Wednesday, January 23, 2013

Your Relationship with Money

                This is inspired by an excellent book from an author who visits Mizzou regularly, Ted Klontz.  The book is The Financial Wisdom of Ebenezer Scrooge, a book of readings/stories from various authors.   The authors tell their life story and how it has shaped their relationship with money.  (If you don’t think you have a relationship with money, try getting by without it!)


                The author proposes that Bob Cratchit (of Christmas Carol fame) had a relationship with money that was just as destructive as Ebenezer Scrooge’s.  Cratchit’s relationship with money was, however, different.  You recall that Mr. Ebenezer worshipped money and held on to every single penny he made.  On the other hand, Mr. Cratchit was quick to blow his paycheck on a single Christmas meal.  It also described that someone as talented and obviously qualified to work for Mr. Ebenezer, should not have too much trouble finding a better paying job, or starting his own successful business.  (Yes, to believe this, we need to forget that the 19th century was quite different from our early 21st century.)


                The book goes on to describe that we all possess a “money script” which determines how we view money and most of us inherit our money script from our parents.  It is no doubt that parents’ views of money vary widely and, within families, the views of the husband and wife can sometime be quite divergent.  Throughout the book, the point is made that money is nothing more than a resource.  It is a resource that we can use to buy things which bring us satisfaction including those things we require for sustenance.  The authors emphasize that money should be viewed as a means to an end, not the end itself.  (We doubt if Mr. Scrooge would have liked this part.) 


                Regardless, the authors implore us to consider the proposition that we all need a little Scrooge in us.  We don’t want to be Charles Dickens’ character Scrooge, of course, but we need to be enough of Scrooge to keep us from spending every dollar and that comes our way.  After all, it was Scrooge’s frugality that allowed him to amass so much money in the first place. 


                We must acknowledge that we, as Americans, have become spenders over the years.  It is hard to recall when we used to be savers.  Some of us even spend more than we make and some even justify it as the duty to help the country recover from the recession.  Those who spend excessively will often say, “If I just had more money, everything would be better”.  This is, simply, untrue.  Consider the multi-millionaires who have squandered and wasted their money to the point of poverty.  Many are professional athletes who did not learn the lessons of money management.  Athletes such as Kenny Anderson, Wally Backman, Charlie Batch, Riddick Bowe, Mark Brunell, Billy Buckner, Jason Caffey, Jack Clark, Derrick Coleman, Dermontti Dawson, Lenny Dykstra, Rollie Fingers, Ray Guy, Tony Gwynn, Steve Howe, Dorothy Hamill, Harmon Killebrew, Bernie Kosar, Terry Long, Darren McCarthy, Denny McLain, Greg Nettles, Jonny Neumann, Gaylord Perry, Andre Rison, Warren Sapp, Billy Sims, Leon Spinks, Lawrence Taylor, Duane Thomas, Bryan Trottier, Johnny Unitas, Michael Vick, Antoine Walker, Danny White, and Rick Wise are on this list ( ).


While we are inspired by the escalating salaries of professional athletes, the stories of their lack of success in controlling their money to support their goals are numerous.  Many overvalue their buddy with the “can’t fail” business idea. These athletes, the lessons of those who fail, are just as important as the stories of the people who get ahead in life by saving 20% of their income religiously.  Yet, saving 20% of your income over your lifetime is a certain way to have a better financial and consumption life when you are older than by spending your money in the hopes of being happier today, with a greater chance of being a financial failure when you are older.  This is certainly true if you use too much leverage (i.e., borrow too much) which can make the bad times worse, just like it can make the good times better.


                Just remember it’s not how much or how little money you have, it is your relationship with the concept of money that will determine the quality of your life.  Or, like an insurance friend of mine told me over lunch, “When I’m dead it won’t matter how much money I have.  All that matters then is whether I’m in heaven or hell.”  I will venture to guess that going bankrupt is a lot closer to hell, than it is to financial success, regardless of your religious persuasion.


-          Matthew Ott, recent graduate Personal Financial Planning

-          Robert O. Weagley, PhD, CFP®, Personal Financial Planning


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