You Are Your Own Worst Enemy

My friend Gillian called the other day — she's been having money trouble and was looking for help. “I'm not really a financial advisor,” I told her. “I write about money, and I try to help people at my web site, but I'm not qualified to coach you one-on-one.” Still, she's a friend, so I resolved to at least give her some advice. I asked her to explain the situation.

“Tom and I are working all the time, but we're always broke. He just wrecked his car, but we don't have money to get it repaired. We'll have to use the credit cards again. We don't have any other choice. There's never anything left at the end of the month,” she said. “I need some help budgeting so that we don't keep having this problem.”

“Well, let's see what we can do. I guess the best place to start is with your monthly income and your monthly expenses. How much do you and Tom bring home each month?” I asked.

“About $4,000 after taxes.” That was about what I expected.

“How much do you spend?” I asked.

“All of it,” she said, laughing. I expected that, too.

“How much do you have saved?” I asked. “Do you have any savings at all?”

“No, we don't,” she said. “There's never been anything left over to save.”

They don't have anything left to save because they're very good at spending money. Gillian and Tom live well:

  • They have a nice custom-built home.
  • Each of them drives a late model SUV.
  • They have no kids.
  • They enjoy expensive hobbies.

I have friends who make half what Gillian and Tom do, but have built a nest egg because they maintain a frugal lifestyle. It should be easy for these two to reduce their spending to create a budget surplus. “Well, let's see if we can find a way to free up some cash,” I said. “Let's list your fixed monthly expenses.”

Gillian listed their bills one-by-one. I jotted them down, making note of anything that seemed particularly extravagant. “Okay, let's see what we have,” I said. “You're paying a housekeeper $50 a week. If you were to clean the house yourself, you'd save $200 a month.”

“But…” she began.

“I think you'd be surprised at how much difference $200 a month can make,” I said. “I know from experience that even a $50 positive cash flow can make the difference between feeling broke and feeling flush. A $200 difference is huge.”

“Yeah,” said Gillian, “but I don't want to clean the house. It's too much work.” I was puzzled. To me, this was a quick and obvious way to free up money. If I were in her shoes, the housekeeper would be the first thing to go — it would be worth some extra work on my part. I tried a different approach.

“You each have a cell phone,” I said. “Do you both need one?”

“Yes,” said Gillian. “I don't know what I'd do without one. And Tom needs one for work. I need to be able to reach him.”

Her reasoning seemed thin, but I pressed on. “Well, what about the cable bill,” I said. “You're paying $60 a month for that. That's an easy one. What about cutting back to basic cable?”

“Oh, we can't get rid of cable,” Gillian said. “We watch TV all the time.” I was silent. “Are you there?” she asked.

“I'm here,” I said. “I'm just trying to figure out what to do. In order for you to turn things around, you're going to have to make some sacrifices.”

“Yeah,” she said, “but we can't cut cable. Tom would have a fit.”

“Gillian,” I said, “this is a little frustrating. I thought you wanted to get out of your money situation.”

“I do,” she said, “but so far you're just suggesting things for me to get rid of. Isn't there something else we can do? Can't we use a budget to get more money?”

“That's what I'm talking about,” I said. “Cutting things like these is making a budget. I know it seems terrible to have to give things up, but you need to make sacrifices — at least in the short term — in order to get ahead. You don't have any savings. Any disaster means you're putting money on your credit card. You need to build up some savings. You need to pay off your existing debt. In order to do this, you need to spend less than you earn. Right now you're spending exactly what you earn, and you'll never get ahead that way. I know, because for years that's how I operated. You're going to have to tighten the belt, Gillian. It's the only way.”

I paused, and then said, “You need to decide what's important.”

It was obvious I wasn't going to be able to help her. I hadn't even explored the Big Ideas, like moving down to a smaller home or trading one of their SUVs for a used car. I had started with the medium-sized stuff — the obvious chaff. But Gillian wasn't interested in making changes if it meant altering her lifestyle. I changed the subject.

We talked about summer. Gillian asked how our garden was. I described the knee-high corn, the ripe raspberries, and Kris' monster tomatoes. “I'm jealous,” she said. “I don't have time to garden. I did get a chance to go to the nursery last week, though. I was able to pick up five shrubs on sale for about $10 each.”

The shrubs were the final straw. There was nothing I could do to help her because she wasn't ready to be helped. She wasn't ready to listen. She said she wanted to change, but she didn't really. She was looking for a magic pill, something that would make life easier without any effort on her part. That's not how it works. Eventually Gillian will reach a place so bad that she'll begin to see the need to take responsibility for improving her situation, but she's not there yet.

Our conversation reminded me of an episode of This American Life I heard recently. The show profiled debt guru Dave Ramsey, and at one point the reporter played a segment in which Dave experienced similar frustration:

Tina calls Dave because she's upside-down on her car loan. She recently wrecked the car, but rather than use the money to repair the vehicle, she spent it. “Ooooo-kay,” says Dave, obviously flustered. “I'm afraid what you're looking at is probably a really good part-time job, about six or eight months of 80 hour weeks.”

“Eighty hour weeks?” says Tina. “That's too much work.”

“I can't help you, Tina,” says Dave.

And I can't help you, Gillian.

This story is based on actual events. Names and situations have been changed to protect Gillian's identity.

More about...Budgeting, Debt, Psychology

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bornbad
bornbad
13 years ago

This story is why I’m so glad I stumbled across Your Money or Your Life. Your friend is someone who really needs to read that book and start the exercises. I particularly find the step where you list all your monthly expenses (right down to the penny) and decide if you got fullfilment out of it, if it lines up with your values, and if you would spend more or less on it if you didn’t have to work. My wife and I do this step together and it’s amazing the conversations that start up about our money (none of… Read more »

Keith
Keith
13 years ago

This article speaks so many truths about a majority of Americans out there. They have no financial education and are unwilling to change their ways. I wrote a post today about your article expressing my own feelings that personal finance classes should be taught in school as a requirement of graduation.

JerichoHill
JerichoHill
13 years ago

JD,

Wonderful. I admire that you tried to help, but you knew when to let it go. I have just been through a similiar situation, so I think I will describe that one in an entry while you are away (gotta fill up this place somehow)

Chance
Chance
13 years ago

The behavior of Gillian and Tina is awfully similar to that of people suffering with obesity. With few exceptions, all obese people know they eat too much and they all know they should exercise more. But, they can’t correct their behavior until they truly WANT to fix it. Without a real desire to change their lifestyle, they’ll come up with every manner of excuse to maintain the status quo. Similarly, Gillian and Tina certainly know enough about finances to know that they’re spending too much money, but they don’t yet have the desire to make the necessary changes in their… Read more »

J at Home Finance Freedom
J at Home Finance Freedom
13 years ago

GRS,

Congratulations, you are the first blogger to earn a starring role in my “Savers Are from Mars. Debtors Are from Venus” series.

Sam
Sam
13 years ago

My husband and I have talked about hiring a cleaning service. Why? Because our house is generally always sorta messy because we are both busy people and don’t have a whole lot of time to clean and because all our friends have cleaning services or people and we make more than them. But we want to be different! We don’t want to be like everyone else – broke. So instead we clean when we can and otherwise it stays messy but we remind ourselves that we are paying ourselves when we clean our house. I think sometimes its easier to… Read more »

Anon
Anon
13 years ago

It’s a bit of a draw. I know people like that and it seems that just when they’re about to go broke they either get a promotion at work, mommy and daddy bail them out, they simply walk out on their debts, or they marry someone who pays off their debts. They never sacrifice. It’s not in their vocabulary and life seems to agree with them. While the bankruptcy rules may have been stiffened, I can still name examples of people who walked out on their debts: Just look at that 24-year-old 2.2 million dollar debtor out there. He’s on… Read more »

Liz
Liz
13 years ago

I used to be Gillian, and I had $6K in credit card debt, no savings, no retirement fund, and I was still clinging to cable TV and other frivolous things and habits that added absolutely no value to my life, monetary or otherwise. You are correct when you say that you can’t help Gillian. She has to be the one to decide between having emergency and retirement savings or watching ESPN and HBO. If she reads your blog, I’d simply like to tell her this: ESPN, the housekeeper, and the cellphone won’t pay for car repairs, medical bills, or a… Read more »

Tyler
Tyler
13 years ago

Definitely a good post here. Although I think the story is made up (that’s beside the point), the idea behind it is very true to MANY people here in America. We have problems yet people don’t want to make sacrifices, and for that, these people deserve everything that comes at them (bankruptcy, foreclosure etc.) I have no sympathies for anyone that gets into trouble on their own, but doesn’t want to bail themselves out of it. For that is what I call pathetic.

J.D.
J.D.
13 years ago

Chance wrote: The behavior of Gillian and Tina is awfully similar to that of people suffering with obesity. Absolutely. Many people have remarked on the connection between sound financial habits and sound food/exercise habits. There’s a clear connection. The same principles apply to both fields of life. I should write an extended piece on the subject. Sam wrote: My husband and I have talked about hiring a cleaning service. I don’t want to make it sound like I’m against a cleaning service for everyone. I’m not. In fact, Kris and I have somebody coming in today. But we can afford… Read more »

Rich Lafferty
Rich Lafferty
13 years ago

I think you gave up too early, or at least you took the wrong tack. It doesn’t follow that someone who couldn’t give up little things couldn’t give up big things. Sometimes the big stuff is easier to do away with than the smaller stuff. It’s that whole cost vs. utility thing again: the utility per dollar of a cellphone is way, way higher than the utility per dollar difference between a used car and an SUV. Considering the savings, loss of utility, and the effect on self-image, you end up with: Trade SUV for $5000 Civic, pocket difference: –… Read more »

The Tim
The Tim
13 years ago

“I do,” she said, “but so far you’re just suggesting things that I can get rid of. Isn’t there something else we can do? Can’t we use a budget to get more money?”

I believe you when you say that “Gillian” is a real person, but that quote is so over the top that it’s almost unbelievable to me. I literally laughed out loud when I read it.

Then I realized how sad it is that some/most people really think that way.

The Tim
The Tim
13 years ago

Actually I just realized, didn’t you mean to say “…so far you’re just suggesting things that I can’t get rid of”?

I just instinctively read it as that, and only realized it said “can” as I re-read my comment.

J.D.
J.D.
13 years ago

Good point, The Tim. I’ll change that sentence to make it read more clearly. (With as much revision as I made to this post — there was a lot of it — you’d think I would have caught that, but no…) That quote is actually one of the most accurate things in the story. And it’s exactly what made me think of the Dave Ramsey thing, which I’d just heard a few days before. I’ve met other people like this, too. I have a close friend who doesn’t understand the very basic principles of a bank account. If he puts… Read more »

Amanda
Amanda
13 years ago

Also… sometimes it’s a choice of values. For example, if you really value your *time*, maybe the cleaning service is worth it, but, you’d be willing to drive an older car or live in a smaller home. If television is a source of real enjoyment to you, perhaps you’re willing to give up the cleaning service. We could spend less money on food, but, we prefer to support local agriculture & have higher quality food. Of course, it also means we don’t eat out as much, and, we don’t have cable. I use my cell phone so rarely that I… Read more »

MillionDollarJourney.com
MillionDollarJourney.com
13 years ago

Just tell Gillian that there are 2 ways to fix her situation:

1. Spend Less OR
2. Make more!

For my wife and I, we try to do both. I also have a similar story to yours but with a family member, maybe I’ll write about it next week. 🙂

J at Home Finance Freedom
J at Home Finance Freedom
13 years ago

JD/GRS,

Is there any part untrue in what I cited on my blog? If it was not an SUV, I will write “car.” If the emergency was not a wrecked car, I will remove the reference. If it was not $4k/mo after taxes, I will remove the number. Thank you.

lackadaisi
lackadaisi
13 years ago

I agree completely with Rick Lafferty’s comments. I know that the lifestyle changes for me would be extremely difficult if I were to have to give up cable, cell phone, or a housekeeper. To me, these are not optional at this point; they enrich my life too much to cancel. We have contemplated switching to less profitable jobs for lifestyle reasons, and I have created a list of items that we would do without, and none of these have come close to making the list. (on the list are: limiting eating out – this would be a substantial savings for… Read more »

Ted Valentine
Ted Valentine
13 years ago

This is conversation was as much a man/woman thing as financial. You’re correct, she’s not ready. She just wanted somebody to listen to her problems, not fix them.

Bobby
Bobby
13 years ago

@Rich Lafferty:

If her friends aren’t going to understand the need to give-up the cell phone, how are they going to react when she shows up somewhere in a USED small car. That would be when they think there is something wrong with the picture.

Veronica
Veronica
13 years ago

Hi JD, thanks for this great writing (and wonderful blog, by the way). I used to be spendthrift myself, and unsurprisingly complained often about being broke. One day a year ago, a friend of mine recalled a phrase taken from the film/book ‘Fight Club’, it goes something like this: “We work in jobs that we do not like, so that we can buy things that we do not” Boy, it hit me real hard because it was the truth for me! Today, I am thrifty person who is reaching her goal of clearing a $12K student loan this Christmas, building… Read more »

DC Portland
DC Portland
13 years ago

It’s a little surprising to me that no one has commented thus far about how similar Gillian’s story is to someone with an addiction, such as gambling or alcohol. She has all of the symptoms. Materialism and consumerism are as much of an addiction in today’s society as other, more taboo, forms of addictive behavior. TV cable is her “dealer” in this case. As with other forms of addiction, Gillian must be the one to help herself. She will need to do the tough work to get to the other side. She is obviously not happy. Once she gets to… Read more »

tinyhands
tinyhands
13 years ago

Quibble: Creating a budget doesn’t necessarily mean cutting things out of your life, however living by a budget may mean cutting back.

I wouldn’t want to discourage anyone from creating a budget (and especially tracking actuals) even if you’re not currently in debt.

NCN
NCN
13 years ago

JD, I have this SAME conversation, several times a week, either through email or in person… Variations include: I can’t give up my motorcycle/boat/camper b/c that’s how I reward myself for working hard during the week… I can’t give up HBO/Showtime b/c “blank” is my favorite show… I can’t take my lunch to work, what would my coworkers think?… I can’t… You get the picture… People do what they want to do when they ar ready to do it.. and not a second before… Great post, btw… easy to read and well written… and I totally understand the need to… Read more »

J.D.
J.D.
13 years ago

@NCN

Heh. My working draft of this entry is saved to my hard drive under the simple title “I Can’t”. It was the repeated use of this phrase during the conversation that prompted me to write the piece in the first place. “I can’t. I can’t. I can’t.” Then you won’t.

Shaz
Shaz
13 years ago

I agree with the previous posters who made the arguments towards perceived value. Personally? I say keep the housekeeper, ditch one of the SUV’s. But that’s what I perceive as valuable. JD is right, she and her husband and to sit down and decide what is really important to them: Keeping up the facade of having all this money and being wealthy, or actually living life on their own terms.

When you think about it, it could require a lot of self-reflection on their parts that might lead to places that are too uncomfortable for them to confront.

Flexo
Flexo
13 years ago

This is one of the reasons why I don’t give spending/saving/lifestyle advice to friends, even when they ask. Whether or not they’re “ready” to hear it, they should hear it from someone who doesn’t have an existing relationship with them, an impartial party, so to speak. It’s like the clinician who comes in to work with a class of students, and tells the class the same things the teacher has been saying all year… the class listens to the clinician because they are from the outside and they validate what the teacher has been saying, while the class simply gets… Read more »

Matt
Matt
13 years ago

What’s the deal with the shrub? Why did that set you off?

J.D.
J.D.
13 years ago

What’s the deal with the shrub? Why did that set you off?

She’s complaining that she can’t save money, but she’s out buying shrubbery that she doesn’t need. It’s ludicrous!

Nick
Nick
13 years ago

This story is very sad, but there is hope for people like that. Don’t give up on her, she might see the light some day! If she could see, really SEE what that debt means in her life, she might realize there are more important things than having new cars and keeping up with the Jones’. I was in an insane amount of debt earlier this year when I woke up and realized what I was doing to myself. I sold my cars and simplified the rest of my life. I cleaned out my house, selling my computers, and anything… Read more »

J2R
J2R
13 years ago

Generally it doesn’t have to be black/white. She could’ve settled for a maid 2x a month instead of once a week. That would be a $100 savings / month.

Instead of switching to basic cable, maybe look at an intermediary package between basic and her currently one?

Instead of cutting cell phone, maybe look into cutting some “Extra services”, like text messaging, web browsing, etc.

KMull
KMull
13 years ago

“Live like no one else will today, so you can live like no one else will tomorrow.”

Sad story. I hope Gillian reads this post, recognizes it is about her, and gets a shock to her senses.

Baddriver
Baddriver
13 years ago

Great story, really got me going emotionally. I completely identify with Gillian (the old me) and You, the me of the last five years. Personally, I would have bluntly stated to my friend that you are not ready for change, you just want to talk about it. Bottom line she is not ready to do the work. But then I likely have a more confrontational personality than you, which makes reading your blog more enjoyable. Thanks

KMull
KMull
13 years ago

Err, make that “so you can live like no one else can tomorrow.”

m
m
13 years ago

With all due respect, I have a difference of opinion from the author of this piece on both how this issue was approached and how the story was presented. Overall, I found the piece somewhat judgmental and lacking in acknowledgment that different people have different priorities and that that is okay. I found that I agree most with the essence of Rich Lafferty’s comments–making larger changes can often be more effective, simpler, and less painful than making lots of little saving sacrifices. In this case, even if the author had taken the time to explore those and other types of… Read more »

JerichoHill
JerichoHill
13 years ago

People get used to lifestyle inflation. We all were broke during our college years, but we got by. I try to keep that college mentality (use all your space in your small place, cook for yourself, party at friends homes, walk, dont spend money, work extra jobs).

Lifestyle inflation, worse than real inflation…

plonkee
plonkee
13 years ago

I think that people with chronic overspending problems just don’t get it in the same way that people without them do. Somewhere, they fundamentally don’t understand money – probably they don’t understand that its all psychological. I think once you do that and address the underlying reasons for spending more money, you’ve got a much better chance.

Aleks
Aleks
13 years ago

I’m not a fan of budgeting. The best advice in most of the personal finance books I’ve read is “pay yourself first”. I highly doubt that Gillian and her husband are living so close to their means that they have to cut out things like cell phones and cable. More likely, if she set up an automatic deposit of $200 a month into a savings account, she wouldn’t even notice the difference. No need to cancel the maid or itemize everything they’re spending money on. If they’re spending exactly as much as they earn now, they’ll spend exactly as much… Read more »

Mer @ LivingBehindTheCurve.com
Mer @ LivingBehindTheCurve.com
13 years ago

People are so funny. I was in a similar situation last month. I was out on a smoke break with my coworker MammaBear, and she was talking about how her expenses were just plain more than her salary, and she asked me if I had any suggestions. I suggested she cancel the cable (she has an 80% chance of having it never turned off where she lives), cancel the netflix account, and upgrade the expensive dialup connection to a slightly cheaper DSL account that can be used to creatively supplement what she lost. “oh, i’m not sure i wanna make… Read more »

Adam Jaskiewicz
Adam Jaskiewicz
13 years ago

As far as not giving up the cell phone, that I can understand. My cell phone is how I communicate. If it weren’t for the fact that I can’t get reasonable DSL bandwidth without also paying for a landline, my cell phone would be my ONLY phone.

Meta
Meta
13 years ago

Ugh…people who think this way make me crazy. It’s just common sense *money-in* and *money-out*. If they’re equal, there’s nothing left to save. Another favorite is a friend of mine who never balanced her checking account, and she would get really annoyed when someone would cash a check after a month or so because she assumed that the cash in the account was the amount of money she had to spend. There would be an OD on the account, and she felt the person who cashed the check was to blame!! Great, if aggravating post. I’d avoid talking to her… Read more »

Ted Valentine
Ted Valentine
13 years ago

@Aleks – Paying yourself first does not work if you’re in debt and spending more than you make. Earning 5% on $200 savings/month will get you nowhere fast if you’re paying 12%+ on a revolving credit card balance and $30,000 in car notes.

Amber Yount
Amber Yount
13 years ago

See I don’t mind cutting out things and being frugal..but it drives my husband nuts…i cant get through to him how important it is that we stop being broke…one day he’ll say he agrees with ne…then the next he throws a fit because i tell him we dont have money for a video game or a vacation.

Jenni
Jenni
13 years ago

This is a great post. I’ve been trying to talk to my parents about how they can save money. They have no savings, yet make over $100k/yr.

They are paying nearly $200/month for a cable/internet/landline package which I think is outrageous when you are barely cutting it month to month, but my dad refuses to get rid of his DVR (which costs extra) and cut back to basic cable because of the ONE channel he wants that is in the upgraded package.

J.D.
J.D.
13 years ago

@m Thank you for your thoughtful comment. You make some great points. I can see how I might have come off as judgmental. That wasn’t my intention. I’m not sure if you’ve read Get Rich Slowly before, but Gillian is in the same place I was just a few years ago. I’ve managed to turn things around, but it has been through sacrifice. I didn’t include this information in the piece because my regular readers are well aware of the fact, and I thought it was too long already. I actually don’t feel that it’s my place to judge Gillian.… Read more »

Moneymonk
Moneymonk
13 years ago

I agree with m Look at the big picture not the little stuff.

Cut your overhead ( house, car) that is usually the killers of the middle class

Aleks
Aleks
13 years ago

Paying yourself first does not work if you’re in debt and spending more than you make. Earning 5% on $200 savings/month will get you nowhere fast if you’re paying 12%+ on a revolving credit card balance and $30,000 in car notes.

Obviously if she’s in debt, the $200 should go on the debt rather than into savings. But the point is to take it off the top rather than trying to force a non-budgeter to budget so there’s something left at the end of the month.

T
T
13 years ago

Oh my, I have someone in my life who’s like this! They are forever complaining about how broke they are and then will turn around and tell me how they’re going to this concert, or to the fair, or buying this or that at the beauty supply place. On payday they complain about how they need more money to survive, that if their room mate moves out they’re “screwed,” and oh, by the way do you want to go out for lunch today to the expensive little eatery down the road? It drives me nuts! I lent some financial books… Read more »

probloggermom
probloggermom
13 years ago

This was a brilliant post. “I” was Gillian, right before my light bulb moment last summer. I’ve included a link and posted my story on my site http://aprobloggermom.com/get-rich-slowly-the-lightbulb-moment/2007/06/27/

joshuat
joshuat
13 years ago

Some comments either said or touched on the thought that changing spending with small adjustments to their behavior is best, rather than making changes that are large/substantial. This is exactly wrong. Personal finance is 80% behavior. Gillian needs to do a complete 180 from her spending, and she needs to do it RIGHT NOW, or she will never control her money and it will always control her. She’s in denial. Like most of Americans that spend more than they make. Dave Ramsey says often that the average millionaire doesn’t know who got kicked off the island, or whatever fad TV… Read more »

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