Financial style

[William]

Financial styles can vary markedly and are often a hotly contested aspect of an interpersonal relationship. The thread topic is about sharing one's financial style, not characterizing the styles of others in negative, disingenuous or pejorative terms. This is otherwise known as civil discourse, something adults are generally well-versed in.

 

Focus on the topic. Good topic. That is all.

[zengirl]

Thanks, William!

 

thatone, you raise some interesting points about debt in general (your style is of a less risk-adverse mindset than my own, but I know it works for some), but you haven't yet answered the question. I'd be curious to hear about the intersection of financial style and relationships in your life, if you'd like to share!

[EasyHeart]

I posted a while back about not caring much about a woman's income and caring a lot about her outgo. I think that's the best way I've found to look at it.

 

I know people who make $500,000/year and live paycheck to paycheck and people who make $25,000/year and sock away a lot of it. I don't think income has anything to do with your attitude towards money. Some people just want a lot more stuff than others. Some people want a big house, others want a fancy car (and some what both). Some want to travel and vacation a lot. Some people collect stuff. Some people buy lots of stuff for their kids. Some won't settle for less than the "best of everything" and spend $200 on a bath towel. Some won't buy anything that isn't from France.

 

I think a lot of peoples' spending is driven by a desire/need to compete in displaying their status. (That's unconnected to income, btw.) If you don't care what other people think about you, you don't have as many stimuli to buy stuff.

 

My girlfriend is pretty cheap, though I'm cheaper. I think that's good, because if it hadn't been for women in my life rolling their eyes in disgust, I'd be perfectly happy still living with a futon and some homemade shelves. I just don't care about that kind of stuff. I need a comfy chair with good light to read in and a little TV and I'm perfectly happy.

 

Most of the women I've dated (or even met) have pretty high expectations for their lifestyle. I don't really care too much, but I make a point of trying to find out what they think is important. If she'll never be happy with less than a 4000 sq. ft. house in the best neighborhood in town, chances are we're not going to mesh on a lot of levels.

 

I haven't carried any debt since I paid off my school loans in my late 20s, but I haven't needed to. I don't like the judgmental attitudes some people in this thread have had, though. Accidents and emergencies happen to good people all the time. People get sick or hurt through no fault of their own, and if you can't work you can't earn. I don't condemn people for that.

 

I remember seeing a lecture by Lester Thurow many years ago where he said something like this: "The best way to become rich is to not have anything bad happen to you. If you don't have to deal with illness, accidents or divorce, chances are you'll be very well off. If you have to deal with any of those, chances are you won't." That's just reality.

[zengirl]

I haven't carried any debt since I paid off my school loans in my late 20s, but I haven't needed to. I don't like the judgmental attitudes some people in this thread have had, though. Accidents and emergencies happen to good people all the time. People get sick or hurt through no fault of their own, and if you can't work you can't earn. I don't condemn people for that.

 

I remember seeing a lecture by Lester Thurow many years ago where he said something like this: "The best way to become rich is to not have anything bad happen to you. If you don't have to deal with illness, accidents or divorce, chances are you'll be very well off. If you have to deal with any of those, chances are you won't." That's just reality.

 

I think your view is close to mine, EH. I think looking at the outgo and particularly the expectations and reasons for that outgo is a good way to go about it. You're right that people can be wasteful with money at all income levels. I'm not quite so cheap as you, in sensibilities, but pretty darn close. Hubby is a bit spendier, though still has no desire to keep up with the Joneses, and I think that's good --- I really can go overboard with saving and kind of forget life-quality at times, so we keep each other in check.

 

And this is a very good point --- my hubby's debt never bothered me because he didn't spend it on something frivolous. He spent it on an education and got a career with that education. A lot of people have to do that, in my generation. I was lucky to get a full scholarship to undergrad --- what I had for undergrad is not available in all states so it's really a crapshoot depending on what state your parents live in.

[Emilia]

I agree with EasyHeart as well. I'm quite stingy and I like stingy guys because to me feeling that we have control over finances is important. I come from a family that never understood financial planning, we either had famine or feast.

 

A balance and a good quality life style matters when you work hard for it, I think not feeling guilty constantly is important. However, I would struggle with someone who felt being materialistic mattered much. Partly because I lived in Africa where we all survived on very little living in the bush (it does teach you to be thrifty I tell ya!) and partly because keeping up with the Joneses is an ugly attitude.

 

I dated one guy with serious potential who had a different attitude and was quite irresponsible. Not so much spending beyond the means but not saving, not seeing the importance of planning for the future, etc. We didn't last that long - this was one of the reasons. I tend to like men who are quite disciplined and have their s**t together.

[EasyHeart]

And this is a very good point --- my hubby's debt never bothered me because he didn't spend it on something frivolous. He spent it on an education and got a career with that education. A lot of people have to do that, in my generation. I was lucky to get a full scholarship to undergrad --- what I had for undergrad is not available in all states so it's really a crapshoot depending on what state your parents live in.

 

I like the old saying, "Never borrow money for a depreciable asset". Borrowing for an education that increases your earning power is smart debt; borrowing money to buy a car or clothes is not.

 

There's always risk involved in anything, of course. I borrowed a lot to go to grad school, but it paid off because I love my career and found a job where I'm very happy. For other people I know, the risk didn't pay off because they ended up not liking the work or not finding a niche in which they could thrive.

 

But life is all about risk; otherwise we probably would never do anything! We just have to try to take smart risks.

[zengirl]

I like the old saying, "Never borrow money for a depreciable asset". Borrowing for an education that increases your earning power is smart debt; borrowing money to buy a car or clothes is not.

 

There's always risk involved in anything, of course. I borrowed a lot to go to grad school, but it paid off because I love my career and found a job where I'm very happy. For other people I know, the risk didn't pay off because they ended up not liking the work or not finding a niche in which they could thrive.

 

But life is all about risk; otherwise we probably would never do anything! We just have to try to take smart risks.

 

Yes. I've had to borrow for cars before -- I had to buy a car when I was 21 and just started working, and I hadn't had time to save up 10K for a decent one yet. (I needed one with decent mileage and no issues because I drove ALL day in my first job, and repairs or bad mileage could've kicked my ass). In my case, at a low interest rate, that was a good investment too. It was paid off within a few years, and I made a lot of money in that job. So, while I like your rule of thumb, an auto loan never bothers me if it's for a normal car and a person doesn't need to trade up every few years (so many people I know do this -- they don't even finish their first loan off!). It's hard to save up enough money when you're young to buy a car outright, and the price of clunkers is often not worth the subsequent repair hassle and costs.

 

Auto debt (if needed), medical debt, student loan debt, and mortgage debt are the types I can see some merit in/acceptance of, generally. CC debt that the person doesn't acknowledge as a mistake or didn't come from a true emergency --- that would startle me, certainly. My mother is the most anti-debt person in the world. I think she was wrong, though, in her absolutist position. Once I abandoned that position, I had a lot less stress.

[EasyHeart]

Like the Pirate's Code, it's more of a guideline than a rule.

[thatone]

You obviously prefer the low cost debt over the high opportunity cost investment to finance something. Not exactly rocket science. Good job on finding the awesome investment, but realise you'd be very lucky finding more of them in the future.

 

SPY calls at a strike ~2.5% above the current price a year out have a 8% premium. that's 10.5% on the stereotypical 'long term' market investment that most people have in their IRA. that is putting zero effort into research or trying to predict the market's direction, just doing what your broker would do (except, doing it yourself rather than paying him to do it).

 

It's not 07 anymore. It's hard to finance a company, and in most cases you'd be personally guaranteeing most of the debt. If you're going to pay up out of your own pocket if your company can't, you might aswell put up the money yourself and pocket the interest.

You also seem to agree with this in your next post:

Cliffs: in practice, putting your own money in a company is unavoidable. Anyone saying otherwise is wrong.

 

indeed, all the more reason not to abandon the cheapest debt there is (a home mortgage or car loan).

 

If you can't run your own personal finance worth a couple tens of thousands a year better than a group of very smart people can manage billions and billions worth of equity in a global scale economy, then you're doing something wrong. I also fail to see how a person can not put "all his eggs in 1 basket", if that basket is his life of which by definition he only has 1 and how creditworthyness comes into play without even mentioning interest (obviously you would finance most of your assets at 0% interest ldo)

 

no, you can't outperform goldman sachs with your own money. but you can still earn more of a return on cash than any other asset. that's my very simple point. and it thus becomes a bad idea to pay off cheap debt with cash.

 

 

because paying 15% a year on ccdebt is way worse than paying 3% a year on a normal loan.

 

 

And that's unfair from them, right? They provided you with the liquidity that you needed in return for a payment plan, in what universe do they not have the right to recoup their money if you decide to not follow the agreed payment plan? You might aswell take goods from a store without paying for them and say it's ok because the owner wouldn't think it's wrong to call the police and have you thrown in jail for it if he could.

 

sorry, they don't hand out merit badges for being nice to credit card companies. given a choice between losing my house and losing my credit rating/credit cards, they would get my initial answer..."go f themselves".

 

your credibility goes out the window when you liken credit default to theft.

 

that's a political point, not a rational financial one.

 

save it for november. maybe if you do everything your politician's contributors tell you to do and think they'll send you a christmas card....but i doubt it.

Edited April 25, 2012 by thatone

[spookie]

I feel like there is a wide range of "styles", or fiscal prowess, for those in the saver category. My own financial style is still evolving. While I have no debt and make a point to live well below my means, its not difficult to do even without being organized or feeling like I am depriving myself, because I make more than would be easy to spend, and more than most of my friends.

 

However, i am rather ashamed to admit that i sont have a good understanding of my cash flow, and my investment skills leave a lot to be desired (I give my money to my dad to invest).

 

My bf is in a similar position- no debt, a saver, but disorganized and poor investment skills. Financial recklessness would be a deal breaker, but he is not reckless, just has a lot of room for improvement. We are both in our twenties and for the time being, I'm ok with where we are.

[carhill]

Retrospectively, I've noted style can change as one lives, evolves, experiences life and learns from experience.

 

Looking back, I was a slave to my own frugality, markedly due to being socialized by Depression era parents. That has moderated over time. Dealing with the costs of caregiving and later a divorce tossed the realities of debt into my lap and I had to learn how to become comfortable and positive about such dynamics in order for them not to own and ruin me. Life is imperfect. Humans are imperfect. Sometimes those results match up. Style synergy.

[veggirl]

I think my BF and I have similar financial styles. He makes more $ than I do, probably has more saved...not sure about his debt level but I don't think he has much...I've never asked though, just going off bits of accumulated information. He has more disposable income than I do, that's for sure. I am more of a spender than he is on little things--clothes for example! He makes more big purchases. All in all though, there isn't a huge discrepancy in our financial styles.

 

My first serious BF though...damn he was ridiculously bad with money. I put up with it because I was 21 and honestly didn't think beyond "today". Now...no I couldn't be with someone who was bad with money, I'm too old for that I don't worry too much about how much debt someone as, at this age it could've been racked up at a young age, I don't hold it against a person, I do concern myself with how they handle their current $$.

[Ursa]

With several financial threads, on the board, I would like to ask three questions:

 

1. Is your financial style aligned with your partner (if you have a serious partner)?

 

2. Was it always aligned? Did this change over time? Experiences, etc?

 

 

 

 

1. More or less, I think. I am definitely more whimsical than he is, not as good at saving and financial planning, and I care more about the ambience of our home than he does, but I'm good at battening down the hatches and spending almost NOTHING when/if necessary. He's a bigger earner and has a much better head for long-term financial planning, but he's actually not as good at day to day budgeting. We both have our weaknesses, but we also both have some self-control and we are both content to live within our means. We live pretty simply and pick something to splurge on once in a while, a trip or a new big gadget. We are both careful with credit and we both came into the relationship owning property. We both just thought it was the most natural way to go, joining all our accounts.

 

2. We have grown together somewhat on this over time. He has loosened up a little bit about spending on things he doesn't care about, like furniture for the house--when I met him he just had two desks with a ton of expensive elite technical stuff, beds for himself and his daughter, shelves for her books and toys, and they lolled around on floor pillows in the living room and ate picnics on the floor, because he just literally does not give a crap about the environment of his house as long as it's reasonably clean, he has somewhere to keep all his electronics, and they can sleep. Ultra Spartan, with a dash of Inspector Gadget. Every other stick of furniture we own now either came with me or was purchased by me over time. We still have picnics on the floor sometimes but because we're choosing not to eat at the table, not because we don't have a table. For my part, I have become better at thinking about long-term financial plans. I'd say we've both done a lot of work at thinking about money in terms of our family, instead of our selves. We work together when we need to figure out a budget, compromising to keep both of us reasonably happy.

[OliveOyl]

My mother is the most anti-debt person in the world. I think she was wrong, though, in her absolutist position. Once I abandoned that position, I had a lot less stress.

 

That reminds me. My mother has never bought on credit as well. If she even owns a credit card, she never uses it. Well last year she got into a dispute with a former apartment landlord about final charges for move-out/clean out expenses after vacating an apartment. They sent her a final bill which she refused to pay. They threatened to tarnish her credit record, and she just laughed and laughed -- for her it's a non-issue. That's one benefit of living without debt (and having sufficient savings for emergencies)... no constant worry about protecting one's "credit rating."

 

Back to the topic... At least my BF and I seem to be somewhat agreement about spending. I've never seen him buy anything very extravagant and we are both currently in "frugal" mode, happy to spend the evening with popcorn and a movie from Redbox. (It was his ex who was the consumer... but that is a whole 'nother topic... )

[zengirl]

That reminds me. My mother has never bought on credit as well. If she even owns a credit card, she never uses it. Well last year she got into a dispute with a former apartment landlord about final charges for move-out/clean out expenses after vacating an apartment. They sent her a final bill which she refused to pay. They threatened to tarnish her credit record, and she just laughed and laughed -- for her it's a non-issue. That's one benefit of living without debt (and having sufficient savings for emergencies)... no constant worry about protecting one's "credit rating."

 

Back to the topic... At least my BF and I seem to be somewhat agreement about spending. I've never seen him buy anything very extravagant and we are both currently in "frugal" mode, happy to spend the evening with popcorn and a movie from Redbox. (It was his ex who was the consumer... but that is a whole 'nother topic... )

 

OliveOyl! Thanks for weighing in and for writing the post I quoted in the OP. Really got me thinking.

 

Yes, I could never be with someone who was TOO spendy. Hubby spends on things like more expensive groceries than I'd like or better household items than I need, but he doesn't need to go out every night, etc, or buy too many real extravagances. His computer equipment is fairly extravagant BUT he uses that to do work on the side which more than paid for it.

[EasyHeart]

As long as you're not borrowing money or have a lot of debt, it's fine to splurge on some things. I'll shop around to save 20 cents on celery and I'll buy 5 bottles of laundry detergent when it's on sale, but there is no way in hell I'm buying a suit off the rack.

 

I AM NOT A SAVAGE, DAMMIT!!!

[serial muse]

1. More or less, I think. I am definitely more whimsical than he is, not as good at saving and financial planning, and I care more about the ambience of our home than he does, but I'm good at battening down the hatches and spending almost NOTHING when/if necessary. He's a bigger earner and has a much better head for long-term financial planning, but he's actually not as good at day to day budgeting.

 

This resonated with me...both my H and I are pretty frugal and neither of us really likes shopping much. I am more inclined, though, to buy something whimsical for the heck of it from time to time (meaning, for example, a small tchotchke-type thing, not a big ticket item like a piece of furniture or an Xbox or whatever).

 

But for household expenses, I'm also more inclined to look around for the best prices and use coupons, whereas H would much rather spend more money if it means spending less time.

 

This is also true of traveling - for example, when it comes to hotels, he'd rather just stay in a Motel 6, because it takes 5 minutes to make the arrangements. I'm willing to spend more time hunting around for deals at nicer hotels with a similar price.

 

On the whole, though, our overarching goals are aligned, so we don't really fight about money; we consult each other on big-ticket stuff and generally agree about savings and budgeting.

[zengirl]

I'd say we've both done a lot of work at thinking about money in terms of our family, instead of our selves. We work together when we need to figure out a budget, compromising to keep both of us reasonably happy.

 

That's a really good goal and crucial to managing money as a couple, I'd imagine!

 

Retrospectively, I've noted style can change as one lives, evolves, experiences life and learns from experience.

 

Looking back, I was a slave to my own frugality, markedly due to being socialized by Depression era parents. That has moderated over time. Dealing with the costs of caregiving and later a divorce tossed the realities of debt into my lap and I had to learn how to become comfortable and positive about such dynamics in order for them not to own and ruin me. Life is imperfect. Humans are imperfect. Sometimes those results match up. Style synergy.

 

Thanks for that perspective, carhill. I've also had to try to cope with financial difficulty and less savings/more debt than I wanted at times. I climbed out of it and remained much the same in my squirrel ways, but a lot less anxious about finances. Honestly, being "afraid" of debt and always feeling like I could be financially wiped out at any minute was worse than when I was wiped out!

 

But for household expenses, I'm also more inclined to look around for the best prices and use coupons, whereas H would much rather spend more money if it means spending less time.

 

This is how my H is, as is my step-father and every man I've ever seriously dated, so it's the only financial dynamic I've ever experienced as a family. I don't think it's necessarily because all men are like that (EH does love saving 20 cents on celery, apparently) at all, but rather because the men I attract are like this. Hubby LOVES that I can find great vacation deals, but he'd never ever bother. He'd just pay a premium or not go as often. Like my mother, I can plan a vacation for far less than most people can imagine, and like my mother, I use that skill to vacation more, rather than simply save money.

 

That's what I splurge on. Hubby splurges more day-to-day and in little/medium ways ($60 video game he plays twice, etc) but I do spend a lot on travel. Never anywhere out of my range, though.