The emotional aspect of money management

[midjd]

There have been a lot of comments/threads about our human tendency to want to avoid various financial things even when these decisions can favor us in the long run (e.g. auto financing, paying PMI, adjustable-rate mortgages... or postponing retirement contributions while paying down debt).

My emotional thing is wanting to pay off my CCs when the balance rises over a few hundred bucks - I pay them off once a month regardless, but whenever that balance gets to $400 or so I start to feel uneasy - even if the due date is a month away. I usually end up throwing money at them a few times a month. I just can't help it. I'm lucky I haven't ended up with any overdraft fees yet.

Do emotions ever win over finances for you? How do you combat this, or is it even worth it?

[2kids10horses]

Mid, about the only thing I can think of is when we bought our first two investment houses. For the month in between the time we got them under contract and got them closed, I didn't sleep very much. OMG!!! What have we done???

Well, a couple of days BEFORE we closed, we interviewed some contractors, at the house to get estimates on fixing them up. And the numbers they told us were was LESS than I was expecting!

Anyway, we bought 'em, fixed 'em, and now, (we've sold those two long ago) we are full time landlords.

But, that really took me out of my "comfort zone" at the time.

In hindsight, it was absolutely the BEST financial decision I've ever made.

[Formerly SK]

This isn't on the same scale as what you are talking about, but I today before I left for the local nursery to buy some plants for an area of our yard, I specifically did NOT check to see how much we've spent so far in our household budget. In fact, I was pretty sure we were already over budget for the month since we've been doing a crap load of yardwork this past few weeks. But I wanted more plants and so I stuck my fingers in my ears and skipped my way to the plant store. I spent $96.

Course, I bought all perennials so that should save us money next year, right???

[Deleted]

My emotional thing is wanting to pay off my CCs when the balance rises over a few hundred bucks - I pay them off once a month regardless, but whenever that balance gets to $400 or so I start to feel uneasy - even if the due date is a month away. I usually end up throwing money at them a few times a month. I just can't help it.

This one makes me nervous, too, because I remember credit card hell from my previous marriage. I'm not going back again.

But part of your post confused me. Are you paying money you don't have? If so, are you spending money in advance? I try hard not to do that by setting up a dummy check register entry in Money labeled "Future American Express." Then I add dollars to the entry as I spend it. The money is still "in" my account, but it is allocated in the month that I am actually making the purchase.

Think of it as a reverse envelope system. You put money in instead of taking money out.

[midjd]

But part of your post confused me. Are you paying money you don't have? If so, are you spending money in advance?

Not really - but all our bills but one are due around the first of the month, while we charge gas/groceries/everything else on the CCs, and I'm paid biweekly - so around the second week of the month, we have about $200 in the checking account and $400 or $500 on the CCs. Then a few days later I get paid and we have plenty in the account. It's just a two- or three- day period every month when I can't immediately pay off the CCs with what's in checking (although I could "borrow" from savings and pay back a few days later, and although the CCs aren't due for another month) and it drives me nuts!

[quotequeen]

Yep. I have emotional hangups about investing. I know I can't time the market, but I'm still afraid of putting a lot of money in right before a big drop and then kicking myself. So I buy in slowly and prefer to buy on days when the market drops. It makes me feel better even if it's still higher than it was a week earlier. I also really loathe the idea of ever selling. Once it's in I want it to stay in until retirement. So even though the money in the taxable account could be used to cover an emergency or job loss, I still want enough in cash for nearly any event so I won't have to use it. And I don't even like the idea of rebalancing. For now that's ok because I can just use new money to rebalance but eventually I'm probably going to have to get over that one.

[Deleted]

I hear you. I’m an emotional mess this month over finances…and it’s all good things but I’m anxious to get it over.

I have a $6500 balance on my credit card that I will pay off this week. This is because I e-filed 4 cases at work that each had a $1035 filing fee. The firm has already reimbursed me, and because I used my personal account, I got $85 free money from Chase, but UGH, just seeing the balance freaks me out.

I paid off my car last week. I’ve received the lien release and just need to get to the SOS to register the title. I won’t be able to enjoy my “no-more-car-payments” status until I get the title registered correctly.

I closed on my house refi Friday and other than arguing with Chase about getting the docs to me BEFORE I would sign them, it went smoothly.

So I don't let my emotions stop me from doing what I feel I should do, but I wish I could lighten up on myself sometimes.

[Deleted]

MidJd, it still sounds as if you are paying in arrears for your groceries (and maybe everything else?). I know people get paid all sorts of different ways, and a lot of people would hate to get paid once a month (which is how I am paid).

But I budget in advance. That is, when I get paid, I figure out all the monthly expenses that will occur that month and do entries for them in Money. Some of these are dummy entries such as "utilities." It gets $225 (the worst possible scenario that wouldn't send me to savings for the shortfall); gas gets $120 (4 fill-ups, used to be $100). You get the idea. Then when I spend the money, I subtract it out. If I choose to use a credit card, it gets put into the dummy entry for the credit card.

I think it is dangerous to budget in arrears. That is the premise of YNAB that one of the other posters keeps touting. You need to have this month's expenses covered and budget future money instead of budgeting past purchases. I don't use that system, but I never want to lose my job and find that I have to cover last month's expenses out of a reduced paycheck.

Just my two cents. I have NO financial credentials except that I love you guys <g>.

[resolution]

I have an emotional reaction to my savings balance. If it goes under 10k I start to cut back on planned purchases because I feel broke. If it goes over 20k I start to spend because I feel like I have money. Ideally I would like to keep 5k in savings and the rest in investments, but I haven't been able to handle the balance going that low. I haven't adjusted to the idea of dipping into investments if they are needed. I let the savings get as low as 7k and just got too stressed so I built it back up to 10k. I am going to try to maintain it at 12k, which is six months of expenses even though I know investing it makes more sense.

[resolution]

May 8, 2012 19:38:05 GMT -5 midjd said:

There have been a lot of comments/threads about our human tendency to want to avoid various financial things even when these decisions can favor us in the long run (e.g. auto financing, paying PMI, adjustable-rate mortgages... or postponing retirement contributions while paying down debt).

My emotional thing is wanting to pay off my CCs when the balance rises over a few hundred bucks - I pay them off once a month regardless, but whenever that balance gets to $400 or so I start to feel uneasy - even if the due date is a month away. I usually end up throwing money at them a few times a month. I just can't help it. I'm lucky I haven't ended up with any overdraft fees yet.

Do emotions ever win over finances for you? How do you combat this, or is it even worth it?

Have you tried keeping an extra thousand in your checking account? I know it doesn't make sense interest-wise, but perhaps knowing you have a positive balance between the checking and the credit card will let you relax and just pay once a month.

[Knee Deep in Water Chloe]

I still struggle with "my kids deserve..." vs. financial responsibility.

[Peace Of Mind]

Mine is totally emotional in every aspect. That's also why I'll never be worth millions. I'm too conservative and emotional with money and not a gambler. I will have over a million, but not $5 million or more like many talk about here. I'd rather keep what we have and gamble the extra. I hate owing any money and refuse to pay interest unless it's real estate. DH wants to take large chunks of our Mutual Funds and rollover to another less "sure" one and I want it in our guaranteed IRA. My attitude is we have "enough" now so let's protect it as much as possible and we can gamble new money. I have to have a nice big savings for emergencies and we are over insured, but I don't care. If something happens to either of us the other will be just fine and I would never have to work if I don't want to if DH were to die. If he gets injured or disabled we have short term and long term disability so we can pay our every day bills without problems. I can go on and on but I will be so pissed if, after all this cautious behavior, something still blindsides us. But I could always go back to work if I need to. Heaven forbid! And I don't combat it. I just go with it and hope for the best! DH has learned it's best to do that too. ;D

[dancinmama]

May 8, 2012 19:38:05 GMT -5 midjd said:

Do emotions ever win over finances for you? How do you combat this, or is it even worth it?

In the past, my emotional thing has been hating debt of any kind - even mortgage debt when the interest rates were so high. The mortgage on our first home was 12.25% and it KILLED me to think we were just "throwing away" that kind of money. We worked our butts off to get that thing paid off ASAP. I double checked our records the other day and we did it in 10 years, refinancing a couple of times along the way, of course.

The mortgage that we have now will not be paid off any time soon. For some reason it does not bother me even though we're going into retirement; I guess it's because the interest rate is so low.

[midjd]

Have you tried keeping an extra thousand in your checking account? I know it doesn't make sense interest-wise, but perhaps knowing you have a positive balance between the checking and the credit card will let you relax and just pay once a month.

Yeah, I usually have $3K-$4K in the linked savings account, but that's another one of my emotional things - I don't like to keep a lot in checking. Luckily today is payday so that problem is solved for another month.

QQ, I hear you on investing - the only thing consoling me about today's stock dive is that my 457 contributions go in today, so at least I'm buying low. Very low. And we have a taxable account as EF/new car fund/other semi-planned expenses/etc. but I think things would have to be pretty dire for us to dip into it - even though it's set aside for that sole purpose...

[quotequeen]

May 9, 2012 9:37:53 GMT -5 midjd said:

QQ, I hear you on investing - the only thing consoling me about today's stock dive is that my 457 contributions go in today, so at least I'm buying low. Very low.

The funny thing is that the stocks falling don't bother me. I don't like losing money, of course, but I'm not really worried that they won't go back up or I should pull everything out and buy gold instead or whatever. I just hate the thought that I bought stocks yesterday that I could have bought today instead.

[happyhoix]

Emotionally I can't wait to pay off our house. When we bought it, we did the 15 year mortgage, and we've occasionally added extra to further reduce the principle. We'll have it paid off in about a year. I know there are some financial advisors who say a mortgage is 'good' debt and you shouldn't be in a rush to pay it off, but there will be something psycologically satisfying going into retirement with a home we own free and clear.

[Angel!]

I don't know if it is emotional or just stress, but I have gotten really, really bad about paying bills. Virtually all my bills except medical are on auto-pay. I use to be one of those people that get a bill & pay it immediately, but now my medical bills just sit. Sometimes for months. I don't know why I can't deal with it, but I know about 2 weeks ago I got an past due notice for a bill that was $3.57 & I still haven't bothered to pay it. Last time I sat time to sort through them, I paid about half of the bills & ended up having to call a few places because I had so many bills that I couldn't figure out what I needed to actually pay.

I don't think it is emotions about money, but just my stress level right now & it is just one more thing that I am supposed to do & I can't handle it. I know I have the money & really it wouldn't take to much time, but the thought of doing it makes me feel overwhelmed, so they sit.

[Abby Normal]

Mine is taking money out of savings. We have a short term savings for annual bills I expect, and I have no problem using that. But when we have to dip into longer term savings- I freak out. Even if we are using it for what it was intended.

[Rocky Mtn Saver]

I understand the cc thing, Mid. I hate to see a balance on my convenience card too. I find that what works for me is to track the expenses on my spreadsheet and fill in the future payment and date so I see a 0 on the bottom of the column. Before I did that, I was always running to Chase to pay off my card. Which negates part of the reason for having a convenience card!

I have an emotional problem with risk. I hate risk with the burning passion of a thousand suns, which has limited my willingness to try entrepreneurship, change jobs, invest, etc etc etc.

[daisylu]

My emotional thing is wanting to pay off my CCs when the balance rises over a few hundred bucks - I pay them off once a month regardless, but whenever that balance gets to $400 or so I start to feel uneasy - even if the due date is a month away. I usually end up throwing money at them a few times a month. I just can't help it.

I do this a lot now too, mostly because of my new childcare situation. I recently switched providers, with new provider almost double the $, and I had to either let them charge my CC every week or provide a check so that they could draft from my checking every week (which was never going to happen!). I have cut back to only paying that card off bi-weekly. ;D


My bigger attachment is to savings - I hate spending it! What I am spending it on has no bearing. I will work more hours until I can "earn" it. DH is the opposite - if it is something that he really wants he will just get it, and the guilt over spending the $ comes after for him. That is when he will do whatever he can find to put the $ back. There is just something to seeing that magical # I guess.