Canadian Personal Finance Blog

I was telling my daughter that comment and she looked at me like I had five heads. I tried to explain that building up debt rarely happens overnight, just like building up your body mass is not done overnight, and I think it is very true.

When I had my weight gain it happened over about a 14 year period, and it was slow, but by the time I finally did something about it, it was significant. It was a compounding of eating the wrong things, in the wrong quantities at the wrong time, and a complete lack of physical exertion, luckily I have taken the weight off and am keeping it off (mostly).

Debt build up is the same way, usually (unless you make some gruesome investments, an incredible blunder or you are a victim of a fraud), slowly without you noticing you are doing it. Buying your lunch every day isn’t going to put you into debt, neither is leasing your car, vacationing in Las Vegas, or buying lottery tickets either, however, start adding these together with spending more than you make and suddenly you are building up debt, instead of equity.  Keep doing this over a long period of time, and suddenly you have a debt load that you cannot afford and you are just not sure how the heck you did it. It was done one small step at a time.

Unfortunately, or fortunately, debt reduction is accomplished in the same way. Unless it rains money, getting out of debt is done slowly and one month at a time, using a plan and self-control and a wililngness to change your lifestyle (because losing weight and debt reduction are BOTH lifestyle changes, not just a quick fix that allows you to go back to your old habits).

Losing the financial bad habits is the key to debt reduction, keep that in mind.

Carnivals

My posting about Jesus is Watching You! was mentioned at the Personal Power and Self-Help Carnival.

Michael James talked about found money yesterday and the joy of paying off bills with found money, and how we should not squander this found wealth, and really use it to create happiness in the future by paying off debt now. I think this is a sensible approach to found money, but it made me think about another post I did a while ago, which was how couples deal with money.

Many times found money can cause a great deal of consternation between spouses because each have their own idea of what the best thing is to do with found money.

I think this is natural, as with most every subject possible spouses are going to have their own ideas, but the problem arises when the two ideas are contradictory or even orthogonal to each other.

Say Mary and Bob get $10,000.00 in found money from an inheritance. Mary thinks she’d like to go on a nice vacation with the family because the family has never really been on a vacation, however, Bob thinks that putting that money on their Mortgage (thus shortening it’s term by 5 years), is the right answer.

Reading this, it sounds like an easy enough “problem” to deal with, both folks want to do what they think is best with the money, but the problem now is you have is a simple difference of opinion. The problem I have seen in my life and from other folks I know is that this is not a simple problem, because:

• There is no wrong answer (or right answer)
• Both spouses have voiced their opinion, and thus feel they have the right answer.
• Money and money management is a divisive factor in many relationships

Is there a Solution?

Only if both parties are willing to compromise, or one is willing to lose (i.e. typical Prisoner’s Dilemma issue). Wikipedia’s explanation of the Prisoner’s Dilemma is:

Two prisoners (the players) during the interrogation each have a choice: whether to betray the other one, and thus to decrease his own jail time by, for example, 1 month (as a compensation for the cooperation), while increasing the jail time for the other by, for example, 10 years, or to stay silent. Each of the prisoners is only interested in receiving the least possible sentence. It shall be assumed that the prisoners make their choices (to betray or to stay silent) simultaneously, and they know for sure that their choice cannot affect the choice of the other one.

All right I am stretching this (feel free to leave a comment), but the need to compromise and find the best solution for the couple is not always obvious to either spouse, and sometimes they feel it is not in their best interest (they got their way the last time, so I want my way this time). Sound familiar to any of my readers? Never happened to you?

Resolution?

I have no canned simple answer for this one, because as I keep saying, Money is a strange and divisive thing in a relationship, especially if the spouses do not agree in terms of money and how to use it.

What needs to be done is have clear lines of communication and rational discussions between the spouses about what they want to do, and a decision made that doesn’t cause either to feel that they have “lost” in this decision. Sounds easy doesn’t it ?

Think this is a simple thing to resolve? You and your spouse never have these issues? Then you are either very lucky (or very naive).

Life always teaches you the oddest things at the oddest times, and this weekend I got reinforced the notion that you “… can’t always get what you want …” to quote Mick Jagger, but sometimes you really do get what you need. I watched my youngest daughter’s basketball team play very hard but just not reach where they’d hope to, and saw that young girls are quite resilient but also quite passionate about things they do.

What does this have to do with your Personal Finances? The same kind of things happen to me on occasion financially, where I have worked hard and am sure I will be rewarded for my hard work, but sometimes circumstances come into play and things just do not happen the way you expected.

What do I mean?

1. You or your spouse were expecting a raise or a bonus at work, yet when your boss calls you into his/her office you get told no raise is coming.
2. You thought you were a shoo-in for a promotion, yet it did not transpire.
3. Your tax rebate turns into taxes owing due to an arithmetic mistake you have made.

All 3 of those disappointments have happened to me (and to people I know).

Financial Disappointments

What do you do about it? Well, a short intense pity parade is fine (with a few drinks), however, you can’t let this stop you from your eventual goals. Short setbacks and battles lost do not mean the end to a war, keep fighting and use this to invigorate your actions. Maybe you have become complacent? Maybe you need to examine why this happened and put in an action plan to make sure it doesn’t happen again (making the same mistakes over and over is a bad thing in life).

Some ways to deal with disappointments financially:

1. Do a “Root Cause Analysis” of what happened. If you don’t understand why something went wrong, what is stopping you from doing it again? Understanding financial failures or setbacks is the key to any financial planning.
2. Give yourself a chance to recover, and don’t panic. If you feel like the steps you are taking are “reactive” (i.e. you are simply doing something because you think you should), step back and think about it, or ask someone you trust if something is a good idea. Don’t go off “half cocked”.
3. Remember financial planning and financial success is a long term thing, you can’t sprint the entire time, sometimes you might have to walk. As long as you aren’t going backwards, you are succeeding.

On to the next financial battle.