Thursday, February 4, 2016

The problem with knowing how much money you have

For about a year now, as I dole out my sons' pitifully small $5/week allowance, I've been asking my boys to think about where their money has gone and where it's going to go.  As I wrote last May,
"Every week, before the boys get their next allowance, they have to write these three things in their Allowance Journal:
  1. Where their past money actually went in the previous week.
  2. What they plan to do with their next allowance for the upcoming week.
  3. Their current savings balance.
That's all they have to do: reflect, plan, and tally. Then they get their money."
The longer I do this, the more I like it; the feedback of "what I think I'll do/what I actually did" doesn't work perfectly, but developing the habit of a cycle of planning, action, reflection, and then revised planning is going to hold these kids in good stead.

Even as I sat here typing this, J-son just asked me about super glue for reattaching one of the stripes on his shoes; when I said we have run out, his response was, "Then I'll save up enough money to buy it."  Meanwhile, about 10 minutes before, N-son had asked about the amount of money he has in his savings account because "I want to save up for a new phone.  I think I need to start paying for my own stuff." 

These two (amazingly perfectly timed) conversations give both a sense of how far the boys have come and also where the system breaks down a bit.  

For N-son, the issue is benign:  he takes the wording of step 2 fairly literally.  Every week, he gets his $5 allowance and distributes it like this:  $1 to church, $2 to spend, $2 to save.  I push him hard to be more specific on "spend", and he usually amends that into "snacks at school for friends".  But notice that this means he's spending only from his allowance, and almost never from his savings.  He's gotten windfalls of money from Christmas and from shoveling snow which morph invisibly into the savings, completely forgotten by him.  For reasons that I don't understand, the savings is effectively a black hole to him.  He's a wealthy young man, with modest desires.  He's going to be rich, and he doesn't even realize that he has already saved enough money to buy his own phone if he needs to (which he actually doesn't need to; I'll talk him down from that).

J-son with glittery ears
and a handsome smile.
But the main point is, he knows about the $5 allowance, and that amount "anchors" his behavior.  If we skip a week so that the next week he gets $10, he allocates $1 on church, $4 on snacks, and $5 on savings.  He spends a bit less than half of what he earns, not because he needs/desires that amount of snacks, but because of what he sees of his income.

But where N-son sees only his income, J-son sees his savings.  Or perhaps, I should say, "sees his savings disappear".  This kid turns snow into earrings:  the $65 he earned by hard labor shoveling snow turned overnight into a pair of long-desired holes in his head.  And even though he then told me he wanted to start saving up for a moped, the very next day he rechecked his savings balance and took out another $12 for an outing with his friends.  The money he earned from his first job?  Likewise, disappeared.  And as a result, if he now wanted to buy super glue to fix his latest pair of absolutely essential shoes, he needs to wait until his meager coffers are replenished.  

I think this is part of why personal finance is so hard.  Sometimes, like J-son, we have bottomless pits of wanting, and we throw whatever money we get into that pit, hoping it will fill us up.  For him, what I hope is that the process of looking backward at where his money went, and what it actually brought him, will help him make wiser choices in the future.  He's already started learning a bit about how spending money to impress his friends is just as likely to bring grief as happiness . . . that's a good lesson to move forward with.

But sometimes, like N-son, we allow our income to determine the shapes of our lives.  It's not a bad thing to spend less than you earn, but I know that his current approach can feel a little rudderless.  He doesn't fix his eye on a distant passion -- a new drum, a pair of bike shoes -- and use that passion to steer his life, however erratically, toward that guiding star.

And maybe I'm not really talking abut N-son and J-son here.  Maybe I'm really talking about my husband and me.  My guy turned 62 last summer, and he keeps asking, "are you sure I shouldn't start collecting Social Security yet?  Does it really make sense to wait until I'm 66 or 70, when I might not even be able to enjoy the money?"  And I think: if we had the money coming in now, would our lives be different?  better?  Would we spend the money just because we had it, or would we save it toward a larger goal? . . . in which case, it makes sense to wait.  My husband is like J-son; he wants the glitter.  He's got a gazillion plans, even if he's not sure what they all are.

And me, I really want to raise the boys well right now, and then when they're grown, I want to restructure almost everything:  housing, travel, my employment.  That's the siren song calling me, and I don't want to fritter away the chance to do that on less important things now.

So I look at how we spend our money right now, and I think, "that's about right".  We're happy; we don't need more.  Someday, Uncle Sam will start sending an allowance our way, but I can wait for a few years for that day.  And maybe my family can, too.

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