In a society so relentlessly driven by money, a person’s bank account defines them, at least to a certain extent. But financial planner Diane McCurdy believes we need to ask ourselves: How can I enjoy the benefits that money brings me each day and still have enough to live comfortably when I retire? Do I have the finances available to do both? And why, oh why, do I keep sabotaging my own future?
In her new book, How Much Is Enough? Balancing Today's Needs with Tomorrow's Retirement Goals
(Wiley), McCurdy insists that the key to balancing today's financial necessities with tomorrow's is self-knowledge. In McCurdy’s four categories, where do you fit in?
Spenders love money for the things it buys them. They prefer to have something concrete like cars or trendy gadgets over having something as abstract as savings. "They enjoy having the newest 'toys' and are often the envy of their friends, much like the fabled Joneses," McCurdy insists.
But they can get into trouble when they spend everything they have — or more. This category of people has the most difficult time saving money. A spender who doesn't pay off his monthly credit card debt, for example, may find himself on a very slippery slope toward bankruptcy. McCurdy’s Tip
: Each month take out your allotted savings and expense money immediately. The rest is yours to spend however you wish. THE BUILDER
Builders see money as a tool. They use it (and sometimes risk it) to turn their dreams into reality. Builders receive joy from the creative process involved in their projects and may even work at mindless jobs just to have the resources to build their dreams. (They probably dream at work!).
Most entrepreneurs and corporate leaders are builders and they make excellent mentors because of their creative endeavors. However, they are prone to miscalculating the funds and risks that are involved in their projects and neglect to leave themselves a margin of error, just in case. Tip
: "Developing a portfolio is a building activity," McCurdy says. "Once Builders get interested in using their creativity here, they're on the escalator!"THE GIVER
Thank goodness for Givers! Society couldn't get along without them, as they make up the volunteers, charity donors, and do-gooders of the world. They buy extravagant gifts for friends that they would never purchase for themselves, and deny their own wants so they can give to others. "Givers put their time, money, and energy into what they believe in," McCurdy writes. "Some of them view having money as almost a sin; therefore, the only proper thing to do with it is to give it away. They also find pleasure in making other people happy or in doing good."
Givers tend to get in trouble because they may ignore their own needs. They also may hurt their children by not teaching them how to take care of money. Tip
: If you first take care of yourself, you'll be better suited to take care of others.
Savers are lifesavers. Without them, who would the rest of the world borrow from? Savers create a fortune in the bank very quickly, while still living a comfortable life, sometimes even on a tight salary. "Savers are great at spotting money-wasting activities and avoiding them without thinking twice," McCurdy insists.
These types are organized and not impulsive buyers. They don't like risk and require a cushion of savings for their own peace of mind. But they can be too conservative and often avoid investments that could actually make their money grow! They also may postpone enjoying their money for so long that it is soon too late. Tip:
Determine how much savings is "enough" to meet security needs while still allowing you to actually enjoy life along the way. Once you reach this number, keep your peace of mind but spend a little money on something nice that you deserve. Life is just too short.
Once your personal finances are in order, fate throws in a monkey (money?) wrench when you fall in love and get married. Money is listed as a leading cause of matrimonial breakups, McCurdy adds. A spender can coexist with a saver, for example, though it may not always be easy. The good news is that compromise goes an astonishingly long way. Since money is an emotionally rooted issue, both parties must approach discussions and even arguments with respect and acknowledgment of each other's needs.
The best thing about money is that all in all, it is nothing more than a tool. There is always more of it in the world to be earned and cultivated to fit your needs — whether you are just starting out with your first job and a zero balance in your bank account, or have become a seasoned veteran to the working world with several hundred grand tucked away safely for a rainy day.
"We know that some day we will hang up our work boots and retire, God granting," McCurdy concludes. "It is important to start thinking about how we manage our finances no matter where we are in the game."
The Attitude Quiz
Excerpted from How Much Is Enough? Balancing Today's Needs with Tomorrow's Retirement Goals
1. A. Shopping is my favorite sport.
B. I shop when I need something.
C. Shopping can be fun sometimes, especially if I'm shopping for other people.
D. Shopping is torture.
2. A. Credit cards allow me to have what I want without worrying if I can afford it.
B. If I can't afford something but it's an investment, why not use credit cards?
C. I give my kids credit cards to teach them the value of money.
D. Credit cards are a good way to build up a credit rating and a handy alternative to carrying cash.
3. When I go out for dinner with friends,
A. We check out the latest hot restaurant, and we split the bill evenly.
B. Sometimes I pay, sometimes they pay –– it all works out eventually.
C. I usually fight for the check.
D. We ask for separate checks.
4. If I see something I like, I
A. Buy it.
B. Buy it if it fits into my game plan.
C. Get one for me and one for somebody else if it's a good deal.
D. Usually talk myself out of buying it.
5. If I won a big lottery, I would
A. Never have to think about money again.
B. Use it to create something important.
C. Spend a lot of it on friends, family, and charities, and keep enough to live on.
D. Make sure my family was taken care of, pay off the mortgage, then live on the interest.
6. If I don't have any money in the bank, I
A. Use my credit cards and line of credit — isn't that why they're there?
B. Use credit to leverage opportunities.
C. Worry that I won't be able to fulfill people's expectations of me.
D. Get anxiety attacks (or I would if it ever happened).
7. A. I don't know where all my money goes.
B. I always have a pretty good idea of how much money I have available, but never let that stand in the way of a good idea.
C. Most of my money is allocated to family, charity, or trying to make a difference.
D. I keep close track of all my bank accounts and investments.
8. I love to use my money to
A. Enjoy life to the fullest.
B. Follow my interests and stretch myself.
C. Make other people happy.
D. Build up a nest egg.
9. When I go shopping for something I need, I
A. Usually come home with a few extras.
B. Find it, buy it, and go home.
C. Look around to see if there's anything I can pick up for anyone else while I'm out.
D. Shop around to make sure I'm getting it for the best price.
10. When I give to charity, I
A. Give to the ones that appeal to my heart.
B. Choose charities that most closely match my aims and beliefs.
C. Give as much as I can because others need it more than I do.
D. Allocate a specific amount to the charities of my choice.
11. A. It's important to get a new car every three years.
B. If you buy the right car, it's a good investment.
C. It's an incredible timesaver if everybody in the family has a car.
D. I take really good care of my car to make it last.
12. When somebody has a new car, I ask
A. Did it come loaded?
B. What kind of car is it?
C. Are you happy with it?
D. How did it rate in Consumer Reports?How did you score?
What does money mean to you? It's helpful to know because any of these attitudes taken to the extreme can sabotage your dreams. Find out by adding up the As, Bs, Cs, and Ds you have; the category in which you have the highest score is your type. You probably won't be one type exclusively, but one attitude will probably prevail. If your top two choices are about equal, you are a combination of two types. Once you know which type or combination of types you are, you'll have a better idea of why you spend money in certain ways, and you'll also be able to see patterns in your wish list, once you get to that part.
If you picked mostly:
As: The Spender
Bs: The Builder
Cs: The Giver
Ds: The Saver