There has been a lot of talk lately about budgeting, fiscal cliffs, and the government’s management of money. Everyone agrees that the government is doing a poor job of managing our tax income, and many are quick to throw in their thoughts on how to balance the federal budget.
But the hard truth is that the average citizen has no say in how the government handles its money. We only get to voice our opinions through the voting process, then sit back and hope for the best. However, we can make changes to our money management skills, as well as teach the next generation to manage money better. Lasting change starts small, and you can start at home.
Income Management in Lower Income Families
If you’ve ever struggled to make ends meet, you know that budgeting isn’t an option for lower income families — it’s a way of life, a necessity. These families learn to make $100 worth of groceries last for an entire month, but they struggle with other aspects of money management. When a sudden income change occurs, such as a tax refund, a job promotion, or an inheritance, this money is almost always managed poorly. (As with everything, there are exceptions to this generalization; this doesn’t apply to all low income families.)
Lower income families spend so much time wanting a nicer car, a couch that doesn’t sag, or a bigger TV, that they blow a large amount of money at once, splurging while they can without planning for the future. They believe income windfalls are a rare occurrence and a cause for celebration, not an opportunity for change.
As a home health nurse, this baffled me until I better understood their beliefs about money. I would see numerous families struggling to pull together $20 for co-pays for a child’s necessary medicines, yet they had a big-screen TV in the living room. When unexpected money would come into the house, they didn’t save it for future necessities, or the rough patches that were sure to come, they spent it. All of it. This self-defeating behavior was ensuring that they remained poor. They could manage the expenses of daily living very well, but they couldn’t manage their money for the long term.
Income Management in Upper-Middle Class and Upper Class Families
One of the great things about being a home health nurse is the exposure to people from all walks of life. While I had more than a few lower income patients, I also had several patients who were very wealthy. These people were keen money managers. They loved to talk about stock options and investing strategies. They had diversified financial portfolios, multiple savings accounts, and the future looked bright for them, as well as generations of family members to come.
However, these higher income families didn’t seem to manage the expenses of daily living very well. They left lights on all over the house, threw out leftovers, and consistently bought brand-name groceries and goods. They missed multiple opportunities to save money that would have been obvious to a lower income family.
In some cases, they could have saved more money than a lower income family generated in a month’s time. These families had the long-term money management down to an art, but they were teaching the next generation to mismanage daily expenses. They did this by ensuring they had enough income to not be concerned with a few hundred dollars wasted here and there.
Is one approach to money worse than the other? In my opinion, no. They both contribute to an unhealthy attitude toward money. Most people would say the higher income families are doing better because their bottom line shows a profit, but they should also consider that money was spent poorly or wasted — this counts as a loss when looking at the big picture.
Effective money management is a lifelong process that is intentional, difficult, and fraught with setbacks. The families that get it right are often the ones who grew up poor, worked hard to build wealth, and took the time to learn how to manage their money effectively long term. They worked hard to intentionally change their previous attitudes about money and to learn how to lead financially responsible lives.
What are your thoughts on money beliefs in America?