Coming clean about money: 5 financial pitfalls

I originally wrote this post about a year ago, but since I’m  focusing on money management this week, it seemed like a good time to bump it back up. Would love to hear your thoughts!

My parents separated when I was five. Up until then, according to my siblings, we’d had a nice, if not flashy, middle-class lifestyle: a newer ranch house with harvest gold appliances, two used cars in the driveway, braces on the teeth and new school clothes.

I don’t really remember that phase of my life.

What I do remember is Phase 2: Extreme Frugality.

After the divorce, my mom – who had been a full-time homemaker for 15 or 16 years – decided to open an in-home day care. I don’t know exactly how much my mom earned in those days, but doing the math, I know it couldn’t have been more than $10,000 or so per year, and that was during a good year. And with four of us in the house at the time, that was not much, even in the mid-80s.

Mom refused to sign us up for any kind of social assistance. Instead, she spent nothing she didn’t absolutely have to. She pinched pennies and made do in a serious way. And though I knew from a young age that I didn’t have as many new toys as the other kids and wondered why all my clothes seemed a little out of date, I didn’t feel deprived. I had a cozy home, good food, enough toys, and a packed bookshelf.

But when I got a little older, I began to notice in more detail the differences between myself and other kids. How come I couldn’t get some new loafers with the curly leather laces? How about a pair of acid-wash jeans I could properly tight-roll, instead of those lame-o hand-me-down green cords?

I also began to notice the toll that broke-ness had really taken on my mom. I have one very clear memory of burning my inner ankle on a motorcycle exhaust pipe while taking a ride behind a family friend. My mom had kept on a brave face while inspecting the wound, but later as I sat in a tub of Epsom salts, I heard her crying and confessing to somebody on the phone that she didn’t know what to do – we had no health insurance, and she had no money to take me to the doctor.

It was at that point that something clicked in my brain: Not having money is actually not fun. Money, I realized, equals options. It buys a certain amount of security. I respected our simple, basic lifestyle, and was proud of my mom for doing so much with so little. But I wanted a pair of acid-wash jeans every now and then, too, and to be able to afford a visit to the doctor when warranted.

Later my siblings and I moved in with my dad. He still had the middle class lifestyle I barely remembered: a nice house, new clothes, modest vacations every now and then. Still not flashy by any means, just more “normal.”

But my dad never talked about money, except in a occasional macroeconomics lesson over a game of Scrabble. I had zero idea how he handled the household finances, or what it really looked like to manage a middle-class income. In my mind, the equation went like this: Dad made more money than Mom, thus, his lifestyle was better, and his worries few. (Which probably was not true at all, in hindsight, but we never talked about it, so what did I know?)

From my mom, I learned that when you have very little money, you have to live very carefully. From my dad, I inherited a strong drive to earn more. What I didn’t learn? How to do both: earn enough to live away from the edge, but to save for a rainy day, too.

I think we all have unique backgrounds that affect the way we respond to money. It’s an emotional issue, and managing our finances well requires more than common sense or head knowledge. It helps if you have been exposed to other people making good choices, and it really really helps if somebody can illustrate all the how’s and why’s.

After a lot of introspection, I finally started to identify our myriad money issues soon after my 30th birthday, when I got disgusted with myself for having an income that, while not huge, I once would have found unimaginable – and still managing to fritter most of it away.

The other day I shared a few areas where I’ve been slacking financially, but of course those details are part of a bigger picture. Here are the pitfalls I identified that have had the biggest impact on our financial messes overall:

  1. “Things will be better when…” syndrome. Katherine commented: “I read a study somewhere that most people think they will be financially comfortable when they reach that next $10K bracket of income. I am no exception- I catch myself thinking that all the time!” I identify with that like crazy. It’s a trap that can keep you from ever really learning to be satisfied and secure right where you are.
  2. Not really understanding what it means to live within a certain income. We live in a culture where lifestyles have become so inflated that most of us are conditioned to a very skewed idea of what it means to be able to “afford” something. And if you grew up in a different economic class than you occupy as an adult, or if your parents simply didn’t talk about money much, it’s difficult to really gauge what kind of lifestyle that 30K or 60K or 90K per year can really afford.
  3. Disorganization. Leah said this in a comment: “…it’s never the AMOUNT of money, it’s where it currently is and my (in)ability to track it.” I can totally relate. Over my lifetime I’ve paid late fees on countless bills that went unpaid while the money languished in my bank account, simply because I didn’t have a system for making sure they got paid. Or overdrew one account when the other had plenty of cash sitting in it. Jon and I would assume the other one had X, Y or Z bill handled, only to find out later that actually, no one did. After years of being so broke we often couldnt pay bills on time, avoiding them had become a knee-jerk reaction. Considering both my husband and I are self-employed, having a solid system for managing money is vital. But it takes time, effort, and an uncomfortable confrontation with Reality to set one up.
  4. Lack of communication. In the comments Stephanie said, “My husband and I had very different ideas of how to handle money based on our very different up-bringings. Add to that the fact that men and women already think differently and it was a formula for disaster. I had no idea how heated our “discussions” over money were going to get.” Yup, yup, yup. Money was such a sticking point with Jon and I that we avoided the topic for a long time and then were constantly in clean-up mode. Bad idea.
  5. Discipline Fatigue. It takes a long time to build up enough savings to cover you if you lose your job (or, in my case, if an important client loses your invoice two or three times in a row…) And it’s not easy to keep doggedly put money away for eventually replacing the car or repairing the roof when there are more urgent (but not necessarily more important) things jumping in front of you, begging for a slice of the pie. I’ve always been more of a sprinter than a marathoner, and keeping my eyes on the long-term prize is probably my biggest obstacle.

So there you have it–my five biggest money pitfalls. They helped me make much of my 20s an unqualified financial disaster, but slowly we have worked on taking control of this part of our lives and I’ve figured out some work-arounds that are helping us keep things more steady.

For me, the first step has been identifying my weaknesses. Without doing that I could have continued to labor forever under the delusion that because I don’t carry credit-card debt, I’m doing just fine. Or that if I could just earn a little more, we’d be all set. Tempting things to believe, yes, but irrational, false, and destructive.

I’d love to hear about your financial weak spots, or whether you can identify with any of mine. Time to come out into the light with me!

**Sharing about finances is particularly soul-baring and sensitive, and I’m going to go hardcore on comment moderation during these discussions. I always welcome disagreement about concepts and ideas, but in order to preserve a supportive and encouraging environment, I will delete any comment that is overly harsh or directly critical of anyone sharing here. Thanks.**

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