193. “I’ve filed for bankruptcy twice. Will I ever stop spending?” (Part 1)
In this episode of the I Will Teach You To Be Rich podcast, callers Lakisha and James share details about their current financial situations—riddled with debt and impulsive spending. The discussion delves into how their upbringings shaped their contrasting mindsets around money, with Lakisha's mother's gambling addiction fostering a disposable view of money, while James's father instilled a survivalist mentality of living paycheck-to-paycheck.
Despite recognizing the need for change, the couple struggles with open communication about their finances. Lakisha often seeks external validation for her spending decisions rather than developing confidence in managing her money independently. As Lakisha and James navigate their path towards financial stability, the episode explores the psychological and emotional factors that can influence one's relationship with money.
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1-Page Summary
Influences of Financial Upbringing on Current Money Behaviors
Lakisha's Mother's Gambling Addiction Taught Her Money Is Disposable
Caller Lakisha claims her mother's gambling addiction taught her that money is constantly coming and going, fostering a disregard for its long-term value. Watching her mother's check-writing crimes led to a "can I get away with it" mindset, which Lakisha has adopted. Her siblings also exhibit poor financial habits, suggesting a generational pattern.
James' Father Taught Him a "Work Hard and Get By" Mindset
Caller James says his father's teachings of working hard while avoiding unnecessary purchases instilled in him a financial survival mentality of living paycheck-to-paycheck without planning ahead, an approach he still follows. James finds himself mirroring his father's cautionary spending guidance with his partner Lakisha.
Current Financial Situation and Spending Patterns
Lakisha and James in Debt With No Savings
Lakisha has a staggering $165,000 debt, including over $100,000 in student loans and credit card discretionary spending. James owes $26,000. Neither has any savings or investments.
Lakisha and James Justify Frivolous Purchases
Despite their debt, Lakisha and James continue making impulsive purchases they later regret, like Lakisha's $820 monthly car payment for limited driving. They often justify non-essential spending as necessities, exemplifying their "can I get away with it" mindset inherited from family.
Emotional/Psychological Relationship With Money
Avoiding Money Conversations Despite Need for Change
Money talks are difficult for Lakisha and James due to differing mindsets. Lakisha seeks accountability but struggles to follow through. Both want a shared financial plan but lack the communication skills.
Seeking External Validation Instead of Financial Independence
James tries guiding Lakisha financially like his pragmatic father did, but struggles to help her take ownership. Lakisha often relies on others to validate her money choices rather than developing confidence managing her finances herself.
1-Page Summary
Additional Materials
Actionables
- You can track your emotional triggers by keeping a spending diary to identify patterns that lead to impulsive purchases. Write down how you feel before and after each purchase for a month. This will help you see if emotions like stress or the need for validation are influencing your spending habits. For example, you might notice you tend to shop online after a tough day at work.
- Create a "future expenses" photo album on your phone to visualize long-term goals and counteract the "disposable money" mindset. Fill it with images representing your financial goals, such as a debt-free celebration or a picture of a travel destination you're saving for. Whenever you're tempted to make an unnecessary purchase, flip through this album to remind yourself of what you're working towards.
- Start a "money conversation club" with friends or family members who also want to improve their financial habits. Meet once a month to discuss financial goals, challenges, and progress. This creates a support system for accountability and allows you to learn from each other's experiences. For instance, one member might share how they negotiated a bill or another might explain their strategy for avoiding late fees.
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Influences of Financial Upbringing on Current Money Behaviors
Financial expert Ramit Sethi and his callers explore how their early financial experiences have shaped their current attitudes and behaviors towards money.
Mother's Gambling Addiction Shaped Lakisha's Disregard For Money
Caller #1, Lakisha, reveals that her mother's gambling addiction has had a profound impact on her financial behaviors.
Lakisha Learned Money Was "Disposable" From Her Mother's Gambling Losses
Lakisha admits she doesn't value money and regards it as disposable, a perspective developed from observing her mother's gambling addiction. The uncertain amounts of money lost at gambling taught her that money was always coming and going, fostering a sense that it wasn't something to be valued for the long term.
Lakisha's Mindset Of "Can I Get Away With It" Developed From Watching Her Mother's Check-Writing Consequences
The anxiety and embarrassment Lakisha experienced due to her mother writing checks that would bounce have influenced her current thinking. Her mother's behavior, which included financial crimes leading to jail time, has shaped Lakisha's disregard for the repercussions of financial irresponsibility.
Lakisha's Siblings Show a Generational Pattern of Poor Financial Habits
Lakisha acknowledges that like herself, her siblings are not adept at managing money. This suggests a generational pattern of poor financial habits stemming from their mother's gambling problem and the associated behaviors they observed growing up.
James' Father Taught Him "Work Hard and Get By," Influencing His Financial Approach
Caller #2, James, discusses how his father's work ethic and financial philosophy profoundly influenced his own money management.
Father Warns Against Unnecessary Purchases As "Voice of Reason"
During his upbringing, James learned from his father the importance of hard work and caution against unnecessary spending. This voice of reason has been with J ...
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Influences of Financial Upbringing on Current Money Behaviors
Additional Materials
Counterarguments
- While Lakisha's disregard for money may have been influenced by her mother's gambling, it's possible that other factors also play a role in her financial behaviors, such as personal experiences, education, or peer influences.
- The mindset of "Can I get away with it" could also be a reaction to a lack of financial stability or education rather than solely a learned behavior from witnessing her mother's actions.
- Lakisha's siblings' poor financial habits might not only be attributed to their mother's gambling problem; they could also be influenced by broader socioeconomic factors or individual personality traits.
- James' caution against unnecessary spending, while influenced by his father, might also be reinforced by his own experiences or societal messages about financial prudence.
- James' financial survival mindset could be a result of not ...
Actionables
- You can create a visual money value chart to reframe your perception of money. Start by listing common expenses and assign a visual symbol, like a small icon representing an hour of work or a personal hobby you must give up to afford that expense. This tangible representation can help you see the real cost of purchases and discourage the view of money as disposable.
- Develop a "Future Self" savings challenge to break generational patterns of poor financial habits. Set up a savings account named after your future self and make regular, small deposits. Treat this account as a way to pay your future self for long-term goals, reinforcing the habit of valuing money with a long-term perspective.
- Engage in a "spend-to-save" experi ...
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Current Financial Situation and Spending Patterns
Lakisha and James are in significant debt with no savings or investments, highlighting issues of poor financial discipline and justification of unnecessary expenditures.
Lakisha and James Are in Debt With Few Savings
Lakisha and James, the callers on the show, are navigating through a tough financial landscape. Lakisha confesses to having a striking debt of $165,000 while James has accumulated $26,000 in debt. Together, their combined debt totals an alarming $190,000.
Lakisha Owes $165,000, Including Bankruptcy, James Owes $26,000
Lakisha has assets worth $21,000 but her debt overshadows them significantly, including a sum well over $100,000 in student loans and discretionary expenses charged on credit cards. James's situation is less severe with $25,846 attributed to debt, yet it remains a large burden for him to bear.
Financially Vulnerable With $0 in Savings and Investments
Neither James nor Lakisha has managed to put aside any savings or investments. This financial vulnerability is exacerbated by their high levels of debt. Their spending habits create further risk, as they disclosed expenditures such as $950 for car payments and $450 for cigars and alcohol, which is a stark contrast to their financial position. With James's fixed costs consuming between 67-75% of his income due to low debt payments and Lakisha likely around 80%, their financial maneuverability is severely constrained.
Lakisha and James' Finances Aim to "Get Away With" Irresponsibility
Lakisha and James's spending patterns reveal a troubling lack of foresight and a disregard for their financial predicament. Lakisha admits to bouts of impulsive spending, even on things that are not essential, like a dehydrator or items from Target that she later recognizes as unnecessary.
Lakisha Regrets Hiding Unaffordable Purchases From James
While there is no direct mention of Lakisha hiding purchases from James, the evidence of her regret lies in the embarrassment felt when receiving multiple packages from online shopping, indicating a pattern of concealment and shame.
Lakisha and James Justify Unnecessary Purchases As "Necessities"
The purchases Lakisha and James make are often justified as necessities, despite their nonessential nature. For instance, Lakisha bought an outfit, a sweatshirt for her ...
Here’s what you’ll find in our full summary
Current Financial Situation and Spending Patterns
Additional Materials
Actionables
- Create a visual debt tracker to make your financial situation tangible and motivate payoff efforts. Draw a large thermometer on a poster board, and fill it in as you pay off debt. Each level can represent a milestone, such as $1,000 paid off. This visual representation can provide a clear picture of your progress and keep you focused on your goals.
- Implement a "24-hour rule" for all non-essential purchases to curb impulsive spending. Whenever you feel the urge to buy something that isn't a necessity, write it down and wait for 24 hours before making the purchase. This cooling-off period allows you to evaluate whether the item is truly needed or if it's an impulse buy that you might regret later.
- Start a "necessity audit" with a trusted friend or family member to challenge and redefine your sp ...
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Emotional/Psychological Relationship With Money
Understanding the complex emotional and psychological relationship individuals have with money is vital. Caller Lakisha and her partner James offer a real-world example of the struggles many face when it comes to discussing and managing finances.
Lakisha and James Struggle With Money Talks
Lakisha and James face tension when it comes to conversations about money, which often stem from deep-seated behavior patterns.
Lakisha and James Avoid Discussions About Money
The discussion of finances is not an enjoyable experience for Lakisha, primarily because both she and James lack the know-how and willingness to engage with it actively. Their money conversations need to shift from a scarcity mindset to one of abundance to make progress, but achieving this change is challenging.
Lakisha Seeks Accountability, but Her Lack of Follow-Through Perpetuates the Problem
Lakisha desires accountability for her financial habits. James often questions her spending, indicating that discussions about money do occur. However, Lakisha's behavior of making non-essential purchases demonstrates a cycle of poor decisions followed by regret – a cycle she struggles to break. She acknowledges that her choices impact her future self negatively, as seen in her cashing out 401(k)s, which is indicative of a lack of long-term financial planning.
Lakisha and James Need a Shared Financial Plan, but Can't Achieve It
While Lakisha knows that sharing the same financial page is crucial, particularly for the future of her relationship with James, their communication struggles make it complicated to form a collective financial strategy. James, adopting a role akin to the "voice of reason" that his father played, attempts to guide Lakisha, but he too faces challenges in navigating this relationship dynamic.
Lakisha and James Seek Financial Support and Validation
The quest for responsibility in financial behavior is met with internal and external forces that make accountability complex.
Lakisha Needs Accountability for Responsible Financial Decisions
Lakisha's purchase habits and avoidance of difficult financial conversations suggest a need for external accountability, but her inconsistencies lead to a lack of follow-through. She ex ...
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Emotional/Psychological Relationship With Money
Additional Materials
Counterarguments
- While understanding the emotional and psychological relationship with money is important, it's also crucial to recognize that practical financial education and literacy can play a significant role in improving financial discussions and decision-making.
- Avoiding discussions about money might not only stem from a lack of know-how or willingness but could also be influenced by cultural factors, past traumas, or other personal issues unrelated to financial literacy.
- Seeking accountability is a positive step, but it's also important to consider that individual empowerment and self-motivation are key components of financial responsibility.
- The need for a shared financial plan is clear, but it's also possible that individual financial autonomy within a relationship can be healthy, and finding a balance between shared and individual financial goals can be beneficial.
- The idea that James struggles to guide Lakisha effectively could be challenged by ...
Actionables
- Create a "money emotions journal" to track your feelings about finances daily. Write down how you feel when making financial decisions, whether it's paying a bill, making a purchase, or checking your bank balance. This can help you identify patterns in your emotional responses to money and address them constructively.
- Develop a "financial conversation starter" card deck with your partner. Each card should have a question or prompt that encourages open dialogue about money, such as "What's a financial goal we can achieve together this month?" Use the deck weekly to facilitate discussions and improve your financial communication skills.
- Set up a "micro-accountability" system with a frien ...
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