Day#22: Discuss finances with a friend or relative.

This is Day #22 of “25 Days to Healthier Finances”, a series of blog posts where Frugal Pinoy readers and myself work on 1 task a day to make our financial lives better. Please stay tuned for the next installment of this series, which will be up tomorrow. Here’s today’s installment:

For most people, it’s taboo or bad manners to talk about money. But sometimes, not discussing money properly leads to even deeper problems. For example, married couples often disagree on their financial status. In one survey, 86% of couples admitted that they regularly fought over money. Another survey revealed that more than 2/3 of Americans learn about money management from home rather than school. Whether we like it or not, discussing money with others has a significant impact on how we perceive or handle it.

Today’s Task: Discuss finances with a friend or relative.

Your discussion doesn’t have to be deep or complex. Here are some examples of some simple starting points:

• Ask an older relative what they wish they started saving up on when they were your age.
• Give your kids glass jars where they can collect loose change and tell them why doing this is important.
• If you’re interested in starting your own business, you can ask advice from a friend who has done it before.
• Ask your parents what they wish their parents taught them about money.
• Go on your social networking sites (Facebook, Friendster, Multiply) and make a post about how you’re interested in learning how to manage your money, invest, or whatever aspect of personal finance you’re most interested in. Ask openly if your contacts have any books or blogs to recommend.

Of course, before you start any conversation about money, assess your relationship with the person first. How close are you? What do you expect to gain from the discussion? Have you discussed finances in the past? If you’re having trouble gauging their comfort level , keep these pointers in mind:

• People are more open to discussing things like cost of living (bills, rent, etc.) and budgeting/planning methods rather than specific price tags on purchases or how much their salary and savings are. Ask “how” rather than “how much”. “Do you know a cheaper grocery store or market nearby?” is better than “How much do you spend on groceries each month?”
• Friends and relatives in the finance sector tend to be more open about these kinds of discussions, so if you have a close friend who works in that field, talking to them is a good start.

Why is this important?

For me, talking about money - especially with my partner - is an exercise in getting real. It allows me to express and evaluate my ideas about what money is and how I treat it as a resource. Without my regular discussions with my partner, I might not be as disciplined about managing my money well. Also, doing this can be a learning experience. I have some friends that I ask financial tips and advice from. They allow me to see things in new ways that I haven’t explored before. It’s certainly much better than keeping all your thoughts and ideas inside without the input of others.

How often do you talk about money? What is your experience with talking to your spouse or parents about it?

Image by pfiesta from sxc.hu

Discussing saving with your spouse

Frugal Pinoy reader Allan G sent in this question as a response to my previous article on saving:

Hi there! I have never been a big spender. I earn well and I have always had. Before I got married, 80% of my money I used to help family and relatives. I was not able to save much except buy a plot of land in Cavite. Now I am married. I am still not a big spender. But my wife is. We continue to help our families the best way we can. When I talk to my wife about saving money she gets mad at me. She says I don’t earn enough so we can’t afford to save. I wonder how I can make her rethink her ways. Any suggestions?

Talking about money with one’s spouse can be a tricky subject.  Money, after all, is the number one reason why couples fight.  I’ve avoided this by talking to my partner about money extensively before we started living together.  It also helps that we have the same values when it comes to money.  But not everyone is that lucky.

There are many things you need to consider when it comes to a situation like this.  Does your spouse have her own income?  What does she spend on the most?  What is her idea of “earning enough”?  Also, is the help you offer your families really necessary? (I’ve discussed in the past how giving financial help to family shouldn’t be automatic.)

Manage your expectations.  First, you need to understand that things might not go 100% your way in the end.  Marriage requires compromise and adjustments - you need to find somewhere the two of you can meet halfway.  Know that if any change will take place, it won’t happen all at once.  Changing one’s financial behavior takes time, and this is something your spouse has to do herself - it’s not something you can force.

Be careful with your words.  It’s important to remember that the health of your relationship always comes first, so make sure you don’t talk about money when you’re angry.  Whenever you discuss money, it’s important to do it when both of you are rational and in a good mood.  Also, be careful of wording your money problems in such a way that looks as if you’re blaming your partner.  Choose “we” and “us” instead of “you”.

Learn more about her financial values.  As I said earlier, it helps to know her standards about income that’s enough for you.  Note that you think you earn well, while she thinks your earnings aren’t enough.  What is her idea of sufficient income?  What are her financial dreams? How does she define “a good life”?  Ask her these questions so you’ll be able to see things from her perspective, as well as have a starting point for your future discussions.

Make it exciting.  As Adie pointed out in the comments, it helps to start saving for something that excites her.  Ask her where she’d want to spend your vacation this summer, then tell her that this is possible and you want to save up for it so you can give her the vacation she wants.  Or, it doesn’t have to be a vacation, it could be an item she wants, a seminar or workshop she’d like to attend, or an experience she has yet to try.

Be sure to follow this up with a discussion on “Kaya naman pala natin mag-save ng kahit kaunti each month.  Why don’t we do it for the long run?”

Consider additional income.  If your wife really doesn’t think that you make enough money (even if you do), you can both discuss ways to add to your income.   If she doesn’t have any income, ask her if there’s a business venture or work-from-home opportunity she’d like to try. You can also ask her if the two of you can start investing.  By opening up the discussion on one aspect of your finances (income), it’s possible you’ll be able to talk about other aspects (such as saving) more freely.

Talk about success stories.  If you have any friends, especially couples, who have financial success stories, tell your wife about it.  Pick those stories that come from something similar to your own income bracket, family size, and lifestyle - it doesn’t make sense to discuss the success of the Ayalas if you’re a regular middle-class family.  Your wife should know that financial success and saving is possible from your income bracket (or even from those who earn less than you do).

Discuss money in several short talks, instead of one big discussion.  This is especially important inf your spouse is really sensitive about the issue.  Keep your conversations light and short so she won’t feel that you are pressuring her too much.

If you want to read more articles on how to talk to your spouse about money, you can start with these three:

• 6 Ways to Follow Up that Big Financial Talk With Your Spouse @ TheSimpleDollar
• How to stop fighting with your spouse about money @ GetRichSlowly
• Getting Your Spouse to Save @ CNN Money

I hope I was able to help!  Thank you to the other readers who chimed in, gave their own advice, and talked about their experiences with saving.

Do you have any personal finance or online moneymaking questions? If so, kindly click here for the contact form, type in your question, and I’ll answer it here at FrugalPinoy.

Photo Credit: Image from Jasper Greek Golangco  from stock.xchng

Bloodlines as Credit Lines

(Thanks to Soli for the title and insight.)

Here in the Philippines, it’s ordinary to seek out the help of close friends and family whenever we’re in financial need. There are even cases where mere acquaintances ask each other for monetary assistance. We’re generally matulungin (helpful) as a culture, and that’s not necessarily a bad thing. Let’s take a deeper look into the idea of using blood lines as credit lines.

Why it works to ask friends and family for financial aid:

It’s part of our culture. From the concept of bayanihan to proverbs about being a “good Samaritan”, at an early age we’re taught to be helpful.

It’s easy. All it takes is a phone call, a visit, or even a text message. “Pare, pautang naman, o!” These people are close to us, and most of them are willing to do anything to help us keep out of trouble. It beats filling up long forms and attending interviews when applying for a loan.

In some cases, it makes sense. If you’re a fresh graduate, starting a new career, and need to help support the rest of your family, it’s hard to find the extra funds to save up for retirement or an emergency fund. Also, for people who find themselves in financial emergencies and didn’t have the foresight to plan for them, they are left with no choice except to ask for help. After all, it’s much better than using a credit card with steep fees and interest rates.

Now let’s look at the other side of the story.

Why it is also dangerous to ask family and friends for financial assistance:

Apart from the money you borrow, there will also be utang na loob. And that is a much trickier transaction to measure. One never knows when utang na loob is ever repaid in full. If someone lends you money and later requests for non-monetary help, you feel obligated to give in - no matter how uncomfortable you may be with some of these requests. Hey, it might not even be your debt, it could be your parents’ - but it doesn’t stop you from feeling utang na loob.

Unsurprisingly, the idea of utang na loob, intended as a display of genuine gratitude, has become one of the foundations of corruption in this country.

Sometimes too much help can turn into hindrance. Someone I know, let’s call her Ms. A, was surrounded by friends and family who gave her financial assistance whenever she needed it. Her loved ones thought that they were helping her. However, the core of the problem wasn’t really a stroke of financial bad luck - Ms. A just had such poor money sense. She spent too much money on unnecessary things. Because everyone was always there to “help” her, she never got around to addressing this problem. The result? Mountains and mountains of unpaid debt - with more on the way. She’s become completely dependent on others and doesn’t even feel the need to look for a source of income via a job or business.

It puts a strain on the relationship. When money comes into the picture, a new aspect of your relationship surfaces. I’ve known of families that have had near or completely irreparable relationship strains because of money. Sisters don’t speak to each other for decades because of unpaid debt. A father disowns a son who doesn’t want to pull his own financial weight. People who were formerly friends start avoiding each other. For this reason alone, I don’t think it’s worth it to rely on friends and family for financial aid.

What is the solution?

Consider what you know about the other person. When borrowing from a relative or friend, or when lending money, think about the other person’s financial sense and what kind of strain this might put on your relationship. Is this person money smart but just ran into some unexpected bad luck? If you’re the one borrowing money, ask yourself if the lender trusts you enough to repay the loan.

Think about other options. Borrowing and lending may not be the only solution to financial problems. Are there items that you can sell? Is there a regular expense that the borrower spends needless amount of money on? Long lasting help doesn’t come in the form of cash, rather it comes in a finding a system that works. That saying about teaching a man how to fish - that one applies here.

Every situation is different, but these are just some things to keep in mind whenever you come across a financial problem where you may have to use your own network of friends or family as financial backup.

Have you ever borrowed money from a relative or friend? Have you ever lent anyone money? Feel free to share your experiences in the comments.