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HOW WE SPEND DEPENDS on how we feel about money.
To be sure, we’re supposed to spend according to our financial situation and needs. But life experiences can so badly distort our attitude toward money that our financial decisions end up being ruled by fear and insecurity rather than questions of affordability. Such is the case with an acquaintance—let’s call her Satee—whose money habits are at odds with her financial standing.
Satee grew up in a typical Indian family of four. Her working dad was the family’s primary breadwinner and financial decision-maker. Her homemaker mom put most of her energy into raising their two kids and taking care of the house. In their family, the financial and nonfinancial responsibilities were clearly divided between husband and wife.
When Satee got married, she envisioned becoming a homemaker instead of a moneymaker. She wanted to be a supportive wife, a loving mother and a responsible daughter. Handling money was neither appealing to her nor on her list of responsibilities.
Satee’s husband was professionally successful and financially savvy. They moved to the U.S. and had two children. They bought a house, saved for retirement and set aside money for the kids’ education. Everything was falling into place, just as Satee had hoped, except for one problem: Relationship and trust issues soured their marriage.
Long story short, Satee went through a messy and conflict-ridden divorce that dragged on for months and turned her world upside down. A property settlement was eventually reached, but the bitter memories and fear of uncertainty remained.
Satee took a while to accept her new role as head of a household with two school-age children. To get through the rough patch, she turned to the local community for emotional support. She met my wife through a mutual friend and quickly formed a bond with her.
A few years later, she connected with my wife again. This time, she seemed happy and settled. She had some money questions and my wife asked me to help. Satee and I chatted a few times, going over some financial basics. She was keen to learn more.
Satee focused a lot on ad hoc, short-term money decisions. She had no clear long-term financial picture. Instead, she was consumed with keeping a tight lid on her spending. Her modest lifestyle left no room for indulgences or even small niceties.
I couldn’t tell if the scrimping and excessive penny-pinching were out of necessity or insecurity. Her financial situation didn’t seem so dire. She owned a paid-off single-family house in a good neighborhood, had a decent job with a six-figure salary, and the kids had fully funded education accounts.
On my insistence, Satee figured out her actual annual expenses for the past few years. It took her a lot of time to come up with the numbers—not because she was unwilling or shirking, but because her finances were overly complicated with multiple accounts. It was no wonder she lacked a clear picture of where she stood financially.
With some help and handholding, Satee finally managed to get the numbers. Her actual spending in each of the past three years turned out to be far smaller than the number she’d fabricated in her head. I wasn’t too surprised. She behaved financially as if she was in poverty, and I knew that wasn’t the case.
Evidently, Satee was underspending and over-saving. The next question I asked: Did she need to save so much? To answer that, she needed to take stock of all her financial assets. Once again, this simple step took longer than it would for most people.
As with her spending accounts, Satee had too many financial accounts, including savings accounts with several local banks and credit unions, high-yield money-market accounts and certificates of deposits with various online banks, a couple of brokerage accounts, retirement accounts from current and past employers, and so on.
Once she located all her financial accounts and reestablished online access, she gave me a call. I asked Satee to go through each account and enter the balance on a spreadsheet—a step she’d never done before. I then asked her to add the numbers up.
At first, Satee didn’t believe the result. Per the spreadsheet, she was already a millionaire in her early 40s, without including her home equity, kids’ education funds and other assets. She double-checked each account. She was hoping to get a different answer, but the numbers didn’t lie. It was clear she didn’t need to save so aggressively.
Will the revelation change anything? Will Satee allow herself and her family occasional splurges? Or will she continue to let money rule her life and continue to get worked up about every unexpected expense, no matter how small?
I certainly hope Satee strikes a better balance between spending and saving, but I wouldn’t bet money on it. Her profound financial insecurity took root during the years of emotional turmoil and uncertainty that followed her marriage’s collapse. It will likely take more than a household balance sheet to overcome her fear of spending.
Sanjib Saha is a software engineer by profession, but he’s now transitioning to early retirement. Self-taught in investments, he passed the Series 65 licensing exam as a non-industry candidate. Sanjib is passionate about raising financial literacy and enjoys helping others with their finances. Check out his earlier articles.
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Sanjib Saha,
I thank you for helping Santee. I am very impressed with your articles. I would love to get in touch with you if it is ok with you. Please kindly allow an opportunity to talk with you.
Ramniwas Vijayvargiya
330 554 1776
Sanjib, you were indeed very kind to help this lady get a handle on her finances.
If she happens to have an account at Vanguard, she can list all her Vanguard and non-Vanguard holdings, including online bank accounts. Then, through their “Portfolio Watch” feature, get an instant analysis of stock/bond/cash ratios, domestic/foreign, growth/value, bond credit quality and interest rate sensitivity, etc. I’ve found it extremely helpful.
Thank you for your note, Andrew.
I think several brokers (and some 3rd party sites too) offer account aggregation services. It’s very easy these days to quickly get insights into net worth, expenses, etc., through any of these. For investment analysis, I’ve found the Fidelity Analysis tool and Morningstar XRay to be quite useful, though I haven’t tried the other available options. I think given Satee’s situation, she simply has too many financial accounts and that makes it very difficult to manage finances and have clarity about her overall financial situation. I think using brokered CDs, short-term T-Bill, Treasury and TIPS ETFs – things that can be done from a brokerage account itself – might help to reduce her so many online savings accounts and short-term CDs at various places.
Over the years I’ve suggested people use Quicken to get a clearer picture of their finances. Now I include Mint and Personal Capital as an easier tool to setup. Knowing where you are is really the first step to moving forward. It was great of you to help set her up on this path.
Thanks, SanLouisKid. Yes, there are many ways, including free tools, to get a consolidated view of the finances. I’ve been nudging Satee to focus on the long term picture and define crisp financial/savings goals so that she doesn’t have to waste so much energy on small or short-term expenses.
Hi Sanjib, I’m a longtime subscriber to Humble Dollar and I’ve always appreciated your stories. Thank you for helping her with advice on her finances so she has a better perspective. Hopefully she will consolidate her accounts so it’s less complicated. You are a good friend.
Thank you so much for your kind words, 1silverloon. It’s very satisfying that she considers both of us as her well-wisher and family-friend. We both want her to find happiness and enjoyment in life.
sir: it was good that you helped your pal get her affairs in order, understood, clarified but that is the end of your utility to her. her happiness may be quite different than yours..
she had the rug pulled out from her once…the savings, the investments and the future are HERS to define. to some,money is insulation, a way of avoiding the bad stuff… and when you have enough insulation, up to you, you can relax as is YOUR will.
that is the value of money…choices. of course as keynes and caroll showed jam tomorrow is never jam…but for the justifiably fearful never jam may be sweeter than the fading memory of the jam, the rolex, the jag when your child needs a kidney and the insurers just laugh…
money is what you think it is if and only if you have it! for me the value of money is a good night’s sleep…for others, i’m sure it’s different….
Thanks for sharing your perspective, David. You are absolutely right about the value of money being different to different people. In this particular case, I think a lot of undue stress, everyday friction and frustration can be easily avoided by internalizing the actual financial situation. Avoiding unnecessary unhappiness at a low cost might be a good start for getting on a path towards happiness :).
Hi Sanjib:
You write regarding this woman that,“Her profound financial insecurity took root during the years of emotional turmoil and uncertainty that followed her marriage’s collapse. It will likely take more than a household balance sheet to overcome her fear of spending.”
Please don’t take this the wrong way, but the best way for her to overcome her fear of spending may be for her to see a counselor to work through her financial insecurity and enjoy the benefits of her previous frugality.
Thank you for your suggestion, David.
Sanjib, would she consider seeing a good psychiatrist or therapist? A good therapist could open her mind to thinking differently and help her become less sensitive to things which trigger anxieties around money. A psychiatrist could diagnose and treat clinical conditions like an anxiety disorder. Life’s too short to suffer with that.
https://www.psychiatry.org/patients-families/anxiety-disorders/what-are-anxiety-disorders
Thanks for sharing the link, David. I think a psychiatrist and counselor might help, and if I remember correctly, she saw one previously for some time (not specifically about financial insecurity but for overall stress management and anxiety related issues). I do not know if the engagement was useful or not, but I have a feeling that if it’s a paid service, it might become a hard sell :). It’s a bit of a tricky situation: will someone with difficulty in spending money spend money to overcome that difficulty?
I was a CPA for 40 years and describe people as savers or spenders; I think it is in our DNA. It is difficult for some savers to override their DNA and “cut loose” and spend some of what they accumulated. In counseling self-employed/small business owners in cash planning and getting them to set aside enough cash to cover estimated taxes (and hopefully contribute to an IRA, SEP, SIMPLE!) some would question setting aside too much. I’d tell them we could reduce the amount set aside, or they could spend some of the excess accumulation.
Thanks for helping your friend; she is lucky to have you. Have you discussed estate planning with her?
Thank you, Jeff. RE estate planning, she has some basic steps taken care of (beneficiaries, guardianship for minors and their assets, etc.). We haven’t discussed much about the other aspects yet.
I’ve been a CPA since the late 80s and we certainly are in the “catbird seat” for viewing people’s lives, esp. the financial version. Thankfully this gal is wired as a saver, as she has more options for a more fulfilling life than our spenders do. I hope she finds the right balance for HER life, & that may mean the status quo.
Thank you, Stacey. Yes, being wired as a saver has been a blessing, especially being able to get back on her feet and managing personal finances for the very first time. It’d have been a much different story if she were wired the other way.
Sanjib, this a good article that illustrates the effect our emotions have on money decisions, even when we aren’t aware of them. You demonstrated kind patience in guiding her toward a true picture of the facts of her financial situation. Perhaps you will continue to lead her toward a true understanding of what those facts mean for her life.
Thanks for your comment, Edmund. My hope is to increase her awareness so that she can make more informed choices.