Words of the Financially Challenged

This is a guest post from Pinyo of Moolanomy. If like what you see, please consider subscribing to his RSS feed.

I have been trying to help someone that I know improve her financial future. Unfortunately, she seems to be stuck in a self-inflicted financial ineptness that’s beyond rescue. Somehow, she always come up with some lame excuses when it comes to money.

“Hey, I can always make more money.”

She embodies the paycheck-to-paycheck lifestyle. It seems that whenever she wants to spend money, she’ll say something like this. I’ve tried to explain to her that this line of thinking is foolish. Her income will come to a grinding halt if she loses her job, gets sick, becomes disabled, etc. I shared several ideas on how she might protect her ability to earn money, but none of them seems to matter.

“There are just two more things that I want, and then I will start saving money.”

Oh, really? Every time we have a conversation, it’s always one or two more things and then she will start to save. For some people “wants” are a bottomless pit, no matter how small they make it appear. The truth is, if you don’t make “saving first” a priority, it will never happen. There is no such thing as saving unspent money; especially, if she doesn’t believe in budgeting.

“It’s only $10 a month.”

Little things do add up. This is one of the reasons why she can’t save any money. Sure, each membership and monthly fee only costs $10-20 per month, but she has about a dozen of these going — e.g., premium channels, web-access for her cell phone, an online movie membership, satellite TV, satellite radio, magazines, Xbox Live, etc. Sometimes, you just have to say enough is enough. Do you really need all these things to keep you happy?

“The new model just came out.”

Why is it that some people feel the need to upgrade every time there’s a new model? To me, her “old” stuff works just fine. Heck, some of the stuff she wants to replace is newer and better than the things that I own.

Does this sound like anyone you know?

25 Responses to “Words of the Financially Challenged”

  1. Anonymous

    @Danielle and Minimum Wage

    It’s just that the people here realize that “paycheck to paycheck”, in the traditional meaning of the phrase, is not a money problem but a mindset problem. In fact, because it is a mindset problem, more money actually doesn’t change the situation. America is full of people who lived paycheck-to-paycheck on $12k a year as a single person out of high school, and who thirty years later still live paycheck-to-paycheck on $65k a year as a couple with grown kids.

    What the people on this blog are saying is that if you reversed their fortunes with someone who is living paycheck-to-paycheck, their situations would both immediately begin to reverse themselves and would eventually end up exactly where they started. The perpetually poor person would ruin their new-found financial standing with poor decisions and overspending, and the FCN reader would immediately begin to work their way back toward sound financial footing. Some people here are even noting that they make less than people who are doing far worse financially.

    “Shoestring” isn’t a word that we just accept. What are these people who live on a shoestring eating? How do they spend the rest of their money? We don’t want to be in their situations – we prefer ours. But if we *were* in their situation we would be off of “shoestring” finances in months. Some of us know that because we’ve already been there.

  2. Anonymous

    Was my post too political for a financial forum or something? I have seen the Haves vs the Have Not’s discussed here before.

    Either people agree and feel no comment is needed, or they don’t agree and they are disgruntled by my comment enough to not post.

    I guess I expected a response of some sort because I check back every couple of days.

  3. Anonymous

    I think we all can agree that the term “living paycheck to paycheck” has begun to have 2 very different meanings.

    Like mentioned above it is when someone gets an unexpected medical bill or car repair, and then they have to decide to pay for that, buy food or fill up their gas tank for the week that illustrates the negative “paycheck to paycheck” in a way I have never experienced in my adult life. (In college credit cards bailed me out sometimes so I know how it feels).

    I think its unfair that people in the PF world have adopted this term for themselves because they are building up a 401K and other assets which they can draw upon when major or unexpected things come up. You are living paycheck to paycheck in the sense that you allocate all of your money each pay period, but if you are unlucky enough to incur a large expense like medical bills from a car accident, you have resources to draw from.

    People truly overextended and living paycheck to paycheck don’t.

  4. Anonymous

    Yes, karla, zero-based budgeting!!! I do it too. But instead of covering the necessaries first and then just doing whatever with the rest of the money (which was really easy when I used to get paid monthly), I track on a customized budget spreadsheet of my own making, so I am very conscious of my money management and cash flow situation. Helps me toe the line and not be too self-indulgent.

    The phrase living paycheck to paycheck sounds like it’s a depressing problem, but it isn’t. I will do so until if and when I decide to retire. (I love my work.) Living paycheck to paycheck is only a terrifying problem to someone near retirement who hasn’t bothered to accumulate capital throughout their lifetime. Then that would suck. Because the next step is living Social Security check to Social Security check. <–I don’t want to do that, so I’m saving/investing as if Social Security didn’t exist. SS checks would be the frosting and not the cake in my old age plan.

    If I already had all the capital I needed to live on, I would still work and live paycheck to paycheck at this time in my life. Living paycheck to paycheck has nothing to do with net worth!

    I also live breath to breath and meal to meal and shower to shower and Mass to Mass…these aren’t problems. Pick your recurring event and it can substitute for “paycheck.”

    In fact, the phrase got me thinking and I posted about it on my blog, the Undercover Millionaire.

  5. Anonymous

    This post reminds me of a stereotypical overspending American. Of which I am one, but not as capricious as this woman you know.

    Have you tried showing her details of what her financial life on paper looks like? For my husband it was really effective for him to see the difference between what comes into our household budget and what goes out. It was a straightforward spreadsheet to make and to see that negative number helped drill the point home. We were spending more money than we made and we were doing it every month.

    Also I have recently been made aware of the carbon impact of eating a fast food hamburger (http://channel.nationalgeographic.com/channel/sixdegrees/).

    Maybe if the edge of financial ruin does not get through maybe the environmental impact of buying new gadgets when the old ones still work, high frequencies of dining out, and the electricity to run it all might get through. Its shaping up to be the green generation that might actually be able to make a positive impact, maybe she is already interested in being more green? Being frugal often goes hand in hand with being environmentally friendly.

  6. Anonymous

    kentuckyliz = you are describing a zero based budget, which I use, too! Every dollar has a purpose, nothing is just frittered away or unaccounted for (when I’m being good).

    Now, the key is that the FIRST bill paid is the tithe, and then the Roth and long term savings. After that, it’s gravy until the end of the month when any of the ‘envelopes’ that have money left in them are emptied into the vacation fund to rev it up a little more than the minimum that is budgeted.

    Yep, I’m living from paycheck to paycheck – but in the RIGHT way!

  7. Anonymous

    Everyone lives paycheck to paycheck–and that is the smart thing to do, rather than touch accumulating capital. So that expression is meaningless. What happens to their net worth over time while living to paycheck to paycheck is the important thing. We will someday reach that pinnacle point when our pile of assets is large enough to generate more income in retirement than in working.

    For some people, living paycheck to paycheck would be an improvement–because they’re living beyond their paycheck.

  8. Anonymous

    Spot-on post.
    I can count on one hand the number of friends that I have in the ‘real world’ who are making sound financial / frugal decisions. So many folks are living paycheck-to-paycheck AND bad-decision-to-bad-decision.

  9. Anonymous

    This sounds like my mother–“once we pay for this, we can start working on paying off the credit cards.” I’ve talked to her many times through the years about how all of the little expenses add up to large amounts over time. It appears that she finally woke up once she kept track of how much she spent on groceries in January–$600 for two senior citizens. She finally is using Quicken and keeping track of everything while they try to pay off nearly $70K of debt in their 70s. I hope that she will keep her focus this time.

  10. Anonymous

    Yes, regular saving is a nice habit like anything. I failed to recognize it when i earn much, but right now i feel embraced and guilt. I will sure start savings from my first month itself, when i get a job.

  11. Anonymous

    I alluded to a couple I know who are like this in my post on Getting Out of Debt Part I.

    The people I know have in the past won $50,000 on a scratch ticket and gone bankrupt. In that order. I think perhaps chronic indebtedness is a lot like any other kind of addiction: you have to want to recognize that you have a problem before you can begin to recover. Some people simply refuse to acknowledge that they have a problem in the first place.

  12. Anonymous

    Oh gosh, that sounds like my mother-in-law, but MUCH worse. My in-laws make awesome money, especially considering that their house has been paid off for 10 years and they have no car payment (our family business pays it). She blows hundreds of $ a week on junk she never even uses, but they have no retirement fund! NOTHING!

    My husband and his father are in business together, so the in-laws just plan on our business supporting them when he retires… So, we’re basically their retirement plan.

  13. Anonymous

    It is so difficult to talk to people about money, even if they are very close relatives. Most people who have troubles keeping up with their finances become hostile/defensive when you ask them why they don’t do the smart thing but keep on piling up debt. These people are willing to sacrifice their financial future for the sake of always being right which is not smart IMO…

  14. Anonymous

    I recall when my brother received a brand new Ford Ranger pickup as a gift for his graduation. At that point he owned a vehicle free and clear, albeit a basic equipped model.

    6 Months later he was trading it in on a more stylish coupe that didn’t really suit his needs. Another 6 months and he traded that in on a new VW Corrado. When he got bored with that he moved on to another new car.

    By the time he was done, he was driving a nice car but one that was fully financed with only a minimal downpayment. I tried to explain how each successive purchase and the subsequent depreciation was destroying the initial value of his gift, but he just shrugged it off.

    Some people just don’t seem to figure out the impact of get it now type behavior and nothing is going to make them change the way they approach spending.

  15. Anonymous

    Ah yes, I know several people like this. Most of them acknowledge that they need to start saving, but never get around to it. I’m not sure what the answer is. I don’t think it’s more education because these people are perfectly aware of the negative consequences of their behaviour.

  16. Anonymous

    “It’s only $10.”

    I shortened that one a little because I hear that statement as well. Every little doodad they want is “…only $10 (or $20). What’s the bid deal.” They subscribe to the notion that a balance in the checking account means they can keep spending.

    Suddenly the cell phone bill with $50 in overages is a “surprise” they can’t afford. First let’s talk about why you didn’t know you were over your minutes. Then we need to talk about why $50 sinks your financial boat.

    I feel sorry that people struggle, but when it’s clearly self-inflicted I can’t empathize. I work hard and practice frugality so I don’t have to make those hard decisions between buying baby formula or paying the electric bill…

  17. Anonymous

    It sounds like EVERYONE I used to know. (including myself). People aren’t going to change until something grabs their attention. Unfortunately, it’s usually something bad that does the trick.

  18. Anonymous

    So much of this is spot on. I know people who have 4 or 5 subscription services, live paycheque to paycheque, and constantly upgrade their stuff. Drives me batty, because I know in 30 years they’ll be in the same position they’re in now.

    I try and help, but I can’t fix everyones problems.

  19. Anonymous

    “There are just two more things that I want, and then I will start saving money.”

    It’s really amazing (and sad) how many people share this mindset (and the others mentioned, too, but this one seems way too common). And, it also seems like the hardest one for some people to get past.

    Great post Pinyo!

  20. Anonymous

    I figure you can’t help those that can’t help themselves.

    My coworker’s boss told her that she can get reimbursed for her mileage. She said “It’s only a few dollars. I’m not going to bother.” I told her that it’s a few more dollars she can put towards her credit cards. I think she may think about it now, but I doubt she will. She doesn’t WANT to get out of debt.

  21. Anonymous

    vje – that’s sound very familiar

    Nickel – thank you for the opportunity to guest post on your blog. As I reread this, I just recall another famous phrase: “You never know what’s going to happen tomorrow.” Instead of using this as a justification to buy the right insurance and protect her future, she use it to spend everything she can so that she won’t miss the opportunity to do so…when something does happen.

  22. Anonymous

    I have a sister inlaw who is ridiculously horrible with her money. In the past 4 years she has borrowed several thousand dollars from various friends and family, and has withdrawn money from her 401K to cover debts. She keeps repeating the same bad habits over and over and refuses to see the part she plays in the problem. She even blames the government and taxes on her plight!! To top it off, her and her husband made approx. $25,000.- more last year than me and my husband and they still have debt. While we live frugally, have no debt, have a healthy emergency fund, and invest in 401K’s and IRA’s they are scrambling to cover the bills and essentials. The most frustrating thing is that I have sat down with her several times trying to teach her how to live below their means, given excellent suggestions for reading material, and suggested pf blogs to help her learn – but to no avail! I think some people just don’t want to look in the mirror.

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