None of us is born with an instruction manual providing answers about how to live our lives. For that matter, even if we did have a manual, what would we do during those early years until we learned how to read? Many of us tend to spend our entire lifetimes trying to figure out the meaning of life and why we act in the ways we do. Our genetics and family environment certainly can have an effect on our thought processes, habits, and basic decision-making. I believe these factors influence our personal spending justification systems.
Think about it: what were the spending habits of your parents while you lived at home? Were your parents super-savers, spendthrifts, entrepreneurs, generous volunteers or donors, or perhaps some variation of these types? Did your childhood environment have a perspective of being rich or poor? Did you grow up with the notion that everyone must work for the man? Perhaps you learned that anything is possible if you just work hard enough and that, if you apply yourself, you will succeed.
The diversity of our environments plus our individual characteristics create an unlimited combination of spending patterns and habits. This is something I often consider when reflecting on my childhood and observing how different my brother and stepsisters are from me. My siblings and I had the same influences in our parents’ home, however, the paths we followed and the results we achieved definitely diverged.
My father and mother divorced when I was six years old
Neither my mother nor father had any formal education past high school. My brother and I were the first in our family’s history to get college degrees. (Later in life, my parents continued to acquire technical expertise in their fields through training and additional study.) My parents had little money during my youth; we rented, and moved quite frequently. By today’s standards, we were probably poor, but as a child, I did not feel that way. We did not go without food or a place to live. We had decent clothes, granted many of my clothes were hand-me-downs from another family.
I began to feel poor at six years old when my parents divorced. This was tough on me and to this day, I swear my maturity jumped several years as a result. I was suddenly the older brother who had to help Mom and my two-years younger brother around the house. We began to struggle financially and moved frequently to smaller homes and apartments. I went to eight different schools by the time I graduated high school. “We can’t afford it” was something my mother said often.
I also often heard:
“Do you think I am made of money?”
“Money doesn’t grow on trees!”
“Do you think we’re the Rockefellers?”
“Just because someone else has one doesn’t mean you should.” (This often progressed to the statement: “If he jumped off a bridge would you do the same?”)
I received this basic financial foundation from ages six to 13 from my mother, influencing my future with money. This began to change when she remarried and, with my stepfather, we landed squarely in the middle class.
A poverty mentality had formed – but with different results
I am not placing any blame on my parents for the environment they provided. Once I was married, had children, and divorced, I had a new appreciation for what my parents had experienced raising children and making money decisions. I can reflect now on how I formed my spending justification system.
Poverty mentality is an attitude. It’s a way of thinking that is said to perpetuate poverty because the focus is on what one doesn’t have rather than what one does have. Thoughts and comments such as “I can’t afford this…” and “I’ll never have enough money for that…” may turn out to be a self-fulfilling prophecy. It’s not clear where this concept came from, but one of the earliest motivational speakers to discuss it was Zig Ziglar. – WiseGeek.org
I believe my brother and I both suffer from a poverty mentality. It has affected us in our motivation, drive, and most importantly, purchases. We both have made numerous big-dollar purchases, engaging our spending justification system in self-talk by affirming We Only Live Once, we are worth it, we work hard so we deserve this item, and life is short (YOLO again). Finally, we felt that because we had been deprived of things in our youth, we should buy them since we could afford to do so.
However, there is a distinct difference between my brother’s and my path. From a poverty mindset I have manifested building net worth and aggressively saving for the future. Who knows when the sky is going to fall? I never want to be poor again. My brother is more inclined to living for the day and enjoying it while you can. (He does save for retirement, so he is not completely skewed toward spending.)
Continued development of my spending justification system
My poverty mentality has displayed itself in some rather curious ways. My basic money foundation has always been as a saver first. From my early teens, shoveling snow and mowing lawns, I saved most of my money. I didn’t want to feel poor and having money in a jar, wallet, or the bank made me feel better.
The spending gene began to emerge as I progressively made more money and advanced in my career. I was consistently earning more money each year, enabling my spending to upsize my overall lifestyle.
Debt is the “American way” and everyone has it, so I thought it was okay for me to have a car payment.
I took on multiple car payments, credit card debt, and a mortgage payment. Very early into my 20s, I was already living much “larger” than my parents had at that age. I don’t believe they had any debt until later, when they bought homes. It felt like I was making up for lost time from my childhood, spending the majority of my income.
However, I did “wake up” in my early 30s with the birth of my first daughter and some sage advice from several financial mentors. They noticed my one-year-old BMW (my first new car) in the parking lot and kept their comments to themselves about spending money on vehicles. Instead, they began talking to me about the benefits of saving, investing, life insurance, and most important, retirement savings plans. I had some savings and a retirement plan my stepfather helped arrange for me, but I did not continue contributing money for my retirement. You know the excuses: I can’t afford it, I don’t have enough money left after the bills, it is impossible to save now, and so on.
Rather quickly, I sold the car and drove used cars for the next several decades. I also bought my second rental property a year later and continued purchasing them for 15 more years. I enrolled in a company-matched retirement account and to this day have always maxed out my employee portion.
The years spent around some great mentors shifted my spending justification system toward an investor mentality and living far below my means.
The spending justification system is shifting again. What’s next?
I have reached the point of financial independence and can retire early. My focus is on building my replacement and bucket list funds so I can go on a YOLO bender when I have gained free time away from my employer.
My poverty mentality and spending justification system returns with a passion when contemplating significant purchase decisions. The recent purchase of an expensive timepiece and the remodeling choices we are making come to mind. We are able to justify these items as things we have planned and prepared for over many years.
Let’s look at the remodel and downsizing, since the timepiece is harder to justify. We have had the goal of traveling extensively in our camping trailer, mixing in hotels and cruising. We bought the truck and trailer 15 months ago and worked out the bugs with numerous camping trips. My wife is on track to leave work in less than a year, which will give us the opportunity to travel while I to continue to work remotely.
Our strategy has involved selling our home, downsizing to a smaller townhouse, and completing our remodel projects while we are still working. This allows us to work through any remodel and cost surprises and to get the work done quickly. We can then focus on items in our retirement other than downsizing/remodeling and work. We’ll have the ability to imagine where we will go on travel and camping trips as opposed to discussions about how to rearrange the electrical outlets in our kitchen.
We are well down this path and should realistically complete our remodeling by June. The challenge has been to recognize our fine-tuned spending justification system and not overspend. It has been something we have to keep in focus as we move away from a steady paycheck from our employers and fund our lives from only our passive income and savings. We have been budgeting for several years now based on the income from those two categories, making sure we can live at appropriate spending levels and still feel that we have “enough.”
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What I’ve learned, through examining my financial history all the way back to the earliest days, is that the more we understand how our upbringing has shaped our beliefs and actions, the more likely we can consciously direct our spending patterns and not be ruled by our unconscious influences.
How about you, are you aware of how your upbringing has shaped your spending habits?
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