- Personal Finance
Debt: Why You Want What You Can't Have
Let me clear up something that seems to be confusing most of America. A roof over your head is a "need". A house that costs 10 times your annual salary is a self-indulged "want". When did such a fine line get drawn between needs and wants? Just the other day I was at the mall (I'm an avid mall walker, not shopper) when I heard a lady announce to her friend that she "needed" new throw pillows for her sofa. What that lady really needs is to be hit over the head with something much harder than a throw pillow. That's a little harsh, but so is America's debt- now that really hurts! The nation is in a financial crisis and people couldn't be more ignorant about their money.
Maybe you're not effected by the financial crisis... yet! You still need to be aware of how your money is spent. Perhaps you have a six figure income and need to maintain a certain "image". I bet I know of someone who makes way more money than you and dresses like he's still a student in college with t-shirt and jeans, (I've seen him in person). Do you know who Bill Gates is? He simply doesn't spend unnecessary money on clothing. Bill Gates is not concerned with his image as a person, because he doesn't have anything to prove to anybody. So even if you feel rich, ask yourself twice what you need to spend money on and who do you need to prove something to. Let's suppose you have to maintain a certain image for your profession, does the profession pay for this extra expense? Subtract what you need to spend on maintaining this image from what you make, and that is your true wage/salary. Maybe it's time to work on your inner beauty instead of your image beauty.
Not to completely exclude myself from the chronic consumer group, I became more aware of where money goes and how the spending can tumble out of control with one slip of a "I need a...". My epiphany came during a college course many years ago on world religion. The discussion was based on Buddhism and the cycle of wanting, getting, and wanting more but never to be satisfied. It was an eye-opener I'll never forget. Simple, but profound to me, someone who almost never wore the same clothes twice. I still understand how spending becomes out of control. First you buy a few items, then you have to buy storage containers or shelving for these items, then you buy a bigger house because somehow you outgrew your smaller one, then you buy another car because the house has a two-car garage and you don't want it to go to waste. There's the cycle- simple in theory, but profound to your wallet. We should be asking ourselves, why do we still want more? What void are we trying to fill?
The million dollar- 29% interest rate, only $20 minimum monthly payment- question is will people learn from this financial predicament? Sadly, I don't think so. Wants and needs are so grossly blurred that I believe people will cut costs on their true needs before they'll sacrifice wants. Our parents helped us financially during our early years out of the nest. When our parents wouldn't bail us out anymore, we turned to credit cards and now the government is bailing us out. Lesson learned...I don't think so.
I've pondered how our mentality got so deranged. Is it that important to keep up with the Jones'? Do we feel we're entitled to more than we can afford? Is our self-worth a mere brand name or image? Or all we all a bunch of spoiled teenagers? That's my theory- it's like high school when whoever had the most, the best, the newest, the prettiest, the coolest, the biggest won the admiration of the other 1,000 pimply pubescent pupils. It reminds me of a recent incident when my friend got a $400 Coach diaper bag and I had just spent $20 on my diaper bag. Miss practicality that I am, I had to ask her if the bag burped him and wiped his ass too. It totes around diapers and spit-up rags for God's sake!
On the topic of kids, I think the guilt that is associated with both parents working has something to do with the chronic spending habits in families. Kids have become very spoiled materially and it seems they receive more hugs from their electronic toys/gadgets than they do from their parents. Do parents know how to interact/ relate with their kids because they're spending so much time away from home and at work? Kids have taken on our agenda of keeping up with the Jones'. They come home from school and say "mom, Sally has a new cell phone, I want one", and you think to yourself, I want my kid to be better than Sally, how dare Sally have a phone and my kid not have one. What are you teaching your kids with this mentality- somebody else has one so I need one too. This isn't teaching her to be herself and unique, it is teaching her to feel like she needs to be the same or better and objects will do the trick. Parents should be teaching their kids to be their personal best, not Sally's best or whoever the competition may be. Point is, watch what you teach your children about money- it flows into other aspects of their life.
Don't forget the psychological component of money- the more you make, the more you spend. I've been guilty of spending what I make. A psychological trick I use is starting an account for my daughter in her name and putting money in there randomly. Also, I do not have easy access to it online- out of sight out of mind. I found it is harder for me to take money out of her account- I feel like I'm stealing from her so I just don't do it. Although, if we ever need emergency money, then I'm sure she would agree to lend it to me so it's a win-win situation. Another trick is to put money away for your dream vacation, the ultimate motivation, and if you don't need the money for other purposes then go. I did this for my trip to Hawaii, but I found out I was pregnant 5 months before the trip deadline I gave myself. so I wisely used it for prenatal care and hospital bills, etc.
If you still need to impress the Jones' and spend over your earning, here are other ways to cut down without detracting from your image: Don't supersize your fast-food order, wear large sunglasses and silly hat to shop brand-name factory outlet stores, wear large sunglasses and silly hat to use a buy one get one free coupon, order "Tall" instead of "Venti" at Starbucks, take homemade leftovers to work but pack them in a trendy restaurant to-go box. Of course I'm being a little sarcastic about all of this because we are in a society where manicures and pedicures are monthly "bills"- a legitimate expense? Are you nuts? I know women who truly think they're necessary.
I prefer to shop like a poor person. I don't get anything, especially clothes unless they flatter me 100%. I don't want any maybe items in my wardrobe. Honestly I'd rather have one expensive pair of slacks than two or three cheap ones that collect dust. You can also try making a list of your needs and wants and I bet the dollar value of your wants exceeds your needs. That might put things into perspective.
Just a reminder of Needs Vs. Wants:
- NEED: Clothing WANT: Brand-name not on sale
- NEED: Love WANT: Hired Help
- NEED: Water WANT: Dom Perignon
- NEED: Point A to Point B WANT: Stylish fully-loaded transportation
WantsI won't be relinquishing during the financial crisis: My gym membership including childcare (my health and sanity) and an occasional Starbuck's coffee (a nostalgic habit that somehow connects me to my tiny chunk of life as a business woman.
**Something I am looking into are stores that have a lay-away program, especially for the holidays. As a child, my parents were never in debt, no credit cards, and my mom used lay-away at stores for any significant purchases. Supposedly stores are starting to bring this back to help reduce credit card use and overspending.
Lay-away is a great psychological lesson for us all.We don't get the item until it is paid off, unlike our credit card purchases where we get the item prior to paying it off. It is good for people to get back to that mentality of earning before spending and hopefully not spending all you're earning.
Fun Fact: Lottery winners are no happier than you or me. Within three months after winning big, they return to their original state of mind/level of happiness- or worse- before they won.
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