Part 2 Module 3 Chapters 1-4

Part 2 Module 3 Chapters 1-4

Taboo: Talking about Money

Studies have shown (years past) that talking about addiction was easier than money issues
The manual suggests we look at television. The subject and dialog often includes sex, a subject that had been awkward or forbidden in generations passed.
We are seeing that change a bit. With the recession, it has become less taboo to discuss money problems.
Why – so many people have had struggles, that it just isn’t as big of a deal anymore
But some members are still hesitant to seek help or discuss the situation openly
This can be illustrated by the fact that my co-workers and I provided 95% of our counseling sessions by phone this last year.

People may feel that others would judge them if they knew their money issues.
Advertising continually tries to convince us that we are not satisfied.
Our happiness is always dependent on our next purchase.
Manual: “if the last 200 things you purchased failed to make you happy, the chances that item 201 can do so are exceedingly slim.”
Advertising continually tries to show us how we have fallen short, but the product that they offer will end all of that. (until we see their next advertisement).
The study manual makes a very “spot on” statement. “ For a financial counselor, the process of examining money-related values and beliefs must always start with examining your own practices and your own background.
Our own opinions and background can alter what we hear members say, and the advice we give.
I was speaking with someone that recently purchased a different vehicle that would meet the needs of the family. They have two kids, and “Needed” a four door because the Jeep Wrangler was difficult to move car seats around in.
It took a few minutes for me to “snap out of it” and wake up. They had purchased a third vehicle. They need to sell the Jeep!
I was blinded by the fact that I love Jeeps. If I purchased another vehicle, of course the Jeep would have to stay. It is a recreational item. Jeeps are Awesome….but my personal thoughts/background blinded me.
They could live with the Jeep Wrangler, they only have two children. Even though it is inconvenient, this didn’t represent a NEED for a different vehicle given tight financial predicament.
He thought as I do that it was for recreation, not just a vehicle. The thought hadn’t crossed his mind that he needed to sell the Jeep.
After a few laughs and stories, I advised him to sell the Jeep. When their finances permit, they can buy another one. Otherwise, they would need to sell the car they just purchased and live with the Jeep.
Financial decisions are about tradeoff’s. What would they rather do, I gave him options and want them to make the decision as a family.
We must learn to separate emotions from our advice.
I often tell people that my job is to help them make financial decisions, but that their emotions should be considered as well. I can make the budget work in black and white, but they must make sense of severe recommendations I make and the implications that will have in their day to day life.
It is easy for me to say that they cannot afford to pay for their child’s car, education, etc…but what does that really mean to them? If they are unwilling to cut in that area, what else would they give up instead? Or would this be enough of a motivator for them to find additional work?

Student Loan debt for their daughters should not be addressed, it is their retirement plan
If you are struggling, you don’t have to spill the entire story. Tell them the current financial goal you are working on. Let them know that we will always have goals to accomplish, and that we need to continue improving each day.

Family Influences

I worked with an individual that won a $120 settlement for being improperly evicted from his apartment.
I found this to be very interesting considering he walked to work from his apartment, he owned no vehicle.
He didn’t seem to have much cash, he was very frugal and wise when it came to spending his money.
I asked him about the settlement one day. He admitted that he had spent all of the money in under a year. He bought really nice clothes for himself, and treated his friends. He was able to live the high life for a while, but didn’t have anything to show for it.
I realized at that point in time that basic savings habits my parents taught me are now just engrained in my life. They are a part of who I am, part of my decision making process.
This co-worker grew up in a situation where they lived paycheck to paycheck, and planning for the future was never part of the process.
Even low income families can develop good habits. The amount they save, invest, set aside may not be as large, but the habit is key. Having this good habit will carry over when their situations improve in life. It doesn’t matter how much you make if you spend it all. Once the money is gone, you are broke just like the next door neighbor…Jones, or whatever his name is…
Some equate not having enough money to vacation over the summer as deep financial struggles. Others who have enough food for dinner in the cupboard, but are otherwise broke, don’t consider themselves to be living near poverty.
How do you define social roles, where are the lines drawn?
People don’t want to be labeled poor. They often have difficult times reaching out for social assistance when they really need it, even though they have been paying into those programs their entire working career.
Kids will pick up on the parents attitudes toward money, and it will influence them.
If parents argue about money, children will be hesitant to talk about money. They want to avoid awkward situations.
If parents complain about paying bills, the kids will interpret bills as being negative, and something they want to avoid dealing with when possible.
The gentlemen that I spoke with in Mid January that told me he wanted our assistance. He needed to create a spending plan that would allow him to keep all three cars. He hadn’t ever owned anything, he came from a poor family. These “assets” made him feel like he had accomplished so much.
How did living in a low income household affect him?
My father operated his own business. My parents often discussed cash flow. I remember when my father sold his business, and went into a new industry. His pay was much lower, but it was a better career choice for his health and the family.
I was taught that my WANTS would not just be given to me, I learned about budgeting.
I also learned about expectations, I learned how to work and earn what I wanted.
What is your background, what did you learn from your parents?
What have you learned from your friends/neighbors, from your kids?
What are your children learning from you?
Is money given, or earned through chores? (different people teach their kids differently)
Do the kids receive an allowance? How much, is it contingent upon anything?
How much is your own allowance, how do you decide how much you can spend on yourself?
In general, we place too much influence on the accumulation of “stuff.”
Think of Maslow’s Hierarchy of Needs:
What will it take to reach the enlightened state of Self Actualization when it comes to our finances?
When will we realize that Stuff doesn’t bring happiness?
When will we (member) realize that we can prepare for a solid financial future, but we don’t need to worry that our neighbors (The Jones Family) know we have achieved success?

Traditions and Expectations:

Financial Peer Pressure

If gift giving has been part of your social traditions, you will tend to follow the pattern.
Holidays, Birthdays, Weddings, or other social events may influence your spending decisions
If you are expected to give a gift if invited, you likely will. If others traveled to an event to see you (IE wedding) you will be expected to do the same. If you receive a gift, a gift in return is often required. This is

Seeking Validation
Members will often ask you a question, hoping to hear you say that things look okay.
Do not validate this unless you have properly assessed their finances and truly feel they are going down the correct path.
They may want to hear it “is okay,” but they may need to make severe changes.
They may even think: Why should I do anything about it, my credit is already destroyed. I just don’t care anymore. It isn’t realistic to think I can rebound from this right now anyways.
They may have given up, or they may just make those comments to help themselves feel less frustrated or stressed with the situation.
If they came to you with a question, they likely need your help. They may even need more help that you think if they do not open up properly about the state of their finances.

Plan to Save

Members will often portray their situation as not being as dire as it really is. How about You?
In order to save, we must spend less.
Saving may also mean that we must give up at least some of the outward appearances of prosperity.
Neighbors don’t know your net worth, but they will notice a new vehicle or extended time away for a vacation.
You have more control over your expenses than you do your income.
Income has a severe impact on how members will interpret Needs vs. Wants.
It is amazing how increasing income increases the number of expenses that are absolute necessities.
Most families can cut 15% from their expenses without noticing a change in lifestyle.
It will alter eating out, clothing and other recreational expenses though.
Examine weekend spending, look at your splurge items, what are your additions, what expenses do you like to “show off,” what do you spend too much time thinking about spending money on?
Key-
Create a set aside fund for re-occurring expenses.
Establish an emergency fund for the inevitable
Decrease reliance on debt for financing purchases
Live within your transportation needs. Vehicles chew off too much of the average family budget
Earning more money will not fix the problem today or in the future. Learning to do a better job with the money you already have is the key to solving hardships and creating a positive financial future.
IDA’s (mentioned in the manual) - AAAFCF administers this program in the State of Utah.
Matched Savings, 3 to 1 to be used for Home, Education, Business, Assistive Tech
Must be 18, have an earned income
Must attend 8 hours of financial management classes before applying