Beating Broke

Personal Finance from the Broke Perspective

Are We Doing Personal Finance Wrong?

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As you can probably imagine, as a personal finance writer, I think about personal finance quite a bit.  Often enough that I write several articles a week on the subject.  I don’t consider myself an expert, but I do think that I know a great deal about it.  And I’m beginning to wonder if we aren’t going about it in the wrong way.

The problem with Personal Finance

We rail on the Joneses constantly.  That, by itself, isn’t really a problem.  The Joneses just aren’t very smart with their money.  But, for all that we rail on them, we spend an inordinate amount of time trying to find ways that we can go about having things that are similar to what they have for less money.  And that is the problem. The Joneses have the fancy cable television package?  Try Netflix, Hulu, or Amazon Prime!  The Joneses have a fancy new car?  Try a newer off-lease car!  The payments are half what they pay, and the car is almost as nice!  The Joneses have a fancy house?  Try making it affordable by DIY, gardening, and renting out a few of the rooms!

We aren’t the Joneses.  We know that.  We know that we really don’t want to be the Joneses.  But, some part of our natural tendencies somehow pulls us back to them, time and again.  We strain hard to become less like them, and find ourselves back where they are.  That is the problem with personal finance.

Are we doing personal finance wrong?

Doing Personal Finance WrongMaybe the issue isn’t the Joneses.  Maybe, just maybe, it’s us.  I alluded a little to this recently (The Joneses and Jealousy), when I suggested that our tribal human history pulls us towards the leaders of our “tribe”, and that we should be looking for a new “tribe” that espouses the same values that we do.  I think that we all end up returning to our Joneses because we haven’t fully made that switch yet.  Because we’re afraid of what the rest of our tribe might think.  What our families might think.  Heck, what our spouses might think.  And, maybe all this frugality and saving aren’t really what we’re looking for.  After all, where does that lead us?  A cheaper version of the Joneses lifestyle?  Isn’t that what we’re pushing away from?

Changing personal finance

I think what we are really looking for, and what we are really jealous of the Joneses for is financial freedom.  It may only be perceived in the case of the Joneses, but it’s still there.  Freedom, financially, to be able to do the things we want to do, go the places we want to go, and have the things we want to have.  We emulate those who have those things without giving much thought to how they got there.  Maybe the Joneses did it through a boat load of debt.  We rail against debt.  Which only gets us so far.  So many of us struggle with even that part of it.  I know I have, and sometimes still do.  But, I can tell you with certainty, that had my perception of debt not changed drastically from where it was when I began this journey, I would be in a far worse place than I am now.  But, even that is only one small change in the way I think about personal finance.  Our entire perception has to change.

What’s the personal finance endgame?

What is it that we are really looking for.  We decide we want to change how we handle our finances, abandon the way of the Joneses, and make our way to a better life.  But, what is that better life?  If you’re thinking that a secure retirement is it, I think you’re wrong.  I think there’s a better way.  There has to be.  HAS TO BE.  There has to be a better way that doesn’t involve working for 40+ years, pinching every penny, saving every dime, only to end up at 65 or 70 with enough money to make sure you can pay for the medical bills your advanced age brings with it without having to live on welfare.  That can’t be all there is to personal finance, is it?  My word.  What if you retire at 65, and die at 66? I submit to you, that what we are really looking for is personal finance independence.  We don’t want to have to count on a job. We don’t want to count on a paycheck to (hopefully) cover the bills this month.

What is personal finance independence?

Here’s the tricky part.  I think it’s going to vary based on the individual.  What personal finance independence means to you is likely going to be a bit different from what it means to me.  Take, for example, Jacob.  Maybe you’ve heard of him, maybe you haven’t.  He writes a blog about early retirement.  He wrote a book all about it.  It’s got more scientific content than some of the science books I remember from school.  They guy is crazy smart about the subject.  But, when he says it’s early retirement extreme, he’s dead right.  If going to the measures that he went to in order to retire early is what is required, count me out.  In fact, it seemed for a long time that it was either extreme or not.  Nobody had really talked much about the in-between area.  Enter Mr. Money Mustache.  He, too, retired early.  And, while he has his extremities, it’s not quite the same thing.  It’s different for each and every person.  What one person thinks of as retirement isn’t what someone else will think of.  Heck, most of us have been so pre-conditioned to think that retirement should consist of afternoons golfing followed by bingo down at the VFW that it’s no surprise that we scoff at people like Jacob and MMM.

How do we get there?

Oh.  Well, the truth is, I just don’t know.  I think that, with a little help from the Jacobs and MMMs of the world, and a little trial and error, we can find our own personal finance independence.  I think that we can take what we learn, adapt it to our lives, and make something brilliantly wonderful out of it.  I know we can.  We just have to try.  We just have to change personal finance as we know it, and embrace something better.

Do You Really Need that Stuff? Think Twice Before You Spend

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Americans love their stuff.  We can’t get enough of the latest doodad, the latest hot new product on the market.

We love stuff so much, research has been conducted on our behavior.  According to Boston.com, a team of archealogists spent 4 years studying 32 middle class Los Angeles families for their new book, Life at Home in the Twenty-First Century.  What they found was fascinating and depressing.

According to the study, ” The rise of Costco and similar stores has prompted so much stockpiling — you never know when you’ll need 600 Dixie cups or a 50-pound bag of sugar — that three out of four garages are too full to hold cars” (Boston.com).  And it’s not just the parents.  “The study found kids’ stuff everywhere, crowding out their parents’ possessions to such an extent that even home offices and studies (more than half of the 32 households had rooms dedicated to work or schoolwork) were crammed with toys and other child-related objects” (UCLA Magazine).

All the while, many Americans are swimming in credit card debt, which may be a direct result of the need to have more and more stuff, even as the stuff leads to less life satisfaction.  In fact, stuff creates stress for many people.

If you feel the need to buy more stuff, keep these things in mind:

The More Stuff You Have, the Less Satisfaction You Have

Do you really need all that stuff?We often think that if we get the latest and greatest item, we’ll be happier or life will be easier, but that isn’t often the case.  In fact, having less stuff leads to all sort of important changes.  If you have less stuff, you can live in a smaller space.  Live in a smaller space, and you pay less for rent or your mortgage, and utilities are also less expensive.  You may need to work less to afford your lifestyle, and instead have more time to enjoy life, which brings greater happiness.

The New York Times states, ” New studies of consumption and happiness show, for instance, that people are happier when they spend money on experiences instead of material objects, when they relish what they plan to buy long before they buy it, and when they stop trying to outdo the Joneses.”

Tammy Strobel, the blogger behind Rowdy Kittens, downsized her life, and now she and her spouse live in a tiny house with minimal possessions.  Because of this lifestyle change, she was able to quit her job and support herself and her spouse when he was in school on just $24,000 a year that she made as a freelancer according to The New York Times.

Your Stuff Is Worth Nothing

Besides considering the improved life satisfaction you will have without more stuff, there is another important reason to curb your consumption of stuff.

While stuff can cost you dearly in out of pocket expense, once you have it, making any money off of it, should you choose to downsize your life, is very difficult.  Yes, you can sell your stuff on Craigslist or Ebay or have a garage sale, but in general, you only recoup 10% or less on the original purchase price.  How is that for depressing?

Just visit a garage sale in the summer and see the huge spread of stuff to be sold.  How much money does all of that stuff represent?  That is money that is just gone, never to be recouped.

If you want to improve your life and your financial situation, just stop buying stuff.   You’ll be amazed how much better you feel when you have less stuff in your life to manage.

Source image credit:My Dad’s a Hoarder, By Simon Scarfe, on Flickr

The Joneses and Jealousy

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We spend a lot of time, while talking about finances, talking about the Joneses. We often talk about how most of us make the mistake of trying to keep up with the Joneses by buying cars that are new, houses that are bigger, and generally spending our way into oblivion.  What we seldom talk about is what really is motivating us to keep up with them.

The Joneses and Acceptance

The reasoning that most people assume is really being put to work is that of acceptance.  And, surely, it does play a part.  Humans are, at our most basic, a tribal animal.  We’ve long been conditioned to be that way.  Historically, we lived in tribes, and what was good for the tribe was also good for the individual.  If any individual of the tribe stepped out of the accepted norms, it was likely to get that individual killed, or other members of the tribe killed.

In more modern times, we talk about it taking a village to raise a child.  We talk about how we’re all “in this together.”  We, as children, are thrown into sub-tribes (classes in school) where we quickly learn that it’s easier to get along with the majority of the other children and not be one of the children that’s ostracized for being a bit “weird.”  As we get older, that need for acceptance grows.  We get to college, and the further splitting of our peers into sub-tribes begins.  Graduates from college quickly find that their college tribe has broken up, and they must find a new tribe.  We begin in the place we spend the most time; at work.  In true tribal fashion, we quickly begin attempting to appease those with the most power in order to gain favor, and thus, not be cast out from the tribe.  We call it getting fired.

And, in trying to appease those with the most power (perceived, real, or otherwise), we learn to buy cars that are similar to theirs.  We learn to buy houses that are as big as theirs.  We learn to eat at the same restaurants, drink the same drinks, and hang out in the same social circles.  All because we have a deep rooted desire to be accepted in our “tribe.”  And because we know that humans have a natural attraction to people who are most like us.  We accept them.

The Joneses and Jealousy

The issue of tribal acceptance is almost a genetic issue.  It’s been conditioned into the human psyche for centuries.  But, there’s another, equally powerful reason that we all try and keep up with the Joneses.  Jealousy.

Masquerade BallThe very same urge that we feel to try and gain the acceptance of those with power (again, perceived, real, or otherwise), also is driven by jealousy.  Survival depends on our acceptance.  And our acceptance is given by those we see as having the power.  And the power we see them with is one that we’d love to wield.  For two reasons.  One, we want the power because those with the power aren’t thrown out of the tribe.  And, two, because those with the power have the ability to throw out those they are enemies with.

It’s a story we’ve seen played out in the news many times.  Some guy (or girl) climbs the corporate ladder and finds him or herself at the top (or near it).  Years later, they have some event that brings them down.  Corruption, greed, or some other malfeasance.  On their way down, we start hearing stories about how all those years they were at the top, they were taking the ideas of those below them and claiming them for their own. Their friends got all the promotions. People who disagreed with them would suddenly find themselves the subject of an internal inquiry and then were summarily fired.  In short, they held the power.  They dismissed their enemies from the tribe.  And, while they eventually fell from power, they wielded it to their advantage for a long time.

Few among us haven’t tasted the desire to have that power.  Whether we intend to use it in a bad manner or not, we’ve felt it.  That desire to have the power.  That jealousy of those that do have it.  And, through our jealousy (and need for acceptance), we learn to buy cars that are similar to the car that those that do have the power have.  And we learn to buy homes that are as big as theirs.  And we learn to eat at the same restaurants, drink the same drinks, and hang out in the same social circles as they do.  All because, you guessed it, we have a deep rooted desire to be accepted in our “tribe.” And what better way to guarantee our acceptance than to be the one who does the deciding?

Replacing the Joneses

Whether it’s through a desire for acceptance, or jealousy of their power, we try to be the Joneses.  We try to be the ones with power.  I’ve felt it.  I’ve done it.  Sometimes I managed to accomplish it too.  Maybe not financially, but socially.  Heck, I’ve still got some of the debt to prove it.  And, I’d bet that there are plenty of you who do too.

Replace the Joneses.  – click here to tweet this.

The only real cure, as many of my fellow personal finance bloggers will attest, is to give up chasing the Joneses.  To stop trying to gain their acceptance, and to let the jealousy go.  But, something that deeply ingrained into our human nature isn’t easy to do.  I’ve gone through times where I’ve done really well with not caring what the Joneses are doing.  And the next thing I know, I walk around the corner, and there’s one of them.  And it comes flooding back in a momentary flash of natural instinct.  Before I know it, I’m looking at big fancy houses that I don’t need, eating at restaurants all the time, and buying gadgets like crazy.  And then my senses return, I realize what I’m doing, and the remorse comes.  Remorse for forgetting that I don’t need that big fancy house.  Remorse at the money I’ve squandered.  And remorse at the lack of will power I displayed.  In times like that, I try to remember that it’s only natural to feel those pangs of jealousy and the need for acceptance.  And I try again.

Giving up the Joneses isn’t an easy thing to do.  In fact, it’s nearly impossible to do.  What you’ve got to do is to replace them instead.  Get a different tribe.  That ladder climbing, socialite-ing, money spending tribe isn’t the only one out there!  Just like our ancestors, the modern human race is divided into many tribes.  Find one you want to be in.  Find one whose leaders are living the life you really want to be living, and gain your acceptance there.  Surround yourself with people who have the same passions as you do, and make them your tribe.

Replace the Joneses.

img credit: Jaguar Ahlan! Masquerade Ball 2012 by jaguarcarsmena on Flickr.