Month: December 2012

Part 3 in the 3 part series Your Identity and Your Money. Find Part 1 here and Part 2 here.

As I was relating my upcoming plan to do a winter hike in the Grand Canyon to a friend, I admitted I was a little scared. “Scared? Really? What could you be afraid of?” he asked. “You’re not frightened” he tried to convince me, “you are just excited.”

This is exactly why I love spending time with young adults. He was honestly surprised at my fear. In considering his reaction, I understand his failure to empathize. At his age, I too was rarely afraid.

The few things that did cause anxiety for me at that age, heights and rats, were external. I cannot recall ever being immobilized by the fear of failure or the fear of rejection or the fear of a wrong choice.

My old fear of heights has mellowed greatly. I can climb ladders and ledges with just enough fear to keep me cautious. I am more affected by watching a child stand close to the edge or totter up a steep staircase than I am by my own exposure.

However, those internal, “What if I’m not strong enough? Smart enough? Good enough?” fears are much more present in my life today than when I was young.

Sometimes writing what should be something simple can stop me in my tracks for days.

Indecision, another byproduct of those internal fears, is my constant companion. My indecision and I frequently battle on a wide range of topics. Most days I can beat it back to the level of rational and helpful doubt, but sometimes it creates a full-blown fear fest waste of a whole day.

Certainly, some of this new fear is due to losing that big paycheck. Like many, a big part of my identity and self worth came as a paycheck. It was a monthly concrete validation of my worth in the world. In addition to the check, that job gave me a great feeling of accomplishment, most days. (It wasn’t all roses – there were significant daily challenges- but that’s another story).

Wrapping yourself in that paycheck is just as harmful and dangerous as measuring your worth by your stuff. One of the more harmful side affects of a paycheck identity is that it invites judgment of others. I’m ashamed to say that I have thought myself better than others because I earned more. You know what it means if you earn more than someone else does? It means you make more money – period. Are you more educated, a harder worker, smarter, or more talented? Maybe, or maybe not. There are many highly educated motivated talented people doing incredible work in fields that don’t pay that well. Conversely, there are plenty of jerks, greedy un-innovative (is that a word?) people that are raking it in.

God help those who think the best measure of their worth are the numbers on their paycheck. These poor souls are just about guaranteed to be sucker punched when they retire, quit or are let go.

I won’t kid you; some moments, I would eagerly trade the new half-baked “better” me for the judgmental decisive fearless a$$hole I used to be.

I tell you this to assure you that I understand that identity change is hard; there will be setbacks. Just know if you are struggling with this, I’m right there with you – everyday. Based on my observations, I think we are in good company.

So who are you?

In this series of posts, we’ve learned:
I am not my FICO score (regardless of how good or bad the number is).
I am not my car, boat, or house.
I am not the high tech toys, nice clothes, or brand name stuff I own.
I am not my bank balance.
I am not my job and certainly not the numbers on my paycheck.

I am a greatly loved child of God.
I am a mother, a lover, a daughter, a sister, an aunt and a friend.
I am kind, dependable, trustworthy, hard working and encouraging.
I am smart, curious, adventurous, and strong.
I am brave.

There – that should beat back those fears for a bit. Now it’s your turn.

Who are you?

Part 2 of 3 the part series Your Identity and Your Money. Find part 1 here and part 3 here.

Why would an otherwise rational and intelligent person chew through their retirement account to keep the mortgage paid on an upside-down house. Or borrow against their home to pay off credit cards even when they know they can’t realistically afford the payments?

The two reasons I’m most often told:

I don’t want to hurt my credit score and/or

I don’t want others to think badly of me

Both of the reasons speak to the same underlying and fundamental question: “Who are you?”

Do you think the only reason you are someone is because you live in a nice house, drive a shiny car, or have an 825 FICO score?

Having an identity that is tied to my stuff, my job, my diploma, my looks, my accomplishments (or worse my kid’s accomplishments) or anything else that has my in front of it, is building our life on a foundation of sand, right at the edge of the beach, near warm hurricane-prone waters.

It might not happen today or this week or even in the next five years, but a big storm will come and it will knock the snot out of you. If you are lucky, that tumble will force you to re-assess who you are.

If there is anything sadder and more limiting than defining yourself by your stuff or your achievements, it’s dying having never known another way.

Let’s make sure we don’t have a misunderstanding here. I think it is vitally important that you meet your obligations. You should pay your debts in full and on time. That’s what you promised to do when you signed that loan agreement and it’s important to me and I know it’s important to you that you keep your promises – right up until you can’t. When you can’t, you must find the courage to realistically and rationally evaluate the situation.

If you are borrowing from one credit card to pay another or have taken out a 401K loan or cashed out retirement savings to pay your mortgage, you (at least temporarily) can’t pay your debts.

There are people who break their promises easily; they can without a moment’s hesitation suggest strategic defaults or debt settlements when the sky darkens. But I don’t know these people.

The people I know see the clouds but insist they can handle the storm. When an illness or a job loss wreaks havoc on their ability to meet their obligations, these Pollyannas trudge on using new debt to pay their old debt, insisting things will be better soon – but they are too scared to sit down and define exactly when soon is or how things will get better. Unfortunately, for some percentage of these good people, the better will not be big enough or fast enough to avoid lasting and sometimes permanent damage.

Often it’s the fear of losing our identity that keeps us from facing our problems head-on; it makes us irrational and just plain stupid. If you puff out your chest and tell me your credit score while ignoring the fact that your net worth is negative, it’s likely you have tied some part of your identity to that number.

Instead of, “I’m Barbara and I have near perfect FICO score” try on “I’m Barbara, beloved daughter of Christ and heir to his throne” and see if that fear doesn’t fade.

Part 1 in the 3 part series Your Identity and Your Money. Find Part 2 here and Part 3 here.

We all know someone, and I know I’ve been that someone, whose identity has gotten all tangled up in their stuff. When what you own becomes who you are, you become fearful of losing it; when a car is no longer just a car or a house a house you start making stupid decisions.

I’ve had that identity problem with a car. The first brand new car I bought for myself was a BMW 325i. It was beautiful and fast and came with a very thick payment book.  That car replaced maybe the ugliest car I ever owned, an orange Datsun B210 hatchback. I bought that one used for about $800 as I remember. It was easy on gas, took me where I wanted to go and never failed me. I neither loved nor hated that car; it was just a car.

Before the B210 I had a MGB Roadster with rusted out floorboards. I loved the MGB. I didn’t even care (most of the time) that it constantly failed me. However, once I had a baby, I started thinking that a car should be safer; like maybe it should have seatbelts and perhaps you shouldn’t be able watch the road whiz by between your feet.  As much as I liked the MGB – it was a car that I owned and had fun driving – it never became part of who I was.

The BMW was a different story, I bought it because I was selling and was convinced by others (it didn’t take much convincing, I really like cars) that I needed to look successful. I loved not just the car but also the way that car made me feel –  more successful, more important, more grown up. It also made me feel very broke.

About half way through that book of payment coupons, my marriage crumbled and I found myself as a single self-supporting self-employed mom. That car payment was by far my biggest expense and many months I worried about making it. The real problem came when the car needed maintenance or repair. The dealer’s service guys were always very polite and efficient. They would fix the car, wash it and deliver it back – usually with an invoice for over a $1000. A $1000 was a fortune to me at that time.

When there were well over 100,000 miles on the odometer and with coupons still in the payment book, in the middle of nowhere it quit on me requiring a long distance tow. I decided I should bite the bullet and get something dependable and that I could afford.

The way I know for sure my identity was all tangled up with that car, was that when I decided I couldn’t afford it one more day, I ended up at the BMW dealer negotiating a trade of my upside-down, much too expensive  present circumstances car for a new one just like it.  With the car picked out, the loan approved (a loan that covered not just the new car with no down payment but also the deficiency on the old car’s value), I arranged to pick up my new ride the next day. I was trading an almost paid off car with payments that choked me for a heavily financed car with even bigger payments that would go on nearly forever. What is that definition of insanity? Doing the same thing but expecting different results.  Oh yeah, I forgot.

Someone saved my life that night; I can’t remember just how it came about but with the next morning came a burst of sanity. Instead of driving up to the BMW dealer to pick up my new car, I headed over to the Honda dealer and traded the old Bimmer on a very vanilla Civic. With the upside down car rolled in to the new car loan, I’m sure it was one of the most expensive Civics ever sold – still it was nowhere near the price of the new BMW. (While not as stupid as the purchase I almost made, I have learned a thing or two since that day and now would never finance a car and I would be very reluctant to buy a brand new car – here’s how I would buy today.)

I know you expect me to tell you that I loved that sensible Civic; that I never again wanted for a fast, tightly engineered, cool car but it’s not true. What is true is that, as of today, I haven’t since let a car be part of my identity and I haven’t since bought a car I couldn’t afford. Now that we could afford that brand new 3 series, it makes me crazy to think about spending that much money on a car, I can easily think of a zillion better ways to spend 40 grand.

These are the ideas that help me in my ongoing struggle to  keep my stuff separate from my identity.

It’s wrong-minded, stupid and downright dangerous to let your stuff become who you are. I know when this is happening because I become willing to make choices that allow me to acquire or keep things that go against my overall goals. I am a fantastic rationalizer and I can talk myself into almost anything. I know this can be a problem, so I always discuss big purchases with someone rational and uninvolved and I go slowly in making those decisions.

It’s perfectly OK to have stuff. Even really cool, expense stuff. As long a) as you can pay for it, in cash, in full without touching your retirement savings or emergency fund or using any other silly accounting self-trickery and b) it doesn’t conflict with your overall long term goals.

Never buy to impress others. If you didn’t own that car, that house or that boat would you still be the same person? Would others still see you the same? Do you own it for your own personal enjoyment or do you use it to try to influence others opinion of you?

When you left your packed lunch in the office fridge and went out to the corner deli with your co-workers, it was only $11.

But then you made that unscheduled stop at Starbucks, downloaded that song from itunes, picked up that blouse on 75% off sale and bought a new book at Target.

All of these are things that most of us have done and then justified with the “It’s only” 5, 10 or 15 dollars.

Being mindful with our big stuff spending is important, but all the good we do there can be undone if we are not just as careful with the little stuff.

In our house, by count – fully one half of our spending transactions last month were under $25 and by total dollar amount – one half of our transactions were under $100. Clearly, paying attention to small transactions is important in our financial life and I bet it is for yours as well.

If you are trying to pay off debt, then starting right now, there is no “It’s only”. Everything counts. 

The only exception to this is your very modest amount of budgeted blow money.

If you have already killed that debt monster – Yea You! Celebrate but don’t backslide. If you stop budgeting or if you only pay attention to the big stuff then you are quitting way before the finish line. Keep moving up those baby steps and collect the prize of true financial peace.