/karen/

Money and what to do with it

Wednesday, 08 May, 2013

I've been thinking about money lately—more specifically, how to manage money and how to make it work for you. I've always felt very stupid and ignorant when it comes to money. I'm not sure why: it's not like I'm bad with it. I don't have any debts (well, aside from FEE-HELP). I don't impulse buy. I know vaguely the basics of making a budget and trying to stick to it, as well as portioning out money for specific causes or goals. But nevertheless, I've never felt like I'm in control when it comes to my money.

Well, it's really our money. I suppose that's where some of the difficulty lies: managing money when you're a couple is entirely different to managing it when you're single. I dare say managing money when you have children is a different thing again because there's this whole other person who has her own needs, wants and expenses.

And then of course it depends on what sort of job you have and how you get paid: the majority of the population receive a salary that comes with a regular pay check monthly or fortnightly. But if you work freelance, which is what most people in creative industries do, how do you manage money when you're not even sure when you'll get paid?

I think my parents were pretty good in what they taught me about money. For one thing, they always taught me to save. I think that's the first lesson I ever learned from them. I learned it pretty young too: as a pre-schooler (and I assume it was during my pre-school years because it's before we moved to Australia), I owned two piggy banks. One was brass and one was ceramic. They used to give me nickels and dimes to put in them. (This was Canada, remember; their names for money are more interesting.) Maybe occasionally they gave me a quarter, but from memory, holes on top of the piggy banks didn't really accommodate quarters. (An aside: I remember the Canadian quarter being the loveliest of all their coins. Mind you, this is before they got the loonies.) When the piggy banks were full, we'd take them down to the bank and deposit the coins in my account. Years later after we'd left Canada, I asked what happened to that money. They told me that it had gone; presumably they'd closed my childhood account and spent it. There wasn't that much in it anyway; after all, how much money would several piggy banks' worth of nickels and dimes be worth, anyway? But I was still a child and the news devastated me.

Later, after we'd moved to Australia, I got a Dollarmite account with the Commonwealth Bank. They operated through the schools, so every week I would deposit my allowance (which was at the time $2.50) during class in little mustard-coloured envelopes. I thought that was what you did with money. It never occurred to me to spend it until much later. (I was a strange child and was not very interested in what was available at the tuck shop—that is, until they got Mamee noodles and Ovalteenies, though the latter I only bought because my mum wanted me to bring them home for her.) I remember a family friend taking us to a toy shop in one of the Westfield shopping centre and the connection suddenly being made in my head: I could buy whatever I wanted with my money! (And what did I buy? Why, My Little Ponies, of course!)

Even so, I never spent beyond my means. I still had savings—even when I finished school, got my first casual job, moved out of home and into college residence, and all of a sudden had to handle things like college fees, textbooks, the costs of public transport, and so on. I was lucky, though: I had a scholarship and parents who were willing to continue supporting me financially while I studied. I know not everyone has that.

And then I got married at the tender age of 21, and suddenly things got a lot more complicated—not just because we were now paying rent; handling utility and grocery bills, superannuation and health insurance; doing our tax (which was a lot more complicated as a couple and used to drive me absolutely up the wall because I used to do it for both of us because it was easier since there were things I needed to know about his tax return in order to complete mine, and vice versa); and giving a portion of our earnings to things like Christian ministry and aid, and so on, but also because we were juggling the needs and wants of two individuals in the relationship. Before marriage when I was a lot younger, I would have these days when I would catch the train into the city and wander around my favourite places (which were usually bookstores)—looking at things, seeing what was out there, occasionally buying whatever it was I fancied (though within limits; I was good at putting things back if I thought they were too expensive, or if I thought I could wait). But as a married woman, my leisure spending had a direct impact on the household budget and my husband's leisure spending: marriage brought a new mindfulness to money matters.

Hmm. I'm rambling. Cut to present day: now in a family of three, I feel especially stupid about money matters—more than ever before, I think. I'm not sure if it's because now we have to handle things like a mortgage and the expenses that come with having a dependent. But as I said, it's not like I'm bad with money: I'm really not. I just don't feel like I “get” it. I feel like I don't really understand the basics, because if I did, I would feel less stupid and ignorant, and more in control and aware of my options—less like a child in the company of grown-ups who seem to be way more confident in what they are doing, and more like an adult with some mastery of the world and the way it works.

The other day we attended a friend's birthday brunch and I got in conversation with a friend who works as an actuary. (See, this is how ignorant I am: I had to look up what an actuary does.) The interesting thing about this particular friend is that he loves money—not in a negative 1 Timothy 6:10 sense, but more that he understands it and its nature and enjoys talking about it the way that some people enjoy discussing cooking. Curiously, unlike a lot of people I know, money is not emotionally laden for him. With most people, you can't talk about money in polite conversation because it raises too many volatile feelings in them—envy, covetousness, superiority or inferiority, and other sentiments that are sparked whenever one compares oneself to another. My friend talks about money as if it were water or electricity—a necessary part of life that everyone must partake of, whether they wish to or no. (Funny enough, as I was declaring that some sort of emotional intelligence should be taught in schools because it's so basic and necessary to human existence, he suggested that the same was true for money.)

I was telling him about my issues with money (specifically the feeling stupid and ignorant thing) and I asked him what he would say to a young person to teach them about personal finance and money management. He thought about it for a moment and then said (and here I am paraphrasing from memory), “Basically, everyone has unlimited wants but limited resources” (i.e. people usually want many things but they only have so much income and can only afford some of those things). (I said, “Really? Just wants? What about needs—food, for example?” and he replied that most needs were really wants, and that you could live on just rice, if need be. It wasn't ideal, but you could. And also, the safety net in Australia is good enough to meet your basic needs. It may not be how you want to live, but you will still be able to live.)

Then he said, “With your limited resources, you prioritise your wants, and if you can, you expand your resources” (i.e. you decide which wants are more important and concentrate on meeting those, but if you can, increase your income so you can meet more of your wants). “Prioritising your wants may mean delayed gratification”—(or being content with less, as another friend added later)—“otherwise you may not be able to meet all your financial obligations”.

Simple stuff, right? And yet I found it hugely helpful—mostly because it was taking a step back and looking at the whole concept of money from afar, rather than getting down into the nitty gritty of tracking your spending and setting budgets. The funny thing was, as I was talking to my friend and telling him a little bit of what we do with our money (for example, how we transfer money once a month into a special account that we use for household maintenance/clothes/shoes/yarn [which, I argued, was pretty much clothes in some instances because I've been knitting myself jumpers], etc., and how that came out of the whole concept of paying strata fees, which are used to maintain common property, or how I keep a special account for Astrid's childcare fees, which I privately call my writing fund [the way that Helen Garner regarded her single parents' pension as a kind of artists' grant]), he was laughing at me (in a nice way), and kept telling me, “Karen, you're all over this!”, and then proceeded to tell me about examples of businesses (not by name, of course) who managed their money far worse than we do.

Then my friend lent me a book called The Richest Man in Babylon. He said that he's a bit of an evangelist for the book because it explains the basics of money really well through a bunch of stories set in ancient Babylon. (Curiously it started off as a series of pamphlets distributed by banks and insurance companies.) I started reading it that afternoon, and despite my annoyances with some of the archaic language, I'm finding it quite helpful. More specifically, I was struck by these two bits of advice: “A part of all you earn is yours to keep” (i.e. put at least 10 per cent of all your income [regardless of how much income you actually have] away as savings immediately after you get it and adjust your expenses accordingly so that you will not miss it) and “Make thy gold multiply” (i.e. use the 10 per cent you're putting away to increase your income by investing it, making it earn interest, etc.). It's funny that even though saving was such a big part of my financial habits growing up, I never thought about it strategically—how much to save (versus how much I would spend on day-to-day living) and what to do with those savings to make them work for me.

I'm looking forward to finishing the book and learning more. However, as my friend warned, I realise that much of the book's outlook is largely selfish: there is very little in it about generosity and sharing with those in need. Furthermore, from what I've read, the author's view of the security of riches is at odds with the Bible's (see, for example, Proverbs 23:4-5 and Matthew 6:19-21): wealth is impermanent and fleeting, so it is better to trust in the one who owns all the silver and all the gold, and gives us all good things to enjoy. (Haggai 2:8, 1 Timothy 6:17).

It's not that I want to be rich (though the Bible acknowledges that poverty is not inherently good, but rather something to be avoided—e.g. Proverbs 10:15, 30:7-9). It's more that I want to be wise with what God has given me.

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