Financial savvy -- good luck or good decisions?

[photo]

Both on these forums but more often in the non-cyber world, I've encountered people who make one bad mistake after another.

1. A woman keeps bringing in deadbeats to live with her and her 3 young children, and each guy leaves her financially worse than before. A new guy she met 3 weeks earlier just moved in. Her poor young children become attached to a father figure only to later have the relationship severed. Needless to say, the woman is on welfare and has credit card debt and then complains how life is so unfair. Her oldest child (7) not only has academic problems but also is developing troubling behavior, unsurprisingly.

2. Someone else has expensive taste and keeps racking up expensive credit card bills, begs for relief, and then goes out and spends more. And now, because of the "bad economy and bad luck" feels a need to file for bankruptcy, despite a household income of over 6 figures.


3. Another person with roughly the same household income as my family doesn't watch prices at all and simply buys what he wants and wonders why my family can "afford" more.

My family has been blessed with good health and a good income for our area, and we are grateful. We've made our fair share of unwise financial decisions in the past, learned from them, and currently have a few indulgences as well as provide college education for our children and have a decent retirement built. Others in our situation are filing for bankruptcy or are barely keeping afloat.

I understand that sometimes, for various reasons, people get in financial trouble that they really had no control over (serious medical problems, for instance). However, for the vast majority of people, it's my opinion that their choices in life largely led them to their current situations: decisions about studying and education; decisions about how many children to have; decisions about expensive purchases; and decisions not to watch their basic expenditures, which were not extravagant but simply nickel and dimed them to the point of not being able to save money.

My question is: how do we best help these people? Quite often, when we are solicited for opinions, we're told that they can't live without certain amenities in life yet they can't afford them, either. Often, those people either file for bankruptcy or ask for handouts from the government. Isn't that just rewarding poor choices?

Isn't our luck often dependent on decisions we've chosen throughout life? (Again, realizing that some situations are genuinely out of our control)

[disneysteve]

The first time you do something wrong, it is a mistake.
The second time you do the same thing wrong, it is a choice.

I think that applies to much of what you're describing.

As Dave Ramsey is fond of saying, poor people stay poor because they keep doing "poor people things" and rich people got rich by doing "rich people things." I think reality is a little more complicated than that but you get the idea.

I, too, know many people who make bad choice after bad choice and then wonder why they can't get ahead. Lease cars, smoke, buy lottery tickets, gamble, finance everything and anything, have costly cell phones, high end cable packages, eat out daily, etc. Well no wonder you can't get ahead. If I did all of those things, I'd be broke too.

[Cassius King]

But I'm Entitled To This Stuff And Quality Of Life!!!!!!!

[elessar78]

Sometimes, as in the case of the woman that keeps hooking up with deadbeats, there are some powerful underlying causes that go beyond just making choices. They need professional help to identify these recurring patterns and through awareness, change them.

The woman with expensive tastes, that's borderline underlying issues and simple, adult decision-making. I think most people treat it as common sense, how to manage personal finances, but it isn't. It's learned behavior and habits. It requires a lot of self awareness to fight off the onslaught of advertising and companies constantly selling to you.

As someone who works in advertising, my goal is always to create, for lack of a better word, lust for the product I'm selling. The sad thing is that people see advertising as this benign thing. But it's mostly working at a subliminal level until you're ready to buy and then that seed is already in your brain.

As for the family, they just lack saavy on how to stretch that budget. I try to run my household like a business (the logistics of running a family) and we always try to keep our overhead undercontrol. Everybody works in a business setting but so few people apply business principles to the home. Is Family Inc. profitable?

[jpg7n16]

Of course they say life is unfair, and blame the economy - who are they supposed to blame? Themselves???

Blaming life or the economy is just easier than saying - "I'm terrible with finances, I brought this terrible situation on myself."


The harder I work, the luckier I get.
-Samuel Goldwyn

Most of us regard good luck as our right, and bad luck as a betrayal of that right.
-William Feather

Diligence is the mother of good luck.
-Benjamin Franklin

The only thing that overcomes hard luck is hard work.
-Harry Golden

[disneysteve]

Originally Posted by photo

My question is: how do we best help these people?

If someone is truly seeking help, they'll listen to what you have to say. If someone is just venting, they really don't care what you say.

I work with 4 woman who all have financial problems that are at least partly their own doing. I generally stay out of their conversations when money comes up because they wouldn't like what I had to say. If one of them ever came to me privately and said, "Hey disneysteve, you seem to manage your money pretty well. Do you think you could give me some advice?" then I'd be happy to sit down with them and try to help them. Until that happens, though, I'll let them go on living as they choose - and it is most definitely a choice to live that way.

[jpg7n16]

Originally Posted by disneysteve

If one of them ever came to me privately and said, "Hey disneysteve...

Your employees call you DisneySteve??

[disneysteve]

Originally Posted by jpg7n16

Your employees call you DisneySteve??

Is there a problem with that?

[MonkeyMama]

Originally Posted by photo

My question is: how do we best help these people? Quite often, when we are solicited for opinions, we're told that they can't live without certain amenities in life yet they can't afford them, either. Often, those people either file for bankruptcy or ask for handouts from the government. Isn't that just rewarding poor choices?

Don't we all wish we knew that we knew the answer to that??

The best I have found is just setting a positive example and being open about our financial situation. (Not necessarily open about our income, etc., but open that we have no debt and about the sacrifices we make to stay that way). People will always focus on the good/luck and overlook the corners you are cutting, for the most part. They will only look at the cut corners enough to turn up their nose, but sometimes these people will come around with time. I have felt for years I never got anywhere with anyone, but people I have known for 5-7 years have come out of nowhere to tell me I really helped them financially. It is hard work and mostly a thankless job. Over the years I learned: less talk; more example. (To be clear - I only broach the subject when asked - I don't go around giving unsolicited financial advice - I am just asked a lot).

As far as the luck discussion, I appreciate how much saving for a rainy day and a plan can change one's life. If you are mostly making solid financial choices and saving for a rainy day, the bad luck in your life just won't be so visible. Just one example? My father is a first generation high school AND college grad. From poverty to upper middle class. If you want to say he was lucky to be able to make that leap, I have no problem with that. But what people usually do is look at where my parents are today and tell me "they had it so easy." Are you kidding me??? Of course, this is always someone middle class who says this - someone who is utterly clueless. Of course, someone had the nerve to tell me I didn't understand unemployment - haven't been there. ???? Um, my spouse has been unemployed/underemployed for 10 years. He was furloughed and laid off long before we even had kids and he decided to stay home with them. There were several years he looked for work and didn't find anything. But we roll with it, so people think we are just lucky. Lord knows it took a lot of savings and planning to roll with 10 years of unemployment. This doesn't just *happen* and you say, "Oh well - didn't need that money anyway."

Along the same lines, I have watched most the people I know live insanely beyond their means during the economic bubble of the last decade, BUT they will blame all of their current financial whoas on a health problem or lack of employment. & I want to be clear that this is no disrespect to those who have a bout of bad luck and are suffering while trying their best. But to watch people live $150k lifestyles for YEARS on $50k incomes, and then to hear them blame their health/job problems for all their financial whoas? It was going to catch up with them eventually - a little bad luck just sped it all along.

Anyway, why on earth do I bother to save for a rainy day? Bad luck seems pretty given, to me. That is life. Lord knows we have had our fair share, but most people would say we are lucky. Because we do save for a rainy day and roll with it.

[MonkeyMama]

Originally Posted by disneysteve

If one of them ever came to me privately and said, "Hey disneysteve, you seem to manage your money pretty well. Do you think you could give me some advice?" then I'd be happy to sit down with them and try to help them. Until that happens, though, I'll let them go on living as they choose - and it is most definitely a choice to live that way.

I've had people do this and still not listen to anything I had to say. That is the hard part to deal with. But I agree - you can only do what you can do - and if they aren't willing to listen, well, what can you do?

[MonkeyMama]

Originally Posted by jpg7n16

The harder I work, the luckier I get.
-Samuel Goldwyn

I think this sums up what I said in my wordy way. Great quote!

[disneysteve]

Originally Posted by MonkeyMama

I have felt for years I never got anywhere with anyone, but people I have known for 5-7 years have come out of nowhere to tell me I really helped them financially.

I've had people do this and still not listen to anything I had to say.

As you've pointed out, you may not always be able to tell that they've listened and heard the message. That may not become obvious until much later. I think if they see a good example and hear the message repeatedly, eventually one can only hope that it will start to sink in. Most people need to crash and hit bottom before they change, though.

[bjl584]

A few years ago, a friend of mine came to me for financial advice. So I sat down with him and we talked. The problem was that everytime I made a suggestion he had 10 reasons why that just wouldn't work or why he can't do that. What was more shocking was that he was convinced that he could do A B and C and it would get him out of trouble. The problem was, A B and C were the same things that he had been doing all along. I started to wonder why we were talking in the first place. He was so confident that he had all the answers and that he knew everything. He was also convinced that I didn't know what I was talking about. Fast forward to the present. He is still a financial mess while my net worth is up 50%. I just talked to him the other day. He is still convinced that if he just does A B and C everything will be ok. Some people, you just can't reach to quote a line from Coolhand Luke.

It may be pride or a false sense of intelligence and knowhow that holds people back in life, but until people realize that they are doing things wrong, and until they want to help themselves, then all the intervention, help, and talking in the world is just a waste of time, effort, and energy.

[YLTL_Dan]

Originally Posted by disneysteve

The first time you do something wrong, it is a mistake.
The second time you do the same thing wrong, it is a choice.

I don't necessarily agree with this quote. It gives too much leniency and allows us to continually justify away our bad decisions.

The key is to proactively learn personal finance and live your life like a cause, and not wait around and be effected by mistakes.

That being said, I've been far from perfect and have learned a lot from the mistakes I've made (look at my signature!). However, now I'm much more proactive in learning so I can hopefully prevent as many future financial mistakes as possible.

[photo]

Originally Posted by MonkeyMama

But to watch people live $150k lifestyles for YEARS on $50k incomes, and then to hear them blame their health/job problems for all their financial whoas? It was going to catch up with them eventually - a little bad luck just sped it all along.

Since typing all caps is considered yelling, my response is BINGO. I've seen that happen so many times. How about the statement, "I lost my job, so of course I can't pay my bills. I have no paycheck." That works for a short while as a young adult just starting out in a career. However, people over the age of 40 who have zero savings yet always seem to have plenty of money for what they want to buy -- then later, when losing a job, genuinely believe they had no control over their lack of savings.

bjl584, the cliché of the definition of insanity -- doing the same thing over and over again and expecting different results -- seems to apply quite well to your friend.

Thanks for all the responses.

[Shewillbemine]

I don't offer financial advice to anyone unless they actively ask me for it.

Change comes from within.

[photo]

Originally Posted by Shewillbemine

I don't offer financial advice to anyone unless they actively ask me for it.

I think that's a given.

[jteezie]

I think luck plays a BIG role, not so much in determining one's personality and savings behavior, but in terms of timing and when someone learns the knowledge necessary to make the right decisions.

I was lucky. Age 18, while channel surfing, I came across a financial show that caught my attention because there was literally nothing else on tv. AND only by chance, did I come across the channel and linger long enough at the time when it talked about something that caught my attention which also was relevant to my financial situation.

What lesson did I learn?
I learned that I should invest my few thousand dollars in savings into a Roth IRA because saving 5k a year from age 18-25 is equivalent to saving 5k from 26 to the rest of your life. The caller received that advice which I decided was also applicable to me. So the next week I opened a Roth IRA.

I am certain I would not come across that factoid/statistic for at least another 5 years if I had not heard it then. By then, I would have been way short on my retirement planning.

[thefrugallery]

I think that a huge component of our financial situations are how we were brought up. Sadly, children who were raised in poor households are more likely to stay poor. That being said, you are not doomed to stay poor if you were raised in a poor household. That is where personal decisions come in. People need to stop feeling sorry for themselves and assume that "it is the way it is." You are responsible for changing your situation if you do not like it.

[Gina23]

Originally Posted by YLTL_Dan

I don't necessarily agree with this quote. It gives too much leniency and allows us to continually justify away our bad decisions.

The key is to proactively learn personal finance and live your life like a cause, and not wait around and be effected by mistakes.

That being said, I've been far from perfect and have learned a lot from the mistakes I've made (look at my signature!). However, now I'm much more proactive in learning so I can hopefully prevent as many future financial mistakes as possible.

You could read it that way, or you could read it the way I did... which was:

"Fool me once, shame on you. Fool me twice, shame on me."

Second chances to make the same mistake DO NOT exist. It no longer becomes a mistake, it becomes a choice.