Psychology of Money: 29

For some readers the debt stats I quoted yesterday don’t mean much. Maybe your earnings, assets and debts involve numbers that make the national averages look harmless. Or maybe you’ve a very balanced budget, but today I’m still focused on debtors.

In the past when I’ve been “sorting my finances” sometimes I’ve sunk considerable time tracing backwards to better understand what numbers contributed to my current (im)balance. And others times I haven’t. Better to crack on with fixing the problem at hand.

One of the simplest habits I once found stupidly hard to stick with involved noting down what I spent my money on … as I spent it. Not just daily, but as it left my wallet.

In my twenties I had a friend that used to do this. We’d go out for a few drinks too many after work and at the end of the evening she’d take out a little notebook and a miniature pink pencil and in teeny writing insert the cost of her half of the bill. I thought she was mad.

Years later turns out this single habit is a lot more helpful than I ever would’ve guessed. It’s also another tenet of D.A. They believe that as soon as you start to do this, even if nothing material changes in your circumstances, some sort of higher power — however you may wish to define that, comes to help make those numbers balance.

This is not to suggest that D.A. operates on the same principles as The Secret (i.e. just ask the universe and you shall receive.) They don’t. But this simple act achieves more than just giving us a detailed up-to-the-minute cash consciousness. At least in my experience. And in the experience of a group of people who have invested serious time and energy to change their spending ways.

So, is knowing how we got into debt important? No, not really says D.A. Knowing the how-come’s doesn’t help with now-what?!

But in case you’re curious, here are some of the big factors that contribute to compulsive debting (which covers overspending and under-earning):

  1. Problems accepting reality – escaping into shopping and other activities that involve spending in an effort to avoid our problems including, ironically, our financial problems.

    I once had a shopaholic friend. Her debts used to cause her such distress that she would medicate with some retail therapy. With other people it might’ve been alcohol. And even though I could never relate to her shopping or hoarding, I could see that for her it seemed the only instantly effective balm. Needless to say, the effect wore off fast and it made her financial reality a total nightmare. It’s one thing getting into debt to get yourself through college, it’s another to double it by competing with Imelda Marcos’ shoe collection.

  2. Emotional insecurity – Do you still feel like a kid and find it hard to accept that you have grown up responsibilities? When it comes to buying white appliances I often feel this way. I think sheesh, I have to fork out this much to buy something required for chores? I feel the same way about going to dentist. It’s like I’m waiting for my mother to drag me there. Even though we stopped living on the same continent about twenty years ago.

    Plenty of people have areas in their life (or even all areas of their life!) where they can’t quite grasp that no one is going to come to the rescue. Serial debtors often operate on the barely conscious assumption that at some point someone will help them sort of the hole that they’re digging.

  3. But the biggest factor of all? STATUS. No matter how independent-minded you think you are or even actually behave, one of the things we still have in common with the animal kingdom is that whenever we interact with another person we are busy assessing or confirming our status and theirs. And what’s the most obvious way to overstate our status? to pretend to be something we’re not? By keeping a lifestyle and having materials on show that we cannot afford.

    Even for those of us who really enjoy a low to middling status compared with whoever we deem to be our peers, just keeping your nose above water often means going well beyond your means (since in general our entire society is totally debt ridden and materialistic.)

    Now if you think this doesn’t apply to you because thankfully you’ve made it to the big bucks or because you voluntarily downsized … think again. Big bucks people are often stuck in a spiralling misery of lifestyle costs that are not easy to opt out of (e.g. real estate, children’s education.)

    And smug down-sizers? Ask yourself how you manage your status today? Do you compare yourself to a different group of people than those you once called peers? Have you moved to another country or areas where you are relatively better off? Do you start competing with others over how many hours you don’t have to work, how little you have to spend? Have you become an inverse snob?

Far be it from me to say we’re all so predictable and we’re so similar. Or to pretend to know better than you do. But the truth is where once I was only fascinated by what makes each of us different, the more I learn, the more I believe that what we have in common in much more interesting.

And ANYWAY if you can relate to the debt problem, then it doesn’t really matter why you’re in a mess. Just that you are.

Happy Bank Holiday to those of us in countries celebrating a day off tomorrow. Hhmmm… I wonder how much that’s going to cost the US and UK economies?

 

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