It’s tempting to think that more money will result in less financial conflicts. However, I haven’t found that to be the case.
The habits that lead to conflict follow us up, and down, the socioeconomic ladder.
Similarly, if I can make a habit of de-escalation in one area of my life then my approach will follow me into other areas.
Earlier this year, my wife had her eye on a very nice jacket. For some reason, I became obsessed with the cost of this jacket.
Where did my feelings come from? I have no idea but I knew my feelings were unproductive. I knew because of the filter I apply to my marriage, “Where are these choices likely to take me, and my marriage?”
I knew it would be helpful to move on but I wasn’t able to shake my opinions.
So I funded the jacket.
Actually, I funded 7x the cost of the jacket.
That jacket was a massive write-off…
I placed the money into an account that is invisible to my internet banking.
I asked my wife to pay cash so I would have no ability to track her spending.
I felt better immediately.
It was one of the best deals I did pre-COVID.
I’ve been running my financials since I was 16 and managed to save 50 cents of every dollar I earned from 16 to 40 years old.
My first job out of college was in finance. My mentors made two observations about spending that stuck with me:
- From the Managing Partner, “We could keep a better eye on the small stuff but that would make this place a lot less fun to work at and it wouldn’t make any difference to my financial life.”
- From a Young Up-and-comer, “If you ever want to get someone then start by auditing their expenses.”
Apply these to myself
=> make sure my choices can survive an audit (by anyone, but especially my spouse)
=> being a stickler for fine detail will make the people around you miserable (especially if you have a life that can’t survive an audit)
As a leader, what does that actually mean?
In 2009, unexpected unemployment left us facing a financial crisis. I started by cutting my personal budget by 80%. I laid that out to my wife and said we needed to cut our family budget by 50%.
We made a budget, we implemented the changes and we went on with our lives.
Good enough was good enough.
Endless optimization makes everyone miserable.
Often there is a fear-based motivator that is driving our attention to fine-detail.
It can be near impossible to transcend fear-based habits!
Two things that might help:
1/ Set a “give a hoot” threshold.
Each year, I set a dollar-amount that is my “give a hoot” threshold. If something is below that threshold then I promise myself that I_will_not_give_a_hoot.
My total spend in the “give a hoot” category is ~2% of my total budget. The 2% spend cuts 90% of my external annoyances and gives me a lot of internal credibility when I say “we don’t have the money for that.”
Not getting wrapped up in the little stuff makes my internal life better and gives me the authority to direct the big stuff.
This policy is a bargain (but letting go is oh-so-tough).
2/ What about when the threshold is triggered?
When something big pops up, I like to pause and distance myself from the decision.
I’ve set my financial life up to create friction in my ability to spend money. The friction gives me time to ask…
What’s the goal? => How does this choice benefit my family, my marriage, myself…
If it won’t make a difference then wait.
Another filter => Am I willing to spend this money on someone other than myself? If not then wait, again.
Investing and spending => I do a lot of waiting and that’s OK because anticipation is often better than reality.
I spent yesterday afternoon at a car dealership and traded my car for a newer model. The new car will be “my wife’s” and I’m going to roll in the oldest car we own.
Knowing that my family is seeing me roll in the “old car” will make me at least as happy as a new car, which I can always get later.
Your spouse, your kids, your unborn descendants… all will be impacted by the choices you make with regard to spending and investment.
Financial values scale across generations.