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November 2012

At various times throughout my life including the present, I’ve been guilty of having attitudes that could be damaging to my hopes for financial independence. I am generally a laid-back person, and my lack of what can be called “urgency” has certainly damaged my corporate ladder-climbing options. Although I’m fine with that, and I have found ways to build my own ladder, I can understand how something like that can be frustrating.

In school, I was able to achieve highly relative to my peers without stressing much over my work. That might have given me the illusion that my achievement was due mainly to skill rather than effort — the stable side of attribution. I later learned that would only take me so far, and excellence on a scale larger than my high school — or the set of all high-school aged clarinet players in the state of New Jersey — or working for a living on major projects — required much more than the token effort I was used to using.

Nevertheless, I managed to avoid stress. Until recently, I didn’t let bad situations affect me personally. I saw the urgency around me as mostly a show. I used to work in a corporate environment, in the back-office financial area. Once in a while we had urgent projects to deal with, but for the most part, it wasn’t an incredible busy job. Having come from a non-profit consisting of only ten or so people working on major, nationwide projects for which we needed five times as many people as we had, it was hard for me to take a lot of the false urgency seriously. Yet I saw around me a culture where if you leave your desk, you have to walk quickly, as if you’re on a mission to save a life.

I eventually transferred to a different department within the company, as did many others who were working for the same supervisor. I later talked to a co-worker who had done the same, and she had been one of those who took on this sense of full-time urgency in her work, regardless of how meaningless to the world it was (and all of our work was). As we were talking about our former boss, she mentioned it was her first corporate job, and she was only acting in this way because she thought it’s how you’re supposed to act in an office setting.

But I took it to the extreme. Not only did I refuse to let work stress me and scoff at the idea of false sense of urgency, I tended to procrastinate. If there was a deadline, I often waited until the last minute, always keeping my faith that I can get what I need to do done within the limits of time. Sometimes I was right, and sometimes I was wrong.

Procrastination is a problem. For some, putting a task off for the future is a way of avoiding pressure or normalizing stress over time. Sometimes procrastination is a result of not knowing where to start. People put off a project because they’d rather it be perfect some time in the future than less than perfect today.

While you might put off cleaning the house until the hour before guests arrive and not suffer any consequences down the road, dealing with your money situation has to begin as soon as possible. While there’s a chance that you could suffer devastating financial consequences if you don’t deal with problems before they grow, even small delays can eat away at your wealth thanks to the amplification effect of inflation.

I can’t just say I wish I had known more about managing my money when I was a teenager. It’s true I’d probably be in a better financial situation today, all other things being equal, had I begun to save money years before I did, but this isn’t a message that encourages people to start something they’re not ready to handle, like the personal responsibility of managing the future. If I were to talk to a teenager to encourage her to start thinking about building financial skills today, I could relate it to her desires, like perhaps buying a car or paying for college, but it’s still going to fall mostly on deaf ears, as we’ve seen from previous attempts to add money management classes to the high school curriculum.

Parents and leaders in the community have the responsibility for modeling good financial behavior, and encouraging examples of good financial behavior among teenagers and young adults. Part of this good behavior is starting to, at the very least, increase awareness of the role of money in life. For the most part, kids shouldn’t need to worry about adult concerns, and spend the limited years before adulthood as kids, but the danger arises when the attitude of holding onto childish things continues into adulthood.

When that happens, you end up with dangerous attitudes:

  • There will be time to save for retirement later.
  • I’ll be able to pay off today’s debt when I finally get a better paying job.
  • Health insurance is for old and sick people.
  • I can spend eight hours a day playing video games.
  • I’ll start worrying about a house down payment when I start a family.

There are two main financial problems with this philosophy. First, it’s more than likely time will run out before you properly prepare for whatever future financial need you might have. Second, you can do much better with more time on your side.

If you start saving for retirement by age 18, you could retire with hundreds of thousands of dollars more than if you start saving at age 35, even if you save much more money each year starting at age 35. The early bird really does get the worm thanks to compounding interest and compounding returns.

Not knowing where to start is not a good enough excuse for delaying. Three things to get you started are relatively simple.

You don’t need to be as passionate about personal finance as we are in order to get started now. You just need to understand the consequences of delay. If you wait, you may never be able to retire or leave the type of job where you don’t want to work. If you procrastinate, you will miss opportunities for financial growth. If you don’t start putting in a little bit of effort today, it could take a lot of effort in the future to support your family.

You should feel a sense of urgency and a little bit of stress to move your finances in the right direction.

Putting off managing your finances until the future is one toxic attitude of many I’m discussing. The first was blaming others or the world for your situation. What tips do you have for discouraging financial procrastination?

Photo: Flickr


The difference between financial independence and a life of financial frustration comes down to attitude. The way you approach all aspects of your life, not just money, has a significant effect on your long-term financial growth. Personal philosophies dictate how you act and how you react to any situation you face.

It’s worth the time to take a look at your personal philosophies to determine how they are helping or hurting you. Think about how you view the world and your place within it. Consider the relationships you have with people and the way you make sense of situations.

I didn’t think about this much until I had a boss who encouraged me to take a look at how my own thoughts were preventing me from succeeding. Never being a fan of motivational nonsense, I wasn’t always willing to listen. This was more about delivery than it was about the message itself; once I was ready to accept some criticism of myself, much later, I understood more about what he was trying to communicate.

When I was younger, I tended to look for external reasons when any situation did not work out in my favor. I attributed bad results to things outside my control. For example, if I was late to the office, it was because traffic was worse than I expected. If I was going deeper into debt, it was because I wasn’t getting paid enough by my employer to cover my basic necessities in addition to my costs to transport myself to the office every day. My approach to life required me to believe that many of the bad things that happened to me were brought on by external events, things which I could not control.

Eventually, I came to realize that I had much more control over my life. I learned to accept every moment as a choice, and that I had no one to blame for any bad circumstances but myself. While there are certainly situations that are affected by uncontrollable external forces, but these make up a very small percent of the factors that affect my life.

While I wasn’t familiar with the psychology behind my approach to life at the time, I was shifting attribution. As I’ve read more about attribution theory in the years since the time I started changing my approach, I’ve come to see how the experts have clearly defined the effects of life philosophies pertaining to attribution.

If you do well on a test in school, you can attribute your success to a number of factors. If you perceive your success is due to your effort or your skills, you are likely to have an internal locus of control — you believe that this positive result is the effect of something inside yourself. If you attribute your successful results on luck or ease of the test, your locus of control is external.

It’s a natural defense mechanism to want to differentiate this locus of control based on the outcome. It’s not uncommon, particularly for managers of people to see this among employees who do self-evaluations, for people to focus on external forces when asked about poor results and on internal forces when asked about favorable results.

The feeling that bad situations are the result of bad luck, difficulty, or an external event more specific can make it more difficult to succeed financially over the long term. If you don’t believe the choices you make every day can have a positive effect in your life, there’s no incentive for making better choices. Blaming ourselves for our bad circumstances requires admitting that we’ve made bad choices. Most people want to feel good about the choices they’ve made, so there is natural resistance to accepting responsibility.

I’ve heard these external attributions — and in some cases, the one having these thoughts at some point might have been me.

I can’t get a job because the economy is bad. With companies laying off employees during the recession, this is something I heard frequently over the past few years. The media perpetuate the story that people are having a difficult time staying in their current jobs or finding new ones, and this helps those in the same situation feel like they’re going through a tough situation with many other people.

There’s camaraderie in the unemployed. And that makes it easy to accept that you won’t succeed until the economy improves — you’re just waiting for the statistics like the unemployment figures to be more in your favor. Once companies start hiring again, once consumer confidence increases, once the public wants to buy products again, you’ll have more options.

The best way for most people to reach financial independence over the course of their lives is to be employed at all times. You can’t wait around for the economy to improve. You need to adjust if your particular skills aren’t needed in today’s market. Being able to adapt is one of the biggest factors in your measurement of your human capital, because it means you can meet adversity with the type of thinking needed to survive.

A factory worker can lament the loss of jobs with outsourcing or computerization and blame the government for unfavorable policies or blame corporations for looking to save money. He will do much better for himself if he accepts the fact that the skills he has do not meet the needs of an economy that relies more on technology and has more access to distant locations where a family’s financial needs are not as cumbersome as they are in this country.

The quicker he concludes that he needs to adapt to a changing world, the sooner he can take responsibility for his future and maintain a healthy income that grows into wealth.

I keep getting charged fees by my bank, and it’s due to their policies.
No matter your bank, read the fine print around overdrafts, choose the best possible bank, and save your money so your balance isn’t dangerously close to zero.

I’m in debt because of a financial emergency. Getting struck as a pedestrian by a moving vehicle is one of the worst things that can happen to someone. Hospital bills for major accidents are one of the biggest causes of financial devastation. Losing a job, helping a family member with her own emergency, and going through a natural disaster like Hurricane Katrina or Superstorm Sandy are other reasons — besides compulsive shopping — that people fall into debt without a mechanism in place to get out.

While emergencies can never be fully avoided, you can be prepared. You can avoid risk by living somewhere that is not prone to weather-based devastation, though that doesn’t limit the possibility completely. You need to have the appropriate level of insurance. That includes automobile, life, health, hurricane, earthquake, flood, disability, long-term care — and enough to cover whatever you might not be able to pay for yourself. You need to have an emergency fund of the appropriate size. With these tools, you can face financial emergencies without jeopardizing your future.

I lost money on my investments. This is one of those cases where people love to look for external reasons for their failure rather their own lack of skill or ability in picking an investment. I’ve seen people absolutely convinced that no real estate purchase is a bad idea significantly overpay for their house and then need to take a significant loss when they needed to sell in the middle of the recession. I’ve purchased stocks I thought would perform well in the short-term, only to find they did not provide the returns I was hoping for.

The list of possible blame recipients is long when it comes to investments gone bad, and here are just a few:

  • The market crashed, so it’s just a matter of bad timing or bad luck.
  • The company’s marketing — or even lying — persuaded me to make a bad investment.
  • I was fooled by Bernie Madoff or some other swindler, who promised great returns amid a tough economy.
  • The company’s CEO was involved in a scandal that destroyed the stock’s value.

External forces certainly play a role, but every one of these reasons can easily be turned around to show the investor was at fault. You can’t time the market, so invest for the long-term or put your money in an investment or savings vehicle much less volatile. Don’t trust marketing. If something sounds too good to be true, it probably is. Ask questions if you have concerns. Diversify so you’re not significantly affected by the actions of one person or one company.

That’s just the beginning in terms of taking responsibility for bad investments.

Once you come to the conclusion that the choices you make have a direct effect on your finances, you’ll be in a much better position for building long-term wealth. If only external forces were to have control over our lives, no one would be able to consistently build wealth or the life they want. Give yourself a chance by recognizing the effect your choices have on your success and failure. The correlation might not always be perfectly clear, but accepting responsibility for outcomes that don’t go your way is the first step towards ridding yourself of toxic financial attitudes that prevent you from achieving your potential level of wealth (and separately, life satisfaction).

The idea that “nothing bad is my fault” is the first of several negative attitudes I plan to consider over the next few weeks. How do you accept responsibility or place blame for the less-than-optimal financial situations in your life?

Photo: Flickr


Although I’ve mostly figured out how to get my financial life in order, other aspects of my life still need work. For example, I’ve visited a physician only a few times over the past ten years. I should be seeing a doctor about once a year if I were to listen to the typical medical advice. With my medical insurance provider changing four times in the last two years, it’s been even more difficult for me to nail down some consistency in medical coverage. But that’s just an excuse.

As an independent contractor, it’s up to me to find and pay for medical insurance — and this isn’t cheap in the state of New Jersey. An increasing number of people in my situation — as well as those who do have employer-provided insurance — are turning towards concierge medicine.

The type of care provided by doctors who follow the concierge model is more like the medical care of the past: doctors have fewer patients and build personal relationships, make house calls, and in many cases, earn a better living than they would when dealing with insurance companies.

For a monthly retainer fee, a patient can have access to their family physician at any time.

There are great benefits to this model, but it can’t replace insurance completely, particularly not for people who aren’t rich. Concierge medicine has been a service consumed by the wealthy, but as it has been growing in popularity, the idea is increasingly gaining traction among those who are not as flushed with cash. The concierge model is not a replacement for insurance. It’s fine when all you need to deal with is a physician, but specialists can cause problems.

Treatment not handled by a physician can be expensive. This is how people without insurance can find themselves in debt that they can’t overcome. One operation can cost hundreds of thousands of dollars without insurance, and concierge medicine does nothing to solve that problem. It cannot be a full replacement for insurance — or it can be, until a patient needs anything more than basic medical care.

The career situation for physicians is difficult, and moving from insurance to a concierge practice is one way for their industry to survive and thrive. Many of the best medical students turn towards a specialty because the compensation is so much better, as a result of the way insurance companies reimburse doctors for services. Compensation is not just the simple issue of supply and demand, but that has something to do with it as well.

Society still needs primary care physicians even though they don’t make as much money as specialists for the most part. To justify the ever-increasing cost of medical school, doctors need to seek higher compensation. A concierge model can increase the annual income of a practice. For the patient, however, the typical concierge medicine approach is incomplete. Insurance is still necessary — though perhaps an insurance plan that includes only catastrophic coverage — because once you need a specialist, without insurance, you’ll need to pay for your care out of your pocket.

Would you be willing to pay a monthly retainer fee for more direct access to your physician? How would you then cover yourself for any procedure or treatment your physician might not be able to handle? Is concierge medicine still only a reasonable health care option for the wealthy? With the Affordable Care Act, designed to encourage insurance for all citizens, is concierge medicine a viable option?

Photo: Flickr


It is a sad commentary on our culture when not only are people willing to trample and hurt each other to scramble for what is perceived to be a “good deal” but when such trampling is glorified by the media. (Crazy people drive ratings, and ratings drive large advertising profits for the media!)

No one ever saved money by spending money. Whether because of the economic downturn or due to more media focus on the art of bargain hunting, being able to clip coupons or respond to advertisements touting low prices is now considered a “skill” worthy of attention. Saving money is an important part of building a solid future, but the idea that saving $500 off a high-definition television or finding two years’ worth of toilet paper for $10 is going to move anyone towards that goal is just plain ignorance.

You save money by not spending it. That’s the only guaranteed method of giving yourself the freedom of not needing to worry about your financial situation in the future. That isn’t to say you should never spend money, but it is imperative to recognize that every spending choice requires a decision. With every decision, weigh the financial consequences.

Yes — you could save $500 on an HDTV by beating down the crowd, grabbing the box, and running to the cashier. But you could save much more than $500 by buying a television that was considered cutting-edge just one year ago. You could save more than $500 by waiting a few months for when the new models come out and today’s model is discounted even more. You could save more than $500 by keeping the same television you’ve had that has been working perfectly for the last few years. Sure, there’s something to be said for upgrading your equipment once in a while, but it’s better to do so when you’re not under the perceived pressure that retailers create during the Black Friday frenzy.

The more I see videos of shoppers acting like idiots when stores open the Black Friday gates, the more I lean towards supporting Buy Nothing Day. It’s not a logical response; someone determined to spend $2,000 for himself and another $2,000 for holiday gifts, postponing the purchases until after Black Friday doesn’t have an effect (other than possibly avoiding stressful shopping situations and mobs of death).

Shopping online on Black Friday (or Cyber Monday) is one way to avoid the madness of humanity on this shopping day. In past years, retailers did not properly support their websites, so online shoppers faced frustration when trying to purchase items from popular stores, but these companies have since learned how to prepare their online storefronts for waves of traffic from shoppers’ computers. If you’re going to shop on this crazy day, at least do it from the comfort of your own home (or office on Monday).

Do not obsess yourself with hunting for these deals. For the most part, it’s smoke-and-mirrors and bait-and-switch, to the extent it’s legal, though some retailers are fine pushing the boundaries of false advertising during the holiday season. You’re not doing yourself any favors in the long run regardless of what deals you think you’re getting. At best, you’re getting a good feeling of winning, beating the retailers, or doing something exclusive. These are just psychological mind tricks and you have done nothing to help your long-term financial condition.

If you like finding deals, acknowledge you’re doing it because you like the game, and you’re attracted by the satisfaction, not because it’s a healthy financial skill or an approach to life that will leave you financially better off.

Deal seeking has grown into a huge industry, as I mentioned when I wrote about the hoax of Black Friday. I’ve been writing here at Consumerism Commentary for almost ten years, and many times so-called “experts” in what has become a business of creating successful advertising-based websites in the financial arena have encouraged me to set up an area of this website for the “best deals” or coupons with information fed to the site from advertisers. There are many websites that operate this way, and I have nothing against them or those who operate them, but with my feelings about the detrimental effects of deal-seeking, it was not something I could not do in good conscience.

I’d like to think that most, if not all, Consumerism Commentary readers who do line up outside stores on Black Friday do not trample other people or yell or fight. While not everyone may agree with me about the futility of this kind of deal shopping from a long-term perspective, from the feedback I’ve received over the past decade, most of the community considers financial consequences to spending decisions and isn’t as swayed by deal-focused advertising as the average American consumer.

It’s fine if you want to go shopping on Black Friday. Keep this in mind:

  • Don’t hurt yourself or anyone else.
  • Be respectful of the employees who have to work at the stores and deal with inconsiderate adults acting like children.
  • Recognize the deal you may be getting isn’t that good of a deal.
  • Accept you’re not doing yourself of your family as much as a financial favor you think you are.

Photo: Flickr


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