Principle #3: Living on the Edge

The Mecklings* were a family that liked to play. Joseph Meckling made a good living and had been used to giving his wife and children expensive gifts. The Mecklings felt fairly secure with their current lifestyle because they had all the neces- sary life and medical insurance, paid their taxes on time, and kept up with their mortgage. However, they spent all the surplus money that came into the household on watercraft and extra cars. Joseph also liked to take his wife, Gentry, on exotic vacations every year, even though they would usu- ally go into further debt for at least four months to pay for the trips. The Mecklings felt like they had life pretty much under control, despite their extravagant tastes, until Gentry became ill with cancer. Within two months, her medical expenses had exceeded $30,000. Even though the Meckling’s out-of-pocket expense for Gentry’s initial surgery and subsequent treatments was only $3,000, it actually blew them apart financially. This was because the family was not aware of their real financial situation and had been living closer to the edge than they thought, just barely making ends meet but not realizing it. “All I could think of was how I was going to come up with $3,000,” said Joseph. “These medical bills were so totally unexpected. I mean how could we have known anything like this would happen to us? We felt like we were living life pretty much like everyone else around us. All our neighbors were doing the same things. I couldn’t really see how we could have prepared for anything like this.” Although Gentry’s prognosis was very good, and most of her medical treatment had been completed, the family was totally stressed out. At a time when Gentry needed to be concentrating on getting well, she and Joseph were actually considering bankruptcy because they had not saved even $3,000 to cover the medical costs she had incurred over the previous four months. 

What’s more, it had not occurred to the family that they could resolve their financial concerns immediately if they were to sell one of their two motor boats. There’s no doubt that Joseph and Gentry found it easy to spend money. Their problem was that they had not “spent” that money in the right place, allocating some of it for emergency needs. As we mentioned in Chapter 2,claiming that you never dreamed anything could go wrong is the ultimate game people play with themselves to avoid taking responsibility when emergencies occur. Financially secure individuals understand the power of preparing for emergency situations by living within their means and putting money away for a rainy day. In Tony Cook’s article “Secrets from ‘The Millionaire Next Door,’” which appeared in Money magazine and The Reader’s Digest, Cook reports on the best-selling book The Millionaire Next Door by Thomas J. Stanley and William D. Danko. Cook notes that in order to learn what today’s millionaires have in common and how they accumulated wealth, Stanley and Danko sent questionnaires to affluent Americans. They found that “about two-thirds of those millionaires aren’t trust-fund babies; eight out of10 accumulated their riches themselves. Most are extremely frugal. Although their average net worth is $3.7 million, they generally live so modestly that even their neighbors don’t have a clue about their wealth. Unlike these millionaires, the Mecklings certainly weren’t living frugally and were very intent on maintaining the same lifestyle as their neighbors. So when things went wrong, the family was devastated. 

The Mecklings made $72,000 a year, which means that after 40 years of work, $2.4 million will have passed through their hands. With that in mind, we have to ask why $3,000 should hurt so much. If they had actually declared bankruptcy, they would have cheated their creditors simply because they wanted extra boats, jet skis, and other toys. Would declaring bankruptcy be fair in this case? Would it be honest? In order to be prepared for emergency needs, it is advisable to accumulate at least three months of spendable income, and ideally to save one year’s worth of net earnings. As we have already stated, the best way to do this is to commit 20 percent of your savings to this emergency category.

Principle #3: Learning How to Spend “Emotional” Money

Learning How to Spend “Emotional” Money Barb and Russell Bellfrey* had been deeply in debt for many years. Even though they were both working full-time jobs, they never had enough money to make ends meet. In addition, their family, which included four children, had never been on a vacation together because the Bellfreys knew they could not afford it. They came to Money Mastery desperate for a way to get their debt under control, but also look- ing for ways to relieve the emotional strain and put fun back into their fam- ily life. As they were taught Principle 3, Russell had a hard time accepting that they would ever be able to find even a little extra money they could put away for emotional needs. With their debt load such as it was, saving even a little money for this purpose seemed impossible to him. But as the Bellfreys began tracking their money, Barb and Russell discovered $100 a month that they had been wasting on unnecessary items that they could now spend into their emergency, emotional, and long-term categories. Barb began putting away 20 percent of that $100 (or $20 a month) into an emotional spending account. With time, as they got their spending and debt even more under control, the Bellfreys began depositing $60 a month into their emotional account. Little by little, the cash began to build up and Barb and Russell started to get pretty excited with the results. 

They finally reached a point where they could do something for the family of which they had always dreamed. Their plan was to fly to California, rent a house on the beach, and do nothing but play in the sand and sun for a whole week. Barb and Russell decided to secretly prepare for the trip without their children’s knowledge. They packed each child’s suitcase and hid the bags in the trunk of their car. They then told their children that they were going to the airport to pick up an aunt who visited them regularly. When they ar- rived at the airport, instead of parking the car they pulled up to the unload- ing zone and the children began to ask questions. Barb and Russell then told their kids they were all going on a vacation by the sea to spend a full week body surfing and playing in the sand. The children couldn’t believe it. So Barb reached for one of her girls’ suitcases and pulled out the child’s clothes. “Are these your clothes?” she teased. Her little daughter said yes. Barb then handed the suitcase over to the sky cap and led the children onto the plane. The family spent a wonderful week on the beach and have since spent other wonderful vacations together because they learned how to save money each month for family outings. The pictures and memories they have of these activities have strengthened their family over the years. All of this was possible because the Bellfrey’s realized the importance of emotional spending and prepared for it.

Principle #3: Saving is actually delayed spending

What does this mean exactly? At Money Mastery we teach that there is actually no such thing as “savings” and that all money is to be spent—what matters most is when and how you spend it. Allocating money to savings is actually “spending” money by putting it aside to use at a later date for necessary needs and wants. Because your money is going to be entirely used up at some point, it is important to understand the concept of “delayed spending” so that you can be sure all of it will be spent in a way that will bring you and your loved ones the most satisfaction and happiness. You can begin to look at savings as delayed spending by tracking your money as we have already encouraged you to do. This will get your spending under control, which in turn will lead you to find more money. 

This is good. But it is not the end result! Now your focus must be turned to the future and what you are going to do with the new found money. Usually what people do once they see that controlling spending brings in a surplus of funds is to consume that extra money the minute they get it. This is wrong! What they should do is put this money away for “future spending” so it will be available later when it is needed. Unfortunately, most people do not understand the importance of this concept. Instead, they are seduced into believing the notion perpetuated by a consumer-oriented society that they can have everything they want right now and everything they need and want later. The actual truth is that if we want to spend all our money on consumable goods and high-interest credit card purchases, then we cannot assume we will have much of anything we will want in the future, including a financially secure retirement. At some point we all have to make a choice: We can either prioritize the way we spend our money so that we will be prepared for the future or we can recklessly spend every extra penny and have nothing for the future. Bear in mind: You can have anything you want, you just can’t have everything you want. People who understand this concept know how to prioritize their money so that they will be able to have the things they want and need right now, as well as what they will need and want in the future. This often requires them to sacrifice in one area of spending so that they can have what is necessary in another area. For example, a man may feel that taking his wife and children out to eat twice a week is an important family activity. It’s perfectly fine for this man to use his money this way if he wishes but he must also realize that he may have to cut down on groceries, entertainment, or other items if he wants to have extra money available to spend on eating out and for the future. Perhaps eating out isn’t as important to you as buying a new outfit every month. 

Naturally, the choice is up to you. However, the key is that you must make a choice because it’s impossible to have everything. As simple as this might sound, we are amazed by the number of people who somehow believe that they can buy a new outfit every month, for example, and eat out as well when they have no way of paying for both. This kind of behavior not only keeps people in a cycle of perpetual overspending, but it also eliminates all possibility of seeing money grow in value over time. Now is the time for you to decide what is important and what is not, and then spend money according to those desires and not according to the notion that you don’t have to make a choice at all. To help you make those decisions, we asked you in Chapter 2 to create spending categories for such things as groceries, entertainment, and house payments. With these spending categories in place, you can see exactly where you spend money, what your priorities are, and what you truly value. To have the things you want right now (like the new outfit), and still be able to have what you need in the future (comfortable retirement), you may have to prioritize your spending by cutting down in some categories. Doing so will help you use your money more wisely, which in turn will lead you to find surplus funds. The next step is to prioritize the spending of these surplus funds by creating additional categories that will be used for “delayed” or “future” spending. Most people call these categories “savings accounts,” but these savings categories should be viewed no differently than any other category in which you allocate funds for the month. You must learn to “spend” money for savings just as you would spend money for groceries. Remember: Saving is actually “delayed spending.” To help you learn how to create these “delayed spending” categories, take a look at the pie chart on the right. 

Notice that it is divided into three categories: Emergency, Emotional, and Long Term (Investments). Each section of the chart represents a percentage of money that you should be “spending” for emergencies, emotional needs, and long-term retirement. We have learned that at the very least, a person should save 10 percent of his gross income throughout his life in order to create a money-making machine that will generate the in- come he will need as he grows older. Even though the ultimate goal is saving at least 10 percent of your monthly income, if you are not already doing that, we suggest beginning with just 1 percent. We have found that anybody can save 1 percent. Some of our clients do not believe this initially, but as they track their money and learn to control it, every single client finds at least 1 percent they are wasting that can be “spent” into saving categories. For example, if a person makes a gross annual income of $30,000, then saving 1 percent would require finding $25 each month that can be spent into savings. Is it likely that a person will find $25 they have been wasting? Absolutely! We guarantee that if you aren’t already saving some percent- age of your monthly income, that by tracking your spending you can find at least 1 percent that you’ve been using unwisely elsewhere. Once you have found that 1 percent, commit a portion of it to the three savings categories we outlined in the pie chart using the 60/20/20 rule: 20 percent for emergencies, 20 percent for emotional needs, and 60 percent for long- term investments. Following is an example of how to spend that 1 percent using the 60/20/ 20 rule: Let’s suppose that Hayden and Rose have a combined gross monthly income of $6,000. After tracking their spending, they find an extra $60 a month (or 1 percent of their gross monthly income) that they can use for delayed spending. Using

Principle 3, we suggest that Hayden and Rose do the following:

 • Emergency Spending: Deposit $12 per month (which is 20 per- cent of $60) into a low-risk fund such as a certificate of deposit, money market account, utility stocks, and so on.
• Emotional Spending: Deposit $12 per month (which is 20 per- cent of $60) into any type of savings or investment account.
• Long-term Investments: Deposit $36 per month (which is 60 percent of $60) into any long-term retirement account such as 401(k), Roth IRA, and so on. As Hayden and Rose see their money grow in each of these savings categories, their confidence will increase and their ability to manage and control their finances will be enhanced. This will help them realize that it is easy to begin saving 2 percent, then 3, and then 10 percent. With time, and as you implement the Money Mastery principles you are learning in this book, it will be totally possible for you to save at least 10 percent every month. Now that we have established the importance of setting aside a certain percentage of income for future, or “delayed” spending, let’s examine the significance of each of the emergency, emotional, and long-term categories.

 Emotional Spending
We have already discussed at length that money is more about emotions than it is about math, so it goes without saying that we will often spend money for purely emotional reasons. This, in and of itself, is not a bad thing. It is simply something we should plan for, especially in today’s product- oriented society where we are often enticed to make impulse purchases. We have found over the years in working with our clients that people spend money whether they have it or not. Saving money for emotional spending takes into consideration that there are many times we need to spend money for reasons that go beyond the categories we have assigned for basic daily survival. Tracking your money will help you balance your spending to your income, but it will not be enough when an emotional event occurs. You must put aside even more money into an “emotional spending account” so that you will be prepared when these events arise. Remember, you can have anything you want, you just can’t have everything you want—and that means you must learn to prioritize your spending so that you can fulfill your emotional needs without jeopardizing the future. What are some of the emotional needs for which you should be saving? 

Typically these include such things as family vacations, holidays, or new recreational vehicles. Some people use their emotional spending money to purchase clothing for a special occasion, to buy novelty decor for their home, or to treat a family member with a surprise gift or getaway. Whatever the money is used for, it is important that it be spent on something fun, and not for routine, daily sustenance. If you are married, emotional money should be spent on your family and not someone outside the household. Have you ever had these kind of conversations with yourself?

 • “I work hard for my money and I owe myself these new clothes!” 

• “Why shouldn’t I splurge to buy all these beautiful flowers for my garden? It’s the one thing that brings me pleasure.” 

• “I never buy myself anything. I’m always spending money on the kids. I want this new DVD player and I’m getting it now.” 

Wouldn’t it be wonderful if you could meet your emotional needs when these kinds of desires pop up by dipping into your emotional spending ac- count? 

Wouldn’t it make you feel sensational to spend money for these needs when you’ve actually put it aside expressly for that purpose? Preparing for the need to spend money for purely emotional reasons eliminates reckless spending of the money that has been set aside for daily survival or for long-term investments. It helps curb debt, and it brings wonderful psychological rewards into your life and the lives of your family members. For those who don’t overspend but constantly deprive themselves and their family members of those things that would help build lasting family memories and close emotional ties to loved ones, emotional spending can be a lifesaver. It gives these people exhausted by the daily struggle for survival a chance to play, relax, and enjoy themselves a little bit when they would not otherwise feel justified in doing so. The only time it is not proper to spend money for emotional wants is when you have not planned for them or allocated funds for that purpose. 

Otherwise, it is totally appropriate to set aside money for the sheer purpose of providing pleasure to you and your family members. Doing so will give you a sense of peace and satisfaction and eliminate the guilt feelings that come from spending money on emotional impulse purchases when you have not planned adequately for them. Now let’s meet a family that learned the value of saving money for emotional needs and see how they were rewarded for their self-discipline.

Principle #2: When you track your money, you control it.

Have you ever taken your car for a tune-up and received a test result form similar to the one on page 35? The value of this kind of analysis is that it allows you to visualize exactly how your money was spent in getting your car tuned up. Without it, the only thing you may know when you pay the mechanic is that $75, for example, seems like too much. Or you may not even consider what the $75 was worth to you at all without something to verify the value of that expenditure. Having a clear picture of exactly where you spend your money is extremely important in today’s consumer-driven society. The constant bar- rage of emotional media messages often lures us into spending more money than we have. That’s why it is more crucial than ever that you learn the value of keeping track of where and how you spend your income. When you fail to do so, you can easily consume every penny you earn on impulse and without any real awareness. 

Tom and Shannon* are a perfect example of this. Shannon liked music and was a member of a club that offered discounts on CD's purchased through its mail order catalog. Shannon bought multiple CD's in order to take advantage of what she thought were cost savings. Tom was into computers and thought nothing of buying himself a new video game every week to play on his PC. Neither Tom nor Shannon tracked these expenditures and were often overdrawn in their checking account because of them. Shannon decided to take money from their savings account to cover the bounced checks she had written, but she didn’t tell Tom. In turn, Tom decided he would dip into their savings to bail himself out of all his overdraft fees but didn’t know Shannon had already used all their savings to cover her problems. Because they didn’t keep track of how they were both spending money, Tom and Shannon had not only overdrawn their checking account, but had devoured all their savings as well. As we mentioned in the introduction, many Americans today are av- idly pursuing their every want with the expectation that somehow it will be fulfilled. Individuals who had parents that satisfied each childhood desire often grow up expecting that they can continue to have every- thing they want as adults. Even with the knowledge that the money sup- ply is not endless, some people continue to spend as though their decisions will have no consequence. It is not until a person learns to track his money that he begins to see that all spending decisions have repercussions. Remember the Haywoods who enjoyed frequenting All-a-Dollar? Once they began keeping track of how much they were actually spend- ing at the bargain store, they were shocked to discover they were wasting $300 each month. Consider this statement by George Clason from the book The Richest Man in Babylon: “Learn to live on 90 percent of your income.” In today’s consumer-driven society, is it feasible to spend less than 100 percent of what you earn so that you can have a surplus for the future? It is, even for those who have become accustomed to devouring every penny they earn and living on credit. We have seen countless individuals do it, but they first learned how to track how much money they spent so they could contain that spending where necessary. Multimillion-dollar sports associations know the value of tracking. 

The NBA, the NFL, and other organizations keep very close track of each athlete’s playing statistics so that when it comes time to trade or negotiate contracts, they will know the value of that player. They also keep track of player statistics and make them known to the public to heighten awareness. This awareness creates interest, which in turn creates profits. A system of tracking is vital to any big corporation that wants to stay in business. Consider the example of a California-based computer hard disc drive manufacturer that was notorious for not keeping track of its inventory. The company constantly had problems filling orders and usually took an aver- age of three weeks to find parts in order to ship products to its customers. The company’s distributor got tired of waiting such long periods and went to a competing supplier. The business lost $12,000 and the distributor never came back. How big was this company’s actual loss? In reality, its damages were much greater than $12,000 because it lost a valuable distributor who took his business to the competition. And what about the IRS? Collecting taxes is a nasty business and without a system for collecting those funds the government knows it wouldn’t stand a chance. That’s why taxes are taken directly out of payroll so that no one cheats the system. Without your own system for tracking your finances, you could be cheating yourself out of valuable money or be cheated by others. “But,” you may find yourself saying, “I really detest keeping track of the way I spend my money. It seems so tedious!” We have found over the years that most people want to get on the road to financial control but initially hate being “restricted” when it comes to tracking money, so they play emotional games with themselves. Have you ever played any of the following games with yourself? 

 Game #1: Avoid balancing your checkbook monthly. 

Many of our clients have expressed to us that they simply don’t want to know how far out of control they are or how bad things have actually become. Fear and guilt are often the reasons for this stubbornness. In fact, one of our clients was so overwhelmed by the thought of balancing her checkbook that she simply opened a new account every six months. 

Game #2: Blame employers or others, and/or think you are not making enough income. 

Many people trick themselves into thinking that their overspending and debt load should be blamed on their jobs and/or their employers. These people convince themselves that true financial happiness can only be found in a larger salary. They assure themselves that pastures are greener elsewhere, and incur further expenses when they change jobs, uproot their families, and move across the country. Remember, it matters not how much you make, only how well you manage money that counts. Even major league athletes who have not yet learned to track their spending think they don’t make enough to support themselves. The Associated Press, reporting on the National Basketball Association’s 1998 labor strike, quoted Jazz player Greg Foster as saying, “It hurts missing a paycheck— especially for a guy like me,” who was scheduled to make more than $500,000 in 1998. After missing close to 30 games due to the strike, Foster and other NBA players felt they just couldn’t make ends meet. “I mean, I’m not Patrick Ewing or one of those guys who gets the big bucks. I need every penny.”1 

Game #3: Claim that you never dreamed anything could go wrong when emergencies hit. 

This is the ultimate gaming strategy, which transfers every bit of personal responsibility onto a “natural disaster” that you couldn’t possibly foresee. We counsel with hundreds of clients who have no idea where the money goes each month and yet cannot see the correlation between this lack of tracking and the total devastation that a basic emergency can bring to their family. One of our clients mysteriously lost her hard contact lenses, which would have cost her approximately $350 to replace. However, because she did not want to feel restricted, she had not tracked her money and there- fore could not find the extra funds to purchase new lenses. This small amount of money put her into a state of total financial and emotional panic. At the outset, tracking your money and how it’s spent may appear tedious and restrictive. But we know from years of helping people gain control of their finances that it’s actually wonderfully rewarding.

Principle #1: Spending is emotional part 2

Get in Control—You Can Do It! 

Understanding that spending is emotional is the first step toward financial control and the key to true contentment and happiness. The remaining nine Money Mastery principles are based on understanding this first most important idea. Having come this far with us already, you’re obviously making an effort to better understand your own emotional approach to money. And that means you’re beginning to take control. Taking control is tremendously rewarding and we encourage you to continue! To see just how rewarding it can be, let’s go back to Doug and Sally Smith. As they worked with their coach, the Smiths began to understand how their emotions were affecting their spending. They realized that they had a problem telling their children no. They understood that they were spending money to make themselves feel better in the short term and jeopardizing their long-term financial security. 

They began making changes by denying their children when it was necessary. This was not easy to do in the beginning. The children were not used to their parents’ new behavior and resisted it. But in a short time, they began to accept their parents’ new way of doing things. When the Smith’s daughter had the opportunity to go to Europe for a high school academic event, instead of stressing out about how they would send her, Doug and Sally encouraged her to get a job and earn the money to go herself. Once she realized her parents were not going to hand her the money, she got a job and earned her own way. Later, she commented to her parents that she had actually enjoyed the satisfaction of making her own money for the trip and had appreciated her experience in Europe much more than if Doug and Sally had just given her the money. Today the Smiths have stopped overspending and have actually begun saving an extra $300 each month. They have begun to look at every expenditure as an emotional decision, determining whether the object of their spending is something that fits their financial priorities or not. We encourage you to think deeply about the first Money Mastery principle by looking at how you emotionally spend your money. 

Take the challenge to complete the following short assignment before going on to Chapter 2. It will help you go further in your commitment to make important changes to your life. Go ahead! Take the challenge! You’re worth it!

Principle #1: Spending is emotional part 1

Think back to the last time you spent money. Perhaps it was yesterday or even a few hours ago. Perhaps you can’t remember the last thing that you bought. If so, think hard until you can pinpoint what you spent money on.Ask yourself the reason for making that spending decision. Did you buy something necessary such as groceries or medication? Was the item some- thing you needed or just wanted at that moment? Did you worry about having enough money to pay for the item? Did the purchase cost more than you thought it should or did you even worry about the price? Will this spending decision have a big effect on whether you’ll be able to purchase other things later? Did spending the money make you feel guilty or did it give you pleasure? Now, try to recall a particular incident where spending money had a strong emotional impact on your life or the lives of your family members. What made that incident so emotional?One of the most important questions you can ask is: “How does spending money make me feel?” Through years of counseling thousands of people, we have heard count- less reasons why people spend money. Many of those reasons have more to do with a person’s circumstances and the way they feel about those circumstances than whether there is, or is not, enough money to spend. Let’s take a closer look at what we consider the three most significant reasons people spend money.  

Impulsiveness 

As we noted in the Introduction, we live in a world full of emotional media messages. These messages often play upon people’s deepest psycho- logical needs pointing out all the things a person may lack in his or her life. Responding to this supposed lack, many individuals spend money impulsively without thinking as a way to meet unfulfilled desires. Without the proper respect for money our current society has become notorious for impulsive, reckless spending. According to Richard A. Feinberg, professor of Retail Management and director for the Center of Customer-driven Quality at Purdue University, up to 50 percent of all consumer purchases are made on impulse.1 Here are some of the responses we get from people who spend money on impulse: •“Spending money fills an emotional void in my life. . .I just feel like I can’t get the things I really desire, so I acquire material things to fill myself up.” •“I like to give my children what they want because it gives me joy. Sometimes I feel like it’s the only thing I can really do right for them.” •“Having the money I want to spend, when I want to spend it makes me feel important. I know my Dad never could feel that way and I always felt sorry for him.” •“I can’t say no to my children. . .they pester me until I give in and get them what they want. They’re just plain stronger than I am.” The Haywood* family is a perfect example of how emotions can trigger impulsive spending. They had a habit of going to All-a-Dollar, a bargain chain store that sells every bit of stock for $1 or less. Purchasing little items such as candy or inexpensive toys for the children gave the Haywoods plea- sure without making them feeling guilty, especially with the store’s low prices, which made the trips seem so innocent. But once the family started to keep track of how much they were spending at All-a-Dollar they were shocked to find it was more than $300 per month. Low prices combined with their impulsive desire to please their children cost the Haywoods some serious cash they would rather have spent elsewhere. Most people are trapped in an impulsive mentality that prevents them from keeping much of the money they make for any length of time. Re- member the time/value of money we discussed in the Introduction? Impulsive spending completely eliminates the possibility of increasing the value of money over time. Did you know that 85 percent of all Americans who win lotteries spend every penny of their winnings on consumable goods rather than investing it in high-yield programs?2 Based on this statistic, it’s plain that the majority of Americans do not understand the profound power of the time/value of money and are destroying their future because of it. Are impulsive emotions affecting the way you spend money?

 Economic Hardship 

Experiencing a financial disaster is another thing that can greatly affect feelings about money and how it should be spent. Have you ever lost a job and had to come home to your spouse with the bad news? What kind of an emotional impact did that have on your family? After the trauma of losing a job, or some other economic hardship such as illness or di- vorce, we often hear responses like these about the way spending money makes people feel: •“I just hate not feeling like I have enough money for the things I want. I get so depressed just thinking about it.” •“Spending money makes me feel guilty, like I don’t deserve the thing I bought or that it will come back to haunt me later.” •“My divorce has wiped me out financially. I have nothing left after I pay child support and alimony for anything I might want to get myself.” Doug* was a young father of three when he experienced the economic trauma of divorce. Within 12 months of the divorce, he began paying more than $900 a month for alimony and child support. Having recently graduated with a degree in graphic design, Doug wasn’t advanced enough in his career to make the kind of money he needed to support his three children and an ex-wife. He was forced to move in with his parents and sell his car. Even then, he barely made enough to meet his financial obligations. The only thing he indulged in was music, buying a CD or two every once in a while. Doing so made him feel extremely guilty because he worried that indulging himself would somehow affect the happiness of his children. Doug’s economic hardship was an emotional situation that had a huge im- pact on the way spending money made him feel. When we are forced into a bad financial situation due to some kind of economic disaster, spending money can be a highly emotional issue that causes friction in marriages and personal unhappiness.  

Daily Financial Obligations 

The struggle for daily survival can also affect why and how we spend money. Even those who are frugal and don’t spend impulsively have heavy debt loads and excessive taxes and are impacted emotionally by the sheer effort of just making ends meet from day to day. We have counseled hundreds of clients who have felt burdened and depressed by this daily struggle: •“I feel angry that I have to fight just to pay taxes and my debts. It leaves me nothing left over to spend on myself or kids.” •“We were just audited recently and I felt so intimidated by the IRS. Taxes are the first thing that comes out of my paycheck and it just makes me sick that I still feel like the government controls my life.” •“We were so poor growing up. I promised myself I would never make my kids wear hand-me-downs, but we don’t have enough money after all of our other expenses are paid for me to really give my kids what I dream of.” • “I can’t believe that I have to work almost six months out of the year just to pay my taxes. It really upsets me just thinking about it.” The Martinellis* are a good illustration of how this daily struggle to survive can greatly affect the emotional well-being of a family. Don and Keisha Martinelli were struggling to make ends meet on the East Coast where the cost of living is high. The couple had three boys younger than the age of 7 and were concerned about financing their children’s college education. Don was working 14-hour days as a controller for a corporation in Manhattan, but even with the long hours, they weren’t able to find enough money to build a savings program for their sons’ future education. In an attempt to earn extra money, they had in- vested in a business opportunity that never took off because they didn’t have the time to put into it, forcing them into further debt and farther away from the boys’ educational funding. This daily struggle simply to survive was draining the Martinelli family and was killing the fun times they wanted to have with their boys because they never dared spend money to take them anywhere or go on any vacations.

The Time/Value of Money

These three forces consumerism, indebtedness, and excessive taxation are largely taken for granted by most Americans, and their casual attitude towards such powers leads to victimization. They know there must be something wrong with their impulsive spending habits, but they have not yet linked those habits to their inability to tune out the media hype that urges them to consume, at any cost. 

These same people long to have more money for retirement, for their children’s education, for vacations, and yet they realize they’re not saving anything. Unfortunately, they have not yet seen the correlation between their enslavement to credit issuers and their inability to save for the future. These people feel overwhelmed by the amount of taxes extracted from their paycheck each month, and by the way that estate and death taxes eat into their savings and investment nest eggs, but have not yet connected big government shearing with their own ignorance about the way the tax system really works. 

Money

These people see tremendous financial opportunity in the world but lack the skills necessary to control these powerful forces and harness the wealth and prosperity all around them. Without a big picture view of how these forces can affect us over time, we may be forever trapped in the moment, failing to understand what we call the “Time/Value of Money.” For those who live from paycheck to pay- check, the daily struggle to survive inhibits the ability to see the true value that money can have over time and the kind of return it can bring over the course of several years. Those who choose to remain in debt do not under- stand that the time it takes to pay off compound interest is affecting the long-term value of their money. The money that they could be using wisely to give them a return over time is instead being paid to creditors, completely stripping their money of any value it could bring them. 

Those who continue to pay excessive taxes, are in a similar fashion, failing to see the time/value of money because they don’t realize the value that their money will bring them over time if they paid their taxes correctly so they continue to let it slip through their fingers even though they don’t need to. People weighed down by consumerism, indebtedness, and excessive taxation have a difficult time understanding the exponential value that money can have if given a little time to grow. The time/value of money can only be explained to a point, and then it must be experienced in order to fully comprehend it. Many of the people we work with are so caught up in the worry and frustration of the moment that they can’t see what’s waiting for them in the future. Others think they already have all the answers about money management. Some of the hardest people we try to help are the financial planners and accountants who have an intellectual base of knowledge on how to deal with money, yet are thousands of dollars in debt because they do not fully comprehend the power of these forces, the emotional impact they can have on lives when they are taken for granted, and how a casual attitude affects the value of their money over time. Are you one of them?