Marketplace

Money and emotions

Question: You know how we often despise in others the qualities that are most like our own? Well, I have always been very critical of my mother for her spending habits, that she seems to spend to fill some kind of an emotional void or to feel secure knowing that she can spend (vs. times in her life when money was in short supply). I notice increasingly in my own spending habits, though, the same impulses, that spending money gives me a pleasure akin to eating a food that was forbidden as a child. Money is my Hostess snack cake. Growing up, we didn't have any, and now I can have it any time I want. The question is: What advice can you offer - or what tools, books, etc. can you recommend - to better understand and reshape my emotional response to spending? Because while my husband and I are lucky enough to have the resources (and luckily I hate to shop), I want to be able to set and achieve spending and saving goals, and to get the same satisfaction from having done so. Thank you for any help you can offer. I have just discovered your program (after listening to Marketplace for years) and am an avid podcast fan. Sarah, Efland, NC

Answer: Whew, this is a huge topic. It's also a wonderful question. I'd love to hear from listeners any suggestions they might have for you or personal experiences to pass on.

Looking at this question through a personal finance lens, I believe that giving is central to managing our money lives. Saving for emergencies and for retirement is central to any financial plan. But I would give primacy of place to giving. The mindfulness of giving forges connections with community and strangers. It reminds us that when you think about what matters most it's usually relationships, experiences and making a difference, not things and money. We get to support causes with our dollars and recycle stuff we no longer want and get it to people who need it more. "Money is to be spent or given away," says Ross Levin, a Minnesota based certified financial planner. "Planned, systemic giving to charity helps dislodge the hold that money may have over you. Sharing your experiences and hopes can have a huge impact on those around you. You get to choose to make a difference."

You asked for resources. A practical personal finance book that grapples with our emotional responses to money in a consumer-dominated society is Eric Tyson's Mind Over Money: Your Path to Wealth and Happiness. Another book I've found valuable isn't directly focused on managing money, but its thought provoking along the lines of your question. It's Stumbling on Happiness by Daniel Gilbert. A Harvard psychologist, Gilbert's book is a quirky exploration of our imaginations. He confronts the issue of we do so many things that don't make us happy and pass on the things that do. Hmmm, maybe I should take it off my book shelf and re-read it...

09/02/09 by Chris Farrell

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Go on trip

Question: My wife (30 yrs old) and I (31) have been saving for multiple years to take a 6 month world trip and I am hoping you'd give me your opinion if it is too financially risky to take this trip. I can take a leave of absence from my work with the expectation that I'll still be employed when I return. My company is an FFRDC [Federally Funded research and Development Center] so it is relatively secure. My wife will have to quit her job and search upon return. However my job is 2/3 of our income and we could live off my job alone if needed. We rent so we should be able to cut most expenses while we're away. We have zero consumer debt, though we have $45,000 in federal student debt at 2% APR. We estimate the trip will cost $30,000 and have $40,000 so that we have a good buffer. This is not our only savings as we have been saving for retirement for multiple years and already have about $100,000 toward retirement in our tax advantaged plans. We also have several months (~4 mo) expenses saved up in the bank for a rainy day. However I am still a little worried. With the poor economy and losing 6 months of pay is this just foolish conspicuous consumption that will put my wife and I in financial peril or is this a small, calculated risk which, given we are young, can course correct even if the unexpected happens? Obviously I'd love to make this trip, but I like feeling financially secure as well. First Name: Nichols, Redondo Beach, CA

Answer: Okay, I'm jealous--really jealous. It sounds like a wonderful adventure. I guess I'm supposed to act like a sober-minded guardian reminding people not to take unnecessary risks when the economy is down. But I can't do it. I don't believe it. As the 15th century French poet Charles D'Orleans wisely wrote, "It's very well to be thrifty, but don't amass a hoard of regrets."

You can't get rid of the risk that when you return you face a rough time. It's in the nature of your adventure. But you've carefully thought through the risks and rewards of taking the trip, and you've done a lot to minimize the risk of hitting a tough patch when you return. You've prepared your employer for your leave. You've saved a lot, leaving yourself a decent margin-of-safety to fund your wife's job hunt when you get back to California. The global downturn also means that in many places you'll be able to take advantage of cut-rate prices. Bon voyage.

10/06/09 by Chris Farrell

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