Thursday, September 04, 2008

Your Money or Your Life

As you may have guessed, I've been on a real finance management kick. I recently sent out a long-ish email to my peers about the urgency and importance of opening up a retirement account right now. I hope that I can contribute to my 401k and IRA each year as I enter through life's more challenging stages. Reading about individuals or couples who have resurfaced after handling unspeakable amounts of debt (think $50k and up!) is encouraging, because it means that you can dig yourself out of nearly any financial situation if you take control. That's what every financial book says- it's just a matter of having a doable plan, time and diligence. I don't ever plan to get into "bad debt" via credit cards (mortgages or student loans do not count) and I hope that my future spouse won't think this is OK in any situation either.

I keep hearing that finances is the #1 cause of divorce, and I am now starting to understand why. I'm not miserly, nor do I have a problem with overspending, but I do have concerns about being with someone who has a more liberal attitude towards spending and debt. I do NOT want to be the person in the relationship always being the "strict" one by curbing spending, and being in charge of all finances because my spouse isn't interested or responsible enough to manage them. Absolutely unacceptable. I can probably do it, but a burden like that takes a real toll on relationships. Learning finances even in a stable marriage is a good idea, not just in case of divorce or being widowed. Typically, from my limited experience, Asians are much more frugal and save a lot more than any other ethnicities. Yeah, it's a more boring way to live (safe is boring sometimes), but how wonderful it is to never experience the weight and worry of huge debt over the majority of your life. That freedom is definitely worth stretching pennies over and resisting rabid consumerism for me. I look at my parents and see that they live simple lives, but have been able to put their kids through college and travel and live comfortably. Of course, they were very poor right after they graduated, and worked odd and low-paid jobs for a while before landing high-paying jobs at booming tech companies. Still, because of excellent planning, I am quite sure they are set for retirement, and even though my Mom is no longer employed and is in school again, they will probably never be in want of money. Even if they did somehow run low on funds, they have an amazing ability to live with few needs and nearly nonexistent wants.

I have yet to develop a balanced attitude about finances, because I am successfully thrifty for a spell, then I go out and splurge on nice things because my bank balance looks healthy. Hopefully I will be able to stick to a budget and also not try to gain so much satisfaction from purchasing things. For all my life up until now, I haven't worried much about money, because I've always had enough and my parents provided for me. One thing I've learned since graduation is that you shouldn't wait for things to happen to you, because they never might, especially when it comes to healthy finances. Instead, actively work towards personal goals. I don't make a ton of money right now, but if I save, tuck away funds for retirement, start an emergency fund, and spend wisely, I will be in a financially secure situation in no time, especially since I have NO debt to my name. Ideally, my future spouse will be in a similar situation before seriously discussing marriage.

Suze Orman article about Marriage and Money

Pertinent when you are not on the same page financially as your significant other:

"In fact, there should be no "I do's" until you and your sweetie both appreciate the importance of living a financially responsible life. If your partner can't see the value in that, then you need to seriously question how this will play out in a marriage.

If you do find you are poles apart, it's time to dig in and work together to resolve any important differences. Don't attack. Help each other grow and learn, through calm conversations and a lot of listening. Quite often, people are financially irresponsible because they grew up watching their parents make all the wrong moves. So they simply never learned how to do things the right way. That's something you can be compassionate about, and help your honey to overcome."

As I was raised in a Christian family, I was warned against putting my security in money (or other things, people), and advised to trust God for everything. I realize that I have to be careful in learning shrewd financial decision-making not to rely on my knowledge to propel myself higher in life. I just think it's a shame that so many of my peers have bad money habits and debt because of their parents; they either didn't support them or modeled bad handling of finances. In this way, my parents gave me a significant head start. They always paid off all their bills in full on time, taught me to never spend money I didn't have, tithe, start off investing low-risk (low-return), and save. I'm still working on the saving part, as it's so tempting to take advantage of being employed and single and young. These days I'm not so big on going out and buying overpriced drinks or paying covers, but it would be nice to own some modern furniture, more artwork, nicer bike parts, nicer kitchen supplies, and lots of books on my to-read list. But with the serious thought of possible debt incurred through marriage to someone in debt plus the wish of wanting to own a nice home and raise kids eventually, my random spending habits seem immature and irresponsible. Everyone else my age who is single is living this sort of good life, so it's difficult to reign myself in, but I'd rather have a head-start than be on the same sad page as everyone else in a few years.

Another part of me is sick of all this money business and not looking forward to the increased complexity of managing finances with a mortgage, family, increased spending, more investments, debt repayment, more paperwork, etc. Can I juggle these matters successfully based on sheer effort and a little research? Maturity seems really difficult, and I hope that I will embrace all the responsibility it entails and not just survive, but thrive.

----- Mom's Response ------

Dear Frances,

Thanks for sharing the blog with us! Now I know more about what you think of us.

Daddy and I don't worry about retirement because
1. we saved
2. we can live real simply
3. as a pastor, daddy can never retire as long as people needs him to teach/preach
4. we trust that as we do our part (#1), God will take care of the rest

It is really a good feeling when we have extra and can share with others, like what some people do to us from time to time. You know what I mean?

Remember the 10/10/80 rule? Tithe 10%, save 10%, spend the rest.

Love, mom

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