker. But reflecting back on the class 10 years later, I now see the wisdom of this unassuming man. There is no doubt in my mind that he possessed significant wealth, but there was absolutely no evidence of it in his daily life – at least not in the sense that I had learned through the way I grew up. He and his wife lived in a modest house near the campus. They owned one car. He walked to work every day. Their idea of a date was a walk.

Post-college, I moved to back to Texas to work for a newspaper. I spent almost five years in journalism before making the leap to a nonprofit job. All the while, I hardly saved a thing. An investment banker I am not. My take-home pay was $425 a week at the paper. I lived well and had fun, but I lived paycheck to paycheck. I would haphazardly save 10 percent of my funds, tithe and then resolve that the rest was mine to do whatever I wanted with nary a care for planning ahead! Then something would happen to my car and because I also spent almost everything I made, I’d put the repair on my credit card resolving to pay it off. Eventually, I would just withdraw from savings and pay off the card (or pay it down) but never managed to get ahead. What’s more, I’d feel really crappy about paying for a car repair with my credit card, so I’d do what any self-respecting woman does! I went shopping or went out to lunch with a girlfriend! Anything to prove to myself that I could afford nice things. I never missed a payment, but I constantly went back to the cards for the supposed freedom they offered.

Over the years, I learned that there is a temporary high associated with making a purchase. I would feel poor (relative to my circumstances), so I quieted that feeling with a purchase to prove to myself that I wasn’t poor. It was so backward and ridiculous! The very thing that made me feel better was the thing that got me in trouble in the first place! But I would feel so much better about my financial life once I went out for drinks with friends or bought a new pair of shoes. Surely, that’s what all those pictures on the refrigerator meant. I was successful because I had nice things. It never dawned on me that having nice things means you no longer have the money that bought them. That’s why millionaires often live completely differently than one might expect. Ross Perot drives a Ford Crown Victoria! He knows this truth!

Today, I am by no means over these fears. Though I’ve given up many of those spendthrift ways, I still struggle to trust that resources will not be depleted. In some ways, my fears are in the opposite direction. I am often afraid to make purchases for fear of being stuck in that same cycle, and I have to remind myself that there’s a difference between spending heedlessly and making a calculated, objective decision. So, what should someone do when faced with the temptation to spend on unnecessary crap?

Here are four strategies that have helped me.

1. Remove temptation. Unsubscribe from the retail email blasts and halt your catalogs. If you want to get extreme with it, cancel your cable subscription or get rid of the TV all together! In our culture, we are flooded with hundreds of advertising messages a day. Let me translate that. Suppose I see 1,000 advertising messages in one day. That equates to 1,000 daily attempts to convince me to part ways with my hard-earned moolah. Over 300,000 messages in a year. You can’t stop the deluge, but why add to it? All catalogs and email blasts do is work to convince you that what you own is not sufficient and that you deserve more. Do not buy it. And while we’re at it, stay out of the mall. Anything you do legitimately need to buy can probably be purchased online which will drastically reduce your emotional involvement in the purchase and likely save you money. Also, malls are depressing.

2. Classics are made to last. When you do make a purchase, especially an article of clothing, ask yourself if  you are buying into a passing trend. Classic never goes out of style, so it makes sense to buy quality items that are made to last. I own exactly one suit and several nice blazers which I mix and match with three pairs of pants for work. My favorite is a navy wool blazer with brass buttons from J. Crew. It wasn’t cheap, but I will never buy another one. Last year’s peplum top craze? I didn’t buy in. While I may not be sporting the trendiest of textiles, there’s no question in my mind that I look put together and stylish.

3. Buy used and repair rather than replace. Brandon makes fun of me, but last year, I bought a pair of never worn black patent leather Cole Haan heels at a used clothing store for $26. They go with everything, so I wear them constantly. I recently had the sole of the front of the shoe replaced at a cobbler for $16 bringing my total spend for classic (non-outlet) Cole Haans to $42, a bargain if ever there was one. Used and a classic! Winning! I was on a thrift store kick and found a nice seemingly unused leather purse for $10. Accessories were 40 percent off that day, so the bag ended up costing just $6. A quick Google search for the brand (which I had never heard of) informed me that my purse is some fancy Italian brand that would have cost me more than $250 new. I carry it daily and get complements all the time on my $6 thrift store find, and it shows no signs of needing repair or replacement anytime soon. Winning again!

4. Question your motivation. When you feel the urge to buy, question what drives it. Are you in a particularly emotional state of mind? Are you in a hurry or under pressure? Are there any unresolved conflicts in your life impacting your immediate behavior? I try to seriously question when I find myself desirous of a new product or service, especially something I’ve heretofore gotten along just fine without. If I’m feeling stressed, I like to go for walks. If I find myself scrambling to find a particular item – such as an article of clothing for a special event – I try to pause and ask myself realistically if there is nothing else at home that will meet the need at hand. Think through why you want to buy something and whether it’s an objective decision or being driven by external factors that you need to deal with first.

Once I labeled that I spent out of a desire to prove my self-worth, I felt empowered to put a stop to it. Life has changed dramatically for me in the sense that I have a much healthier approach to finances. Not saying I’m perfect. Far from it. But thinking objectively about my history and how it informs the way I live day to day empowered me to change and to realize just how full my life is already. Now time for a walk!