The Psychology of Budgeting, Part 4: Personal History

I suspect that most of us who struggle with financial discipline come by it honestly.

(I apologize in advance to my parents, who – bless their hearts – read this blog. But I can’t do this series without transparency, so here goes…)

I grew up in a house with one spender parent and one saver parent – both to their stereotypical extremes. I think it’s fair to say that I overheard my share of arguments about money. And stuff. That cost money.

There were many messages that I took from these overheard arguments, but the overwhelming one was this: Money is a mystery.

When I went to college, I lived fairly frugally. I had my own credit card my senior year, but my limit was only $250. (If only college students today had such limits.)

After I finished school, I packed up my hand-me-down Toyota Celica and set off for Washington, D.C. As a poli sci major, I figured it was as good of a place as any to find a job.

I had $1500 in my checking account and gave myself until it ran out to swim – or sink – in the big city. Realizing the necessity of frugality, I crashed on a friend’s floor and hit the temp agencies my first morning.

Within a month, I had three job offers (yes, 1994 was a very different economic climate!) and was thrilled to accept one of the jobs at, let’s just call it, a prominent pro-Israel lobby.

They paid me $24,000 a year. I thought I’d hit the jackpot.

My credit card limit was bumped up from $250 to $1500. I used it liberally, but almost always managed to pay off my bill each month.

I didn’t have a budget. Nor a savings plan. Nor any real clue about how much I was spending each month in relation to how much I was taking home.

Money was still a mystery.

But my $24K made me feel flush. And for a single 22 year-old living in DC in 1994, it was enough to cover me and my Ann Taylor habit.

Moving to Israel in 1997, the financial doom cloud started to loom a little closer. My expenses were higher and my income was lower. A lot lower.

I altered my life style, but in retrospect, not enough. Somehow, I managed to hang on and avoid the “minus” (checking account overdraft) trap for several years, but eventually – after I got married and had my first child – the money mystery started to unravel.

Apparently keeping up with the Cohens while burying our heads in the sand and assuming it would all work itself out is not, in fact, a money management strategy. As many of you have read, the seduction of credit cards, coupled with a series of poor (really poor) decisions, caught up to us.

The rope of denial was about to hang me.

To unravel it, I had to confront this belief I’d grown up with that budgeting was an exercise in futility. That money was so mysterious, so impossible to understand, so difficult to manage, that why bother trying.

The first step was to become intentional. No more mindlessly swiping the credit cards. No more justifying expenditures with my “it’s only….” attitude.

I had to let go of the opposing spender / saver archetypes that I’d grown up. Those myths were based on emotion. What I needed was facts. Numbers. Objectivity.

By embracing those numbers, I learned two key lessons:

1. Numbers are neutral, so they can’t make me feel bad about myself. They don’t get to dictate whether I am a success or a failure.

2. The numbers of personal finances are really pretty simple. Not mysterious at all, in fact. No high level calculus involved. Not even geometry. Just basic addition, subtraction – the occasional multiplication or division problem. All stuff that I can handle (usually with the aid of a calculator).

I will admit there are still times when the money-is-a-mystery paradigm rears it’s ugly head. I see others with nicer cars/homes/vacations/cell phones and think, “How do they do it? What do they know that I don’t know? Surely we should be able to get some of that, too!”

But then I go back to the numbers. Maybe those other people make more money than we do (entirely possible). Or maybe they have fewer expenses (day school, anyone?). Or possibly they have credit card debt out the wazoo and are worried they’ll end up living in those nice cars if they don’t get caught up on their mortgage payments (also plausible).

The stuff is the stuff, I have learned. How we come by it – and how we feel about it… that’s still a bit of a mystery to me.

But our numbers? They never lie.

{Of course, now I have to figure out how to translate all of this to our three children. Afterall, I don’t want them blogging about us one day.}

One of the things I love the most about writing this blog is the community of commentors. I recognize that this is a private subject, but if you want to share some of your personal history on this post (even as “anonymous”), I’d really welcome that. If you want to write to me privately, I love your emails and would welcome that as well.