Spending :: Directions For Women

Spending

when monopoly mimics reality

February 29th, 2012

As a kid, one of the lessons I learned from many intense Monopoly sessions was if you own property and rent it out, you will make money. And the more valuable the property, the more you can rent it out for, and thus the more money you’ll make.

I’ve seen my grandson learning the same lessons as he has played one of the many versions of Monopoly that he owns–Beatles Monopoly, Fantasy Baseball Monopoly, Yankees world Champions Monopoly, and regular Monopoly. (Never mind what he is learning about making money by selling the same thing in many different guises!).

But we both had a new learning experience recently when we played his newest version–Electronic Banking Monopoly. This version comes with a little calculator that’s like a bank and credit card combined…it keeps track of all your liquid assets (no more bills in different colors to line up along your edge of the Board!). When you have to pay rent, it’s a quick swipe and your assets are automatically switched over to the property owner’s account. If you’re the one getting the rent, it automatically switches to your account without ever passing through your hands.

Want to buy a house? You have to check with the bank about the amount of your cash available (no more counting up the bills in front of you to see if there will be any left over for the built up properties you may soon land on or the penalty you may have to pay to get out of jail!).

No more seeing your stash increase as you earn $200 for going past “Go”.

No more counting out the bills to see how many fives you need to pay the rent.

No more keeping track of what your neighbors have just by looking at what’s in front of them. If they keep spending, you have to figure they have plenty.

But, we learned some very important truths:

It is difficult to know what you own and what you owe if it all happens automatically.

It is misleading to conclude that people who are spending MUST have more money than you.

It is much less fun not to have a clear picture of your available assets. In fact, it was nerve wracking. And disempowering because it was hard to plan.

We learned our lesson and went back to playing basic Monopoly!

~~~

P.S. In our real lives — a society driven by credit — it is even harder tracking what we own and what we owe, but we must if we want to take control of our finances.

Some useful resources:

American Association of Daily Money Managers at www.aadmm.com, an organization providing personal financial or bookkeeping services to those who need it.
Mint.com (www.mint.com) is a free online money organization program that brings all your financial accounts together in one place.
Or, if you would rather keep your financial status offline, you can purchase Quickbooks for your computer, cost is $183.

Nonetheless, as with the Monopoly game, it seems it should be easier than it used to be with all the computer tracking available. But I find there’s an emotional component missing when we go completely digital and for some of us, paper and pen may well still be the way to go.

Categories Women and Finance
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A New View of Value

by Eleanor Blayney

February 22nd, 2011

When was the last time you told yourself, “No, it’s too expensive”?

Some of us have banished this phrase from our vocabulary or say it in a voice so tiny, it cannot be heard over the loud beckon of something that we want. We don’t like telling ourselves “no,” with the result that the mental chatter in our head consists mostly of justifications for the “yes.”

For others of us, “too expensive” is an automatic barrier we erect to keep us from engaging fully with what the world has to offer. We don’t take the trip, go out for a nice dinner, buy the premium brand, or sit in the best seats, nor do we even let ourselves be tantalized by these luxuries. No mental small talk here. The price is too high – discussion over.

There is, of course, a vast middle range between the automatic self-indulgers and the knee-jerk self-deniers. It’s here where questions of value reside – where we have to do a bit of thinking as to whether a given expenditure is really worth it.

Actually, it can involve a lot of thinking. Value is an elusive and highly subjective concept, not to be confused with price. One woman’s trash can be another woman’s treasure, as any inveterate prowler of Saturday yard sales will attest. Taste, too, may play a part – if you don’t like caviar – you’re unlikely to appreciate, let alone pay the going rate for those exquisite, slimy eggs.

There may be as many different registers of value as there are individuals. Generally speaking, however, these registers fall in one of the following categories:

Affordability. In this case, we make our determination as to what we will pay based on what we CAN pay. While this approach has the merit of keeping us out of cash flow trouble, it discounts the importance of quality in our purchase decisions. The warning “you get what you pay for,” can be relevant here.
Cost/benefit analysis: MBAs and economists favor this approach to value, particularly when evaluating alternatives. The most valuable option will be the one with the most benefits per unit of cost. Sounds sophisticated and scientific, but benefits (as well as costs) can be highly subjective and emotional. Name brands use this subjectivity to their advantage. Branded products or services almost always cost more than generics, while offering virtually the same features. But when it comes to choosing a bottle of ketchup or aspirin, the thought that Heinz or Bayer was what “Mom always used” trumps the just-as-good generic every time.
External reference: Sometimes we decide what is valuable based on what others think, do, and spend. When we are teenagers, this shows up as “peer pressure” and is, unfortunately, very powerful. The problem is, however, not all of us grow out of this way of thinking. In its adult form, this is referred to as “keeping up with the Joneses.” Either way we are looking outside ourselves for our measures of value.
Internal reference or self-esteem: When we truly appreciate ourselves, in the sense of knowing ourselves and how we choose to live our lives, the question of monetary value becomes simple. We don’t need accounting or economics courses to know if the price is right, and we certainly don’t need advertisers or trend-setters to tell us what to buy, and for how much. We define value as whatever best honors us and sustains us. Our use of money – what we buy, save, or give – is not a source of shame or indecision, but a form of personal expression.

At Directions, we believe self-knowledge is the first, and perhaps most powerful, lesson of personal finance. This knowledge will not, of course, eliminate those occasions when we must tell ourselves “it’s too expensive” or “I can’t afford it.” But this self-talk is no longer about denial, but affirmation that we are making a choice that honors what is most important to us.

Categories Personal Finance for Women
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The Two Faces of Choice

by Elizabeth Jetton CFP®

August 25th, 2010

Directions is pleased to welcome a guest blog post from one of our cofounders, Elizabeth Jetton, CFP® . For more about Elizabeth, click here.

I recently read a fascinating interview published online in Knowledge @ Wharton with author and researcher, Sheena Iyengar, a professor at Columbia Business School who wrote The Art of Choosing.

When I ask clients what is important to them about money, often both men and women will tell me, “It’s having choice: being able to do what I want. “ Simple. Choice equals freedom. Or does it?

The psychology of choice is fascinating. Studies indicate how fickle we can be about what we want, whether we are in the grocery store, choosing between jobs or selecting an entrée at a restaurant. We are impacted by what others want; by what our culture values and by competing internal pulls between what we truly value, what we think we ought to value, what our gut tells us and our rational mind is telling us.

There can be a cost to having too much choice. In one of her studies, Iyengar compared 401(k) participation rates for Fidelity funds, which manages billions of dollars in retirement funds. In 401(k) plans where the employees were offered 10 or fewer investment choices, participation in the plan was around 75%.

When the number of investment choices reached 50 or more (Fidelity offers 4500) participation in the plan dropped to 60%. In other words, too much choice can paralyze us. We may lack enough information or context for even beginning the process of choosing. We feel defeated and exhausted before we start. Not a good thing when it could mean the difference in whether or not we have enough money to spend when earning a living is no longer desirable or feasible.

Something else I’ve observed in myself regarding spending money will probably seem so obvious to you. If I don’t go in the store, I don’t have to make a choice of what to buy, so I don’t buy. Duh.

I love to knit. What I really love is yarn: the feel of different yarns, the colors, the vision I have of creating something beautiful, the image of myself relaxing in my favorite chair with a pile of yarn in my lap and the dog by my side. I do not seem to be able to enter a yarn shop without buying something, despite very strong intentions not to buy, because I do not need more yarn. I have accumulated what a saleswoman calls, “SABLE: stash accumulated beyond life expectancy”.

As soon as I enter the yarn store, the “now I must choose” part of my brain engages and I find myself scanning the aisles, not just looking for the pleasure of it, but weighing choices. That is, do I want a silk yarn or alpaca? Blues or reds? The choosing brain vs. the rational “just looking” brain usually conquers me. Maybe it’s the ancient female ancestor still alive in me, who goes “on the hunt”, who is a gatherer of berries, seeds and greens, searching the forest for the next meal, gathering, gathering, gathering. Shopping (for the things, like yarn, that call to me) feels like ancient ritual, feels good, feels like gathering.

I can gather a lot of yarn in a year if I allow myself. And sometimes that leads to the vicious cycle of guilt: guilt for unintended spending. Guilt makes me hungry. Great – now I can feel guilty for spending and for eating.

We’re laughing, right? But this behavior can cost a lot more than plowing through a yarn budget. We won’t make a choice where we need to make it (participating in a 401(k), hiring a financial advisor, etc.) but we will get trapped into choices we would be better off avoiding.

The pull is strong. The gratification of choosing whatever it is calling us- shoes, children’s toys, jewelry, home goods, books, yarn … you name it – can represent the opposite of freedom: addiction, a lack of ability to choose “no”.

Freedom is the ability to choose not only “yes”, but to choose “no”. To feel the empowerment of serving a grander goal, like money for your future, or money for a long desired trip or building reserves so you can have true freedom even if times get a little rough. You can achieve these goals because you exercised your choice to say “no” to the pull of “more” and exercised your choice to say “yes” to not spending. Additionally, you have the choice to say yes to , but to saving, to calling an advisor, to raising the question with your friends or an advisor about money, to appreciating all that “yarn” (insert your own passion) you’ve already acquired.

The choice to love what you have, just like your mother told you, is perhaps the greater freedom. The power of choosing “none”, a statement of personal independence. I’m still a work in progress, because I’m human. It helps to talk about it!

Categories Personal Finance for Women
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Tell me the truth, do I look broke in this?

by Eleanor Blayney

July 15th, 2010

The similarities between budgeting and dieting are pretty obvious. Both are decidedly female subjects, reliable ever-green topics for women’s talk shows and magazines. Most men don’t obsess about these subjects, at least not in these terms. They may profess interest in “personal financial strategies” or “regimens for getting ripped,” but rarely do they admit to the humbler, more prosaic activities of counting either pennies or calories.

Both budgeting and dieting are governed by very simple rules and have very simple solutions, which apparently few people ever follow or believe in. If they did, the trillions of dollars spent on products and promises to get our waistlines slimmer and our bank accounts fatter could be redirected to something more socially redemptive – like curing cancer or eliminating world hunger. Maybe it is our female aversion to math that is behind it all. In the case of both budgets and diets, success comes when we take basic equations, and make them inequalities. To get richer, take the $ inflow = $ outflow equation, and make it an inequality: $ inflow > $ outflow. To get thinner, do the same thing with the calorie intake = calorie expenditure equation, but this time make the first term less than the second. What could be simpler?

If you don’t do math, then try something just as easy: write everything down. Everything you eat, everything you spend – write it down. It’s almost like the act of writing induces a caloric burn, on one hand, and stops the money burn in your pocket, on the other. You eat less and save more, just by putting pen to paper.

But there is at least one important difference between dieting and budgeting, or more precisely, between the underlying compulsions that drive us to them: namely overeating and overspending. The difference has to do with visibility. When I eat too much for too long, it shows. It makes it harder for me to walk upstairs; it makes sharing a seat on the bus or fastening my seat belt on a plane a difficult and even embarrassing activity. Not so when I overspend. I move through the world quite easily – some would say too easily – even when I am overburdened by debt or unpaid bills. It is almost impossible to know how much money people have or don’t have by the front they put to the world. Millionaires drive used Fords, and destitute dames wear Prada.

Another difference – there is a now surgical solution for excessive weight that does not exist for excessive spending, even though both are clearly hazardous to your health. Obese adults can now have gastric bypass surgery, which makes their stomachs smaller and limits the body’s ability to absorb food. If, after bypass surgery, you eat too much, you feel really sick. Can you imagine a similar procedure for overspenders? Something a surgeon might embed, maybe in your feet or fingers, that made it way too uncomfortable to shop at the mall or on the internet for more than a few minutes at a time. If you did manage to spend too much anyway, you would find yourself regurgitating all that stuff you did not need and could not absorb, or rather, afford.

I have heard, however, that gastric bypass surgery does not work, if the person undergoing the procedure does not change her attitudes about food. In other words, without revising the way a person thinks about food, no adjustment of her digestive system is going to work in keeping the weight off. Undoubtedly, the same would be true of any mechanical solution to overspending. Without really wanting what results from controlled spending, even a surgically-altered overspender would still pack on the debt.

I guess there is no avoiding it, when it comes to overeating or overspending. At the end of the day, they are simple struggles of mind over matter. And until those afflicted really focus on what does matter – health, wellbeing, and physical and emotional freedom – no program of personal discipline has a chance of success, no matter how many times it is featured on Oprah.

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