Tuesday, August 28, 2007

personal finance & the shabby room

Why are personal finances so taboo?

For us nerds in the personal finance blogosphere, our topic of choice is one of great comfort and invokes some lively discussion. I'm sure many of us have noticed that we are in the minority when it comes to interest and feelings toward personal finance. When one ventures out into the real world the story is quite different. Personal finance is like that bedroom with the hideous paint colour and the gouges in the walls, that you have been putting off patching and painting since you moved into your house. PF tends to be an item that no one likes to talk about for fear that it will cause harm or entail us to stir up some kind of impossible effort or negative feelings.

If anything, whenever personal finance is discussed in social circles, the polite phrases to use tend to be limited to:

- 'I wish I had a million dollars'
- 'That's too expensive'
- 'If I only had the money'
- 'If I only made more money'
- 'I can't afford it'

The 'normal' and 'polite' thing to do seems to be to claim that one does not have enough money, and to want more. Can we learn anything from each other engaging in this type of social behaviour?

Couldn't phrases and discussion points like the following be more helpful?:

- 'Should I pay off the house or invest?'
- 'What technique do you use to save more of your net income??'
- 'I prefer to live below my means, in order to invest in my future.'
- 'It's not how much you make, it's what you do with it.'

Why aren't these phrases on the tips of people's tongues, aside from the fact that the issue at hand is somewhat personal to some people?

...Because no one wants to patch, sand, and paint those walls in that shabby room. No one wants to look in the closet. No one wants to address the issue of those boxes (or bodies) that they've hid in the closet. I think the shag carpet may need replacing and the bay window is moldy as well. Addressing these items will definitely take them away from the activities they enjoy in their everyday lives; so much for that vacation they planned. In private they'll endlessly stress about that shabby room, whether it be at work, even while on the beach in Jamaica...

If you have someone in your life who freely and enthusiastically discusses theirs and your personal finances with you, or even personal finance in general, count yourself lucky.


Philip B said...

I've learned to just keep my mouth shut about investing and finances. I have certain friends who I will never broach the subject with again; because of their reactions to the topic. I don't really understand why it is such a taboo subject, maybe because they were never taught about it? I am 30 and don't have any contemporaries who hold the same interest or knowledge of investing as myself. I think a lot of people my age are too concerned with the here and now and have no long range vision.

telly said...

Great post MG!

I agree, I would love to hear either of,
- 'I prefer to live below my means, in order to invest in my future.'
- 'It's not how much you make, it's what you do with it.'
in general conversation but it rarely happens. Apparently, telling someone that you live below your means is bragging but telling them you make six figures / yr isn't!

philip b, I have a few of those friends as well (and one sister, but I MAKE her talk about it :)) but thankfully I have a few friends that are willing to discuss finances as well. Good thing for PF blogs eh?

I know it may be unfair to say but I think, in general, the people I know that clam up or quickly change the subject are the ones that have always felt uncomfortable about their financial situation and feel better just by avoiding the discussion altogether.

SavingDiva said...

I totally agree that personal finance is a taboo topic...that's why I have my blog. It's a great sounding board for all of my budgeting ideas...

FourPillars said...

I have a number of friends who are interested in finance so I can talk with them about it. I find that people I know are either really keen on the topic or just don't have any interest at all...

Age is a factor as well. I think most people in their 20's and early 30's are more concerned with careers, houses, kids maybe, which is not necessarily a bad thing.

By the time people get to their late 30's (like moi) or older they start thinking about retirement a bit more since it starts appearing to be a lot closer compared to when you are in your 20's.


Canadian Dream said...

I know what you mean. I get one article about me in a national paper and the entire office thinks I'm some kind of investment god.

It's like their entire view of me just changed overnight because they suddenly realize I know a little bit about money.

Too werid. I wish would could speak about such things a bit more freely.


Anonymous said...

Lots of families out there have elderly or near-elderly members who are invested substantially in bonds, and young members who are just starting out.

Logically, it would make sense for the young people in the family simply to get a mortgage from the old members who need the bond allocation for retirement, right?

Unfortunately, it rarely happens. The thought of grandpa foreclosing on his grandson is just too much for most families, so grandpa goes to the bank and buys GICs, while the grandson goes to the bank and gets a mortgage.

Bottom line: the bankers get rich off of this arrangement. Simply because the family can't have coherent discussions of finances, and can't use secured financing as a way to provide a way of the young to buy assets, while providing the old with a method of funding their retirement and providing relatively 'safe' investments.

Financial Jungle said...

I generally feel uncomfortable talking about PF with my friends, because it's a very personal topic. More importantly, I don't want them to accidentally share their financial situations with me, and regret it later. Something you just can't reverse.

There's nothing wrong with writing annonymously on the Internet. I feel that I can trust the PF bloggers whom I become fond of. Beside, they give better advice than my friends who think a $70 stock is more expensive than a $20 stock.

telly said...

Anonymous makes a solid point...and one I've actually never thought of.

I wonder how many people (generations) out there have this arrangement? It makes a lot of sense and actually, would probably make a pretty good post imo (including tax details, etc. of this set up).

Anonymous said...

How very true MG...we have friends who are retired who never bothered to invest for the future and now they are paying the price, while we can travel, buy new cars, do all the things in retirement that you want to, they have to watch every penny, not fun...to retire means money to spend, travel, shop, give to the kids, pay your taxes quarterly, not a bad problem to have. Good luck to all those 30 years olds out there who are starting early, it sure pays off.

Anonymous said...

We started really saving early with 3 kids under 4 years of age, one income. We are now semi-retired, financially secure with over 2.2m in cash/stock/bonds/ and another $400K in real estate, which I don't include in overall assets. But PF was a taboo with our friends, just didn't talk about it. You hit the nail on the head.

Brip Blap said...

I feel very comfortable talking about generalities but uncomfortable talking about specifics. Most of my contemporaries are concerned about money but not about 'finance' per se. I am concerned about financial freedom, and making sure I am on a path to retiring young. Most of my colleagues/friends are looking to make as much as possible in order to spend as much as possible. We're all seeking to maximize income, but I'm the only one seeking to minimize expenses - and that is awkwards at times, like when everyone wants to drop $20 on lunch...

nancy said...

one kind of fun question I'll often ask, if there's even a reasonable chance that the people will respond is, 'what financial habit has worked really well for you?" Even if the person feels lousy about their finances, usually there is at least one habit they feel good about, and it opens the conversation.

@financialjungle - ha ha ha about the friends who think a $70 stock is more expensive than a $20. I've had so many similar discussions ... umm... well, it's not, really, if you think about it ...

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