Are You Financially Responsible?

I was talking with a friend recently who described how her mother taught her and her siblings to become responsible. Mom would take the young charges to an amusement park and hand over the day’s worth of tickets to each child. The idea was the kid was supposed to hold on to his tickets so he would have them in hand for each ride. The inevitable happened—the tickets got lost. The hapless child was told by Mom—“no tickets, no rides.” Of course, there was weeping and wailing, but Mom was firm: “No tickets, no rides.” Guess what, she ended up having a child who was responsible with his money and his possessions.

This same friend is an employer for a small family-run business. She describes how many of her employees have problems managing money. They will make statements such as, “I don’t understand why I am overdrawn; I still have checks!” When things get tough—garnishments, credit card debt—they quit their job and move on to another one, hoping to escape the inevitable outcome. These statements are almost unbelievable. However, many people have similar magical thinking when it comes to money.

Do these statements sound like something you might say to yourself?

1. I want this new car; I’ll buy it. Never mind that the other bills are piling up. Everything will work out somehow.
2. I know there is a chance that I’ll get laid off since my company is not
3. doing well, but I deserve this special purchase.
4. My spouse is so grumpy. He/she nags me about the money I spend for myself. What’s the big deal? I work hard for that money.
5. It’s such a drag to have to record what I spend in my checkbook/spreadsheet. I’ve never been good at math anyway.
6. I’ll feel guilty if I don’t spend a lot of money (i.e., more than I can afford) for this upcoming special event (wedding, landmark birthday, 25th or 50th anniversary). This is a once-in-a lifetime event. So what if it takes five years to pay the bills?

If you didn’t have a parent who taught you financial discipline, directly or by their
example, it will be up to you to teach yourself. This may be difficult, but not impossible.

1. Know that you will have to experience some initial discomfort (as the child did who lost his tickets and had to last the whole day with no amusement park rides.) Therapists call this short-term pain, long-term gain vs. short-term gain, long-term pain.)
2. Consider how much better you will feel when you have a sense of being in control of yourself and your finances.
3. Be willing to learn good money management techniques. This can involve taking classes offered by non-profit credit counseling agencies or hiring a financial planner to set up a structure that works for you.
4. Know that money management techniques mostly help increase your awareness of your current financial reality. The more you understand where you are now, the more ability you have to create a better new reality.
5. Create some well-defined and achievable financial goals with a detailed plan for achieving them. For example, this could involve setting aside five percent of your paycheck for a special trip you have always wanted to take. If you use payroll deductions to go into a special account, you don’t get your hands on the money!
6. In a similar way, use payroll deductions to create savings for retirement and/or the inevitable rainy days that seem to come along. Again, this is “hands off” money!
7. Find more economical ways to satisfy your needs for recreation and celebration so that you have enough money to pay the basic bills.

One of the positive outcomes of the current recession is that people are rediscovering ways to have fun without breaking their personal banks.

Here’s to you being the kid who has his tickets in hand—ready to enjoy the day at the amusement park. It can be done!

Judy Davidson