How often do you talk with friends about money? I don’t mean dreaming about earning $1 million and what you’d do with it. I don’t mean winning the lottery either. Everyone has those discussions, because they’re opportunities to dream, and dreaming with friends is a great pastime.
But those dreamy discussions about money rarely include what’s real in our life at the moment. I mean, when was the last time you talked with your friends about the use of credit cards, or how much they earn each year? When was the last time you talked about the debt you’re carrying?
When I ask that question, the common answer is somewhere between never and almost never. They even feel uncomfortable talking about not talking about money because it gets too close to real, honest discussions about money.
Of shaming and highlights
Most of us are familiar with the concept on social media of seeing the ‘highlights’ of other people’s lives while we sit in the middle of the mud of our day. We see sandy vacation pics while we look at winter after having a long fight with our kid over getting dressed. We don’t see that our friend is actually really sick and had to fight with their own kids for hours. The only smile of the day is the one they posed for and sent off to the world.
Money is so much like that. We can sort of maybe guess how someone is doing financially by seeing what they purchase. Yet it’s a mistake to gauge how much someone makes by their spending. The truth is that for most people you can best gauge their financial health by what they don’t spend.
My one friend has been driving an ’82 Tercel since he got his driver’s license 18 years ago. He pulls it up beside the fancy trucks others drive, and has even endured mocking comments about his old car. But my friend gets to ski 5 days a week during ski season and mountain bike 4 or 5 times a week during the biking season. He kayaks and runs and yes, he spends some time working as well — working as a guide and doing some manual labour jobs. He makes considerably less than many of his friends who join him on the weekends in the mountains, yet having talked to him, he’s got no debt and has a huge sum of money saved for retirement.
Outwardly, you might gauge his financial success as lacking, but when you get down to the numbers he’s young, and on his way to becoming a millionaire while still living the life he wants. Many of our other friends work 10-12 hour days, get out in the mountains maybe once on a weekend, and have high six figures in debt between houses boats and trucks.
Can you tell which one of those people could quit their job and go on a 3-month surfing trip with their whole family, without making any real dent in their finances? Yep, that would be my “less successful” friend who drives an ’82 Tercel.
But to be financially successful you don’t need to drive cars that are almost as old as you.
One of the best ways to get healthier financially is to simply get comfortable talking about money. I went out to the movies last night with a friend and during the course of our conversations we talked about what he earns and if those funds are really needed. The long and short of it is he doesn’t earn much and really doesn’t like his job. His job really isn’t needed, so quitting wouldn’t be a big deal.
He went in the next day and told his boss that he was only working 3 days a week, which was his original agreement. When the boss said that he needed to work as much as he was told, my friend gave his two weeks’ notice. Then found another job, working 3 days a week, paying just a bit more, that’s closer to home. Now my friend can get back to what he really loves.
Having a simple conversation about money turned my friend’s thoughts about his job completely around. He believed he wasn’t doing great and was stuck in a dead-end job he hated that was bad for his health. Now he’s doing so much better than he was and didn’t need the job anyway.
A house of cards
The fact is, most of the people you see driving fancy cars can’t actually afford to purchase them. They simply decided that they could afford $300 or $400 a month in loan payments. If they lost their job and missed a paycheque they would lose that fancy car because it’s one big house of cards ready to come crashing down.
Most people purchasing the latest motor home can’t actually afford it, nor can they afford the 60% of the value of that motor home that will be lost in the first year. A bank simply decided that person was a low risk for a loan and loaned them money to purchase something they couldn’t afford. Just like our friend with the truck, if they miss a few paycheques due to health reasons or job loss, everything they ‘own’ suddenly shows as really being owned by the bank.
[Tweet “Fancy toys are only proof you know how to spend money, not manage it”]
Most of the people you see with a lot of expensive possessions own nothing but a piece of paper that says they owe the bank money. That car isn’t really theirs. That boat will have the bank on the paperwork and that house will have the credit union on the title.
If you want to start getting comfortable talking about money then check out the Total Money Makeover by Dave Ramsey. Stop equating things (things the bank has loaned your friends to use) with financial health. Having a bunch of new fancy toys is only an indication that someone knows how to spend money, not manage it and create wealth.