Are You Part of the Sandwich Generation?

The photo above may look yummy, but once you get behind the metaphor it isn’t so appealing anymore.

What is the sandwich generation? Basically it’s the people who are financially caring for their retired parents while they are also financially providing for their children. In other words, they are financially “sandwiched” between two generations that can’t provide for themselves. It’s a relatively new term, which just made its way to the Merriam-Webster Dictionary in 2006. Though the term originated in the US, it’s a common phenomenon here as well.

But how does this happen?

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Behavior, Not Knowledge, is Essential to Financial Success

Which would you rather get - P3,000 in three days, or P5,000 in three months?

Think about it for a while.

If you answered the P3,000, this usually means you are financially impulsive, since you’d be turning down an interest rate that is much better than what banks and most investments offer.

In a study conducted by researchers from the University College of London, nearly half of their respondents preferred the lower (but sooner) sum - and that these people also showed impulsiveness in other areas of their life. From the article (emphasis mine):

“…researchers suggest money savings or financial behaviors are linked to a set of other personal behaviors, rather than personal knowledge and experience with money.

…[they] discovered impulsive behaviors such as overeating, smoking and infidelity are associated with financial gullibility.”

This means that even if you know a lot about money, investing, and business, it doesn’t guarantee that you’ll be financially secure. What guarantees your financial success is your behavior. If you are consciously planning for the future and spend time evaluating your impulsive desires, then you have better chances of being financially successful - even better chances than someone who had formal training in finances, but doesn’t exhibit those behaviors. Perhaps this is why even the smartest people we know make stupid decisions regarding their money.

How do we use this information to our advantage?

1. Acknowledge that you don’t have to know everything to start fixing your finances. One of the obstacles that most people face when it comes to fixing their finances is inaction. They think “Oh I have to read more about saving before I can actually save” or “I need to know more tips before I can start”. Being good with money is not always about facts - it’s also about behavior. While we need to study some things - especially when investing - we don’t need to know much to get started.
2. Realize that managing money well is a habit. It’s something you have to cultivate and practice regularly. There is no one-off solution, magical budgeting program, or miracle investment that will save you. It takes regular, continuous work.
3. Know that changing impulsive financial behavior may mean changing other aspects of your life as well. My mother was such an impulsive spender, but her impulsive behavior wasn’t limited to money. She was that way about almost everything. From her business endeavors to her anger. For those who are truly impulsive, it may be a more difficult journey to get your finances together - but it doesn’t mean you shouldn’t try.

If impulsive spending and investing was one of your problems, take a look at your past behavior and see how you’ve changed since then. How have these changes affected your finances? How do you feel about the research I quoted above?

Image by cobrasoft from sxc.hu

Living Without Cash: Can You Do It?

Living without cash is an extreme idea, but Mark Boyle of The Freeconomy Community is doing it. In this article from The Guardian, he talks about his experiences and the reason behind his decision:

If we grew our own food, we wouldn’t waste a third of it as we do today. If we made our own tables and chairs, we wouldn’t throw them out the moment we changed the interior decor. If we had to clean our own drinking water, we probably wouldn’t contaminate it.

This article was controversial and received harsh criticism from some readers, which you can read if you scroll down to the comments section (Boyle responds to his critics here). As for my own opinion, while I don’t believe that everyone should (or can) do this, there are some important lessons we can take away from his experiment:

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