I remember being four years old, hiding out in the back storage room in our house, shivering and crying and clutching White Bear, wishing my parents would just stop yelling at each other. “Thank you for making my life an unmitigated misery,” my mother shouted at my father, barely holding back the tears. Why was Mom so angry?
As I continued to listen to the conversation, I learned what she was worried about: paying the bills.
A skilled carpenter and in many ways a brilliant man, my dad has never liked to think about money and, consequently, doesn’t manage it well. This lifetime of financial inattentiveness culminated when I was in high school. He defaulted on his mortgage. While his friend, a lawyer, helped him work out a loan modification, he rented out his house and crashed at another friend’s to save money.
One day, he and I got together to watch the Red Sox and a thought popped into my head.
“Dad,” I asked him, “Who do you think thinks about money more? You or Bill Gates?”
“Without a doubt, me,” he said and laughed. “I’ve spent my whole life trying to avoid thinking about money, thinking I was above it. Now it’s all I can think about it. It’s like money is exacting its revenge on me for ignoring it.”
Money affects every aspect of our lives. When you have it, you can live the life you want and do things that make you truly happy; when you don’t, every decision you make is based on what it will do to your finances. They say money is power, and it is. But I don’t mean the greedy, control-the-world Donald Trump type of power; I mean the power to take control of your life without drama or stress about how you’re going to make ends meet. Power is not about the car you drive, what percentage of your portfolio should be in bonds, or how to get the most airline miles: it’s about freedom.
My parents’ struggles with money formed the basis for my financial outlook–and managing my financial affairs better than my dad did has given me a peace in life that, as much as he deserved it, he never had. You may have had a similar experience–watching your parents struggle and hoping you never had to live through that kind of stress.
Perhaps the story of a young man I interviewed for a Wall Street Journal story is more relatable. When Felipe Matos enrolled in college to study graphic design, he never thought the degree would be the very thing that prevented him from pursuing his dream career. But more than $50,000 in debt later, he found himself working as an assistant building manager–with half his salary going toward repayment of his student loans.
“In order to get into my field I’d have to intern,” he explained, adding that his dream job would have been working in animation at Pixar. But in order to avoid defaulting on his loans–and the ruined credit and exploding compound interest that would ensue–he had to defer his dreams.
The point is this: Managing your financial life is not about spreadsheets and compound interest. It’s about your life. The financial decisions you make can give you freedom or make you a slave. The phrase “financial freedom” gets tossed around a lot, often accompanied by visions of hammocks on tropical islands. In fact, Amazon.com lists seven hundred and fifty books with that title. Personal finance titans Robert Kiyosaki, David Bach, and Suze Orman have all authored books with the words “financial freedom” in the title. Even without the hammock, it makes all the difference in the world.
Alli Mulder graduated debt-free from Indiana Wesleyan University five years ago in 2007. “After graduation, I didn’t have to take any old job immediately just to pay my student loan bill,” she told me. “The freedom of not having those payments has allowed me to put my money and my attention toward my dreams.” Four years after graduating, she works as an enrollment counselor at her alma mater, where she helps other young people avoid the student loan trap.
These two stories show the contrast between financial freedom and debt bondage. Felipe and Alli earn about the same amount of money. But Alli is able to pursue the work that’s important to her, while Felipe is chained to a job he hates. And satisfaction with one’s career is a leading predictor of satisfaction with life.
Unfortunately, Felipe’s story is far too common. One survey of corporate managers found that of the 68 percent of workers who said they would like to reduce the hours they spent working but couldn’t afford to, more than half reported that their debt was holding them back.
And here’s the tragic part of it: A weak financial life can cause so much stress that it impacts your work performance–and therefore your ability to improve your financial situation. Half the respondents of a poll conducted by Workplace Options said that their financial concerns cause them stress and anxiety; 48 percent of those respondents said the stress made it difficult to perform well at work.
The importance of financial security has been known forever. The Bible has more than eight hundred mentions of money property; Jesus talked about money more than he talked about heaven and hell.
It’s a well-worn cliché that money can’t buy happiness. But as anyone who’s suffered through a stack of unpaid bills will tell you, lack of money can be a one-way ticket to misery. I have a lofty hope: that this book will change the way you feel and think about money to bring you financial well-being, and a sense of security and peace in your life. That is what money, at its best, can provide.
Excerpted from How to Be Richer, Smarter, and Better-Looking Than Your Parents by Zac Bissonnette by arrangement with Portfolio Penguin, a member of Penguin Group (USA), Inc., Copyright © 2012 by Zac Bissonnette.
[Image: Flickr user Mike Bitzenhofer]