ICFE eNEWS #11-18 - April 7th 2011

Seven Habits of Highly Unsuccessful Spenders
by Ted McLyman

After working with people and money for years, this is what I've learned: Money makes us crazy! "I have too many choices. I am inundated with too much information. And life is moving at warp speed."

What becomes apparent are the habits od these unsuccessful spenders.

  1. I can do it, just watch me. We are overconfident that we can control our spending. We think we can control our behavior--this time. We accept the teaser credit card application because we think we won't use it. We buy "six-months-same-as-cash" because we know we'll have everything paid off in time. Bad things--life--only happens to the other guy.
  2. I know I'm right and I can prove it. We rationalize and confirm our spending decisions. No one likes to be wrong and losses/failure emotionally hurt--a lot. We ask "experts" we agree with to confirm our spending choices. We discount anyone who disagrees with us. Over time, we can rationalize just about any spending decision.
  3. I'm smart. We think the skills and abilities that have made us successful in one area will carry over to our spending decisions. I know a number of very smart and successful professionals who thought they could run a restaurant. They could not--regardless of how good their mom's pizza recipe. We tend to confuse luck with being smart. Admit it, some of our buying choices worked because we were at the right place at the right time. Brains had nothing to do with it.
  4. This time is different. We want to believe that a bad spending choice in the past won't happen again. It can and it may. We aren't very good with figuring out risk and probability. If we were everyone would own life insurance and not more than 10% of their company's stock. Remember, the group can be wrong--dot coms, housing, and so forth.
  5. It's an investment. We as individuals have no control over the market price or rate of return of anything. We can ask a price for our Beanie Babies, gold plated coins, and collector's edition presidential plates but the market will determine what it is worth. Just because the guy on television says it's a great investment does not make it so.
  6. I have enough time to get my spending under control. We never have as much time as we think. Compounding is our friend--if we use it. We seldom get a "do over" with our money.
  7. I don't have enough money. If we are really honest with ourselves, we have money. We simply don't like to make the hard choices about our spending choices. Instant gratification is great. Our feeling brain loves it. However, have to choose between the car that cost more than my first house and being able to retire in the future.

Ted McLyman is a fully licensed financial advisor and author. He is a retired Lt. Col, USMC where he served in various command and staff positions to include: economics instructor, U.S Naval Academy; Aide to the Assistant Secretary of the Navy for Financial Management; and served a tour in Southwest Asia during Operation Desert Storm.

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Sent by:

Paul Richard
President - Executive Director
Institute of Consumer Financial Education (ICFE)

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