The untold reason why you either have money problems or problems with money
in a movie from long ago, Finess, are two close friends; Hackman and Hoffman (abbr. Hack & Hoff). Hack left his place to go visit Hoff, for it had been a while since they last met. Once there, Hack noticed that his friend was particularly disconsolate and heavily burdened, which led him to probe what the issue was. Hoff didn’t hesitate, but asked Hack to lend him some money, “I am broke dude”. Hack had no problem lending his good friend money, not until they went into Hoffman’s kitchen, where several transparent jars were lined up on a corner. Hackman noticed that in them were huge sums of money; on one jar was labeled rent, on the other utilities, then love-dates, and also, house equipment. Hack couldn’t get his mind over it, he kept asking himself why Hoff needed a loan; if he already had so much? When he verbally asked Hoff that question, Hoff pointed to the food jar, which was empty and said; “it is for that jar that I’m borrowing”
Money is a real issue in our society; a necessary evil for some, an unnecessary blessing for others. Everyone tends to have a unique definition and special appreciation of the role it plays in his/her life. Money as we can all agree is a means to something else, mainly a solution to problems either created by its presence or its lack thereof. But what isn’t being told, that should be, is that, there are two types of problems many face because of money. The first problem is the “saving” problem (what amount to save, how to save it and where to save it), the second is the “spending” problem. This piece explores the latter and makes the case that poor saving habits are far less disastrous than poor spending habits. But why?
The Ungenerous response to generosity
I grew up having a neighbor who had a predictable, monthly, money spending habit. Each month, whenever he received his salary, everyone knew. On such a day, he would bring back home lots of fruits, gifts and sometimes; he was prone to carelessly share his money with anyone who expressed a financial worry, regardless of its magnitude. This would generally go on for about two weeks, after which his demeanor completely changed from the too generous man to the “I don’t have any money” man. This new state equally lasted for the next two weeks, or until he received his next paycheck. Everyone, especially his wife hoped that he was going to change and develop better spending habits, but he didn’t. She then quit hoping and after a mild struggle, persuaded him into joining a njangi. This in a bid to help him, channel his finances from spending, to savings. Being a devoted man, great at keeping his word and commitment, he joined the njangi and religiously saved huge sums, each month. It wasn’t an ordinary njangi, the type you save as and when you please; it was the affluent version of it, where huge sums are deposited on a precise date. Two years later, it was time for him to “pick” (take his money back). He did eventually pick. But Guess what happened after that? For the sake of curiosity, let us admit that, he had plenty of options in his hands, which were; he could invest in building his house, or getting married in church, or in launching a business. Another stream of options (the negative one) would have been to spend it on drinks, women and drugs. But the last option, would have been the option of no optionsthat is, if he was short of ideas and didn’t know what to do with the money, he would have saved it all, once more. But what did he do?
Two weeks after he had picked, was the outburst of a quarrel between him and his ex-wife, in which ex-wife blurted out nasty things in anger. She claimed, he had spent all the money in a generously foolishmanner. Also, she said that as usual, he’d shared part of the savings to those who came knocking with their unending problems. He equally donated some to an orphanage he and his fellow church members were in the habit of visiting. Finally he assisted his brother financially to enable him finish his housing project. This was all bananas to his ex-wife, she couldn’t reconcile the fact that, he was so good at spotting and solving others problems but so blind and dumb at doing same for himself and his immediate family. That caused him his marriage/union (come-we-stay).
I’ve always puzzled Why? She just realized that her husband didn’t have saving problems, but rather spending problems and instead of her using her ingenuity like before to help him, she let her emotions get hold of her and abandoned the man to his misery
Why do we have poor spending habits but good saving habits? & why do people get frustrated ones they receive their money?
The answer to this is what behavioral economists call “the financial thermostat”. This is an internal calculator that does all it can to put your finances at the level where you feel either comfort-able with less or uncomfort-able with more.
To better understand this notion, take a look at the human body. How do you measure your body temperature? With the use of a thermometer. What is the appropriate body temperature? The norm says 37o (even though 360 or 38o might do), at this temperature it is a truism that you’re healthy. But if your body temperature rises to 420 and above, what do we say? You’re temperature is high and you’re very sick? After measuring, we generally take all the necessary precautions to regulate the temperature, bringing it down to the appropriate condition 37o. This is how the internal thermostat works.
The Magic 25k
I have a friend called Peter. For the sake of argument, let’s say Peter earns 100,000 frs per month. What generally happens is that Peter after receiving his salary, will by all means look for ways to spend this money, until it get to 25k, after which, like a vision from heaven; he becomes fully conscious about his finances and takes his spending seriously. This happens every month and I’ve decided to call 25k, his magic figure (net worth). This behavior isn’t unique to Pete says the behavioral economists, each individual has his magic figure; for some its 25k, for others 50k for others 100k and more.
When Donald Trump lost almost everything in the early 2000’s what happened? He couldn’t be satisfied with the title of millionaire, but worked his way back up to Billionaire. That’s where his thermostat was set. Billions! Nothing less than that.
My neighbor probably set his thermostat at 50k, my friend Peter set his at 25k, and Trump set his at a Billion, where is yours set?
The thing about one’s thermostat is that it doesn’t just help us to, or prevent us from spending faster; it also helps us search for money faster to keep ourselves at that comforting level. That’s why that neighbor of mine always paid his rents, he always kept money for feeding, and his thermostat was set to always have money for those basic needs. Trump also had to become a billionaire again, because that was his magic figure. The contrast between Hoff and my neighbor is that while Hoff’s thermostat pushed him to lend money in order to feel comfortable with his jars full, the same thermostat drove my neighbour to empty his pockets in order to remove him from that uncomforting feeling of having more. This explains in part, while those who gamble, scam or win lotteries end up losing it all. Everyone has his or her magic number, the point where we all turn from selfless to selfish & unconscious spenders to conscious spenders
What is your magic figure, how did you set your thermostat? How can you raise you bar and solve your spending problems? That will probably be the subject of my next piece, if you show an interest. As always thanks for reading, hope you grabbed something.
Please remember to leave a thoughtful comment, it helps both the writer and other readers. Nonetheless, preserving the good habit of sharing this with someone in need.
Leslie Michael ace
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