I spent last weekend doing exactly two things: I played a lot of the Old Republic and I did my taxes. In terms of maturity points, I calculate these actions balance each other out and leave me with a maturity balance of precisely zero. Which, I suppose, is better than have a negative balance.
Fortunately for me, doing taxes is actually a happy time since it means I’m going to get a nice check coming back from the government. It’s the one time in the year that I can feel good about the obscene amount of interest I’m paying off on some of my student loans. Those big-ass numbers on my 1098-E translate into fat deductions.
I won’t say that I grew up poor. I certainly don’t have the experiences on this list. But I also didn’t grow up wealthy. I remember the electric getting turned off more than once. The cable was turned off and reactivated with enough regularity to set one’s watch to it. Car repairs were something to be feared. Even then, it wasn’t until much later that I learned through discussion with my parents just how close to the knife’s edge we were sometimes. To their credit, they tried to conceal the truth from my brother and me as we grew up. Nevertheless, kids are perceptive little buggers and there was no way we couldn’t pick up on things like having the electric turned off or the worries when something broke on the car.
It wasn’t poor, but it was certainly close enough that I picked up a particularly bad habit when it comes to money: extra money has to be spent immediately:
When a windfall check is dropped in your lap, you don’t know how to handle it. Instead of thinking, “This will cover our rent and bills for half a year,” you immediately jump to all the things you’ve been meaning to get, but couldn’t afford on your regular income. If you don’t buy it right now, you know that the money will slowly bleed away to everyday life over the course of the next few months, leaving you with nothing to show for it. Don’t misunderstand me here, it’s never a “greed” thing. It’s a panic thing. “We have to spend this before it disappears.”
I understand this problem.
It’s why people can go bankrupt after winning the lottery. It’s why people can believe that they’re “just barely making it” on a household income of $250,000 per year. It’s why I don’t allow myself to think “if I just had a bit more money, I’d be fine.”
Sure, I have things I need to pay off. My student loans are a monkey I can’t wait to have off my back. More money would help with that, right?
Except that I don’t think that it would, not really. Here’s how my tax return showed me this sobering lesson.
My monthly budget is finally squared away. I’m caught up on all my loans. Nothing is delinquent. I’m squaring things away on a personal debt that’s been on the books for a while. Things are looking good.
This tax return I’m getting could clear one of my smaller loans entirely and still have a bit left over. But as soon as I saw the number, my thoughts weren’t “oh man, I can pay my loan debt with this!”
My thought was “hey, I could use this on a new Kawasaki Z1000.”
Several weeks ago, I got the new motorcycle bug. My current bike is a 2005 Ninja 500 that I bought from my brother. It’s the bike I learned to ride on and it bears the scars from my efforts. It’s a good little bike but I’m hungry for something newer and faster.
I did some research and even talked to my credit union about taking out a loan. I was this close to signing it before I realized that the monthly payments were going to be uncomfortable. I walked away from it and went back to my old bike that makes weird noises sometimes and has cracks in its fairing, but is still mine. I own both my vehicles outright. No auto loans. But the craving for that shiny new beast is still on my thoughts and every so often, I’ll take a look at craigslist and Cycle Trader to see if there’s a good deal that I could snatch up.
The 2014 Z1000 retails for about $12,000. My tax return could pay off a student loan . . . or it could be the down payment on that shiny new motorcycle.
And here’s where the problem really starts gaining strength. With the Z1000 in my theoretical grasp, the idea of buying a cheaper bike is unappetizing. The truth is, I could buy a good used bike and pay cash. The truth is, I don’t even need a new bike because my Ninja 500 is running well and suits my needs perfectly.
That’s the problem. As soon as my financial grasp increases, so too does my reach. Three years ago, when I bought my first motorcycle, the used Ninja 500 was at the very limit of my means. I had to pay it off monthly. Now that I could pay cash for one, my hunger is for something that I can’t do that with.
This is why I don’t think highly of winning the lottery. I think it’s safe for the ego to assume that if one suddenly came into a big sum of money, their tastes wouldn’t grow accordingly. They would be content to continue to live at the same level of expense. I don’t think most of us are really that wise. I know I’m not. I can say “oh, I’d pay off my loans and then invest the rest,” but I don’t think that’s true. I think those dollar signs would crack my self-control like a raw egg and I’d be getting that shiny new motorcycle before I did anything else.
I’m not even getting back that much money. It’s certainly not “quit-my-job” money. But even that humble amount has my brain telling me to abandon all the financial plans I’ve laid out and BUY THE NEW SHINY. Figure the rest of that shit out later. Spend it before it’s gone and I’ll have nothing to show for it.
I’m resisting that urge. I’ve pulled myself out of my previous financial pit by sticking to a particular plan and every reasonable part of my brain is telling me that sticking to the plan is the right call. There will be other motorcycles in the future. Hell, if I stick to the plan, eventually I’ll be able to buy the motorcycle I want without taking out a loan. The only problem is that I’d be able to do that eventually instead of now.
But even though I know that, I still look at the pictures and I think . . . I think.
Maybe nobody else feels this way. Maybe I’m the only one. Maybe I’m just really that greedy at my core, that I want something that much that it overrides my common sense.
I’m sticking to my plan. I won’t give in. I just wish it wasn’t so damn hard.
Cynical Idealism 
Here’s the thing about self- control: it’s a lot like a muscle. It gets stronger by exercising it regularly, but it can also get strained if you try to work it too hard. To maximize your self control, you have to know how to reward yourself responsibly.
For example, for windfalls like you mentioned here, you really should buy yourself something with it. But you shouldn’t spend all of it, and you certainly shouldn’t use it to put yourself under a bigger mound of debt.
The rule I heard once was the 5% rule. Spend 5% of the windfall immediately on something for yourself, and put the other 95% away. Personally, I find that to be too little, but I agree with the sentiment. I would say spending 10-25% of it right away is good. I would also say it’s best to spend it on something you really like, or on some sort of experience you find fulfilling. Getting good seats to a concert is a perfect example, since that will feel like a satisfying use of your money.
That said, I know I’m very lucky. Not only because my family in a good position financially, but also because they taught me good money habits. A lot people with money are guilty of conspicuous spending, but my parents taught me that being thrifty is a virtue for everyone. As a result, my spending is pretty static, and I don’t really think about extra money all that much. Every month my credit card climbs to the same amount, and every month I pay it off with my stipend check. I just got a new source of income, and now all of that money is going into my savings account, and my stipend check is still paying off all of my monthly expenses just the same.
Not sure how much I should talk though, since I’m using my tax return to buy a new gaming PC…but I have been saving up for it for the past three months…
I don’t remember the electric and water turned off?????
I didn’t say that the water was ever turned off. The power was once at the place on Iron Bell. It was only for a few hours, though. Usually, it was the cable that was getting turned off; that happened several times.