It is an exciting day and also tinged with a bit of sadness when our children leave home. Maybe they are off to see the world, heading to university or flatting with their friends. Does this mean we stop supporting our children financially? This question can become the elephant in the room for many families.
The short answer seems to be no we don’t stop supporting them financially! Among friends and clients it seems many of us with adult children are still helping out in one way or another.
The agreement we had with our children was we would support them during university and after that they were on their own. Sounded like a really good plan at the time, but over the years it hasn’t quite worked out that way. The number of parents in the same boat as us seems to be growing.
The old adage of children leaving home at 18 or when they finish their tertiary education and supporting themselves, has disappeared for a high percentage of parents. We are faced with the dilemma of supporting our children for longer than originally thought. This can cause friction between the parents.
This story was told to me in a humorous way, but there were serious undertones.
“Our son came back from overseas, no money, no job, so of course we welcomed him back home. Six months later he is still here, he has a job, but isn’t contributing a penny. Continue reading →
Throwing good money after bad or the ‘Sunk Cost Fallacy’ is another form of overspending that we can slip into without realising. It could be the house renovation that becomes the never ending money pit and deep down we know we will never recover these costs when the house is sold.
Sunk Costs are everywhere and they don’t occur only in your finances or business. Have you sat through a really bad movie thinking “oh well, I’ve watched an hour so I may as well watch the rest”. Gottcha!! You have just succumbed to a Sunk Cost.
“In for a penny, in for a pound” my Dad would say, as we headed to the local eat-all-you-want buffet restaurant for a family dinner. “I’ve paid my $25.00 (ok, this was a little while ago), so I am going to get my money’s worth and eat as much as I can”. Over the course of the next couple of hours he was true to his word!
So what is the Sunk Cost Fallacy? Well, in a nutshell: we keep making decisions (monetary or otherwise) based on how much we have already spent on a project. It’s hard to let go of something that is going backwards, or not complete an expensive project even though the cost of continuing just isn’t logical. Continue reading →
I bet you didn’t know you were an author did you. Whether you recognise it or not we all tell ourselves stories to justify and rationalise our spending. Some of those stories are short blogs, and others are full length novels!
What do I mean by justifying and rationalising our spending? I looked up the Merriam-Webster dictionary to see what they had to say about it and this is the definition of justify, “To provide good reason for the actions of [someone].”
Interesting. What about rationalise? “To think about or describe something (such as bad behaviour) in a way that explains it and makes it seem proper, more attractive etc.”
I probably don’t need to add much more as those two definitions really sum it up. But I am going to.
We were at a dinner party recently, and the usual question of “what do you do” came up. Generally one of two things happens when I say I am a money mentor. The person suddenly has to go and talk to someone else (the same thing happened when I used to say I was an accountant). Or I get chapter and verse about how good (or bad) they are with money. Continue reading →
Money mistakes; yes we all make them, but do you ever wonder why? It’s all about what is going on in our head. But you knew I was going to say that didn’t you.
This is what happens. The more we attach emotion and meaning to money, the more we lose sight of what it really means. The maths bit goes out the window. It is when 1+1 equals more than 2 that mistakes kick in.
Here are five tips to help you avoid money mistakes
1. If you are feeling emotional, don’t make important financial decisions. Sounds really obvious doesn’t it; but when you are emotional your perspective narrows and you can lose sight of the big picture. A warning here, have you tried to help someone see logic when they are in a highly emotional state? It can backfire and they dig their toes in even more, empathy and understanding is needed more than reasons and logic until they have calmed down.
2. Being stressed or tired are also not good times to make financial decisions. We just don’t think straight. Wait until the tension has eased. I remember my Mum saying, never go to bed angry as you may say things you regret later, the same applies to money decisions when you are tired you may regret what you buy. Continue reading →
Conspicuous spending or Keeping up with the Joneses and using money as a status symbol used to be thought of as the prerogative of the rich and famous, well not anymore.
Why do we feel the need to keep up with the Jones? I see it frequently with clients when I am mentoring them. “We couldn’t possibly cancel the holiday, it wouldn’t look good”. So what! What is more important looking good or staying afloat financially? Well, it seems for many people it is looking good.
I have just finished reading a novel, The Deaths, by Mark Lawson, there are a number of really great one liners (no I won’t spoil the plot by telling you this one), it is my favourite: Continue reading →
I like these guys (bank economists). They don’t pull any punches, they tell it like it is and for the most part, they talk in language that everyone can understand.
We heard (what we all really knew) that the USA is still precariously fiscally balanced. Cameron used the analogy of a household budget to explain, they have:
an income of $23,000
outgoings of $35,000
credit card debt of $12,000
and only $385 in savings!
As I said, precarious.
In Europe, it’s more of the same; Cameron says their economic models are basically flawed. In the Eurozone, the economic architects and power houses are Germany & France (who have not been the best of friends for the past 1,000 years). On top of that, they have differing money psychologies. On one hand Germany says, we have to save money before we spend it (makes sense) and on the other, France, which has a Balance Sheet in tatters, has just lowered the retirement age so people can get to the dosh sooner [that the govt doesn’t have]!