Tuesday, August 28, 2012

The Good-Enough Budget

"You have excellent math skills and
you deserve good things!"
I have a half-developed pet concept I keep turning over called the "good-enough budget." The term is a take-off on that classic Winnicott term, the good-enough mother. Without getting into a whole history of Object Relations, the basic idea of the good-enough mother is a departure from the Freudian and Kleinian "good mother/bad mother" dichotomy. The good-enough mother is less of an abstract, but is seen as a real person dealing with the real world, doing the best she can to respond to the developing needs of her infant, and for her efforts and responses to be sufficient to the child's needs. (The history of modern psychotherapy is basically written on the backs of "bad mothers," so the idea that something short of perfect parenting is still considered "good enough" should be met with cheers.)

The good-enough mother does a few crucial things consistently well:
- She sees her child for who he is and doesn't project her own fantasy;
- She accepts and responds to her child's needs without shaming or rejecting;
- She provides a "holding environment" with her attention, love, and physical care that supports her child's development from a dependent infant to a mature, authentic adult.

So how does this relate to money? How can a budget be good-enough?

First of all, the good-enough budget is concerned with boots-on-the-ground financial management (meeting your real life, day-to-day financial needs) and not an abstract concept of financial perfection. Do you account for every penny? Do you religiously reconcile your accounts every month? Probably not. And the good-enough budget doesn't require you to. As long as you have a basic framework for what you earn and spend, you're still in better shape than "failing" at the ideal.

The good-enough budget reflects who you really are. Do you eat take-out for every single meal? Then your good-enough budget shows a higher number in Take Out than in Groceries. Same thing for all of those other "naughty" financial behaviors that people consistently omit or under-report in their budgets: buying clothes, liquor, taking taxis, etc.

Not quite ready to accurately account for those expenditures? The good-enough budget doesn't judge. Figure out all of those committed expenses -- things like housing payment, car payment, student loan, cell phone, internet, insurance -- and everything else can be "discretionary" for now. Practice simply staying within your means (so that "committed" plus "discretionary" is still less than "income) and the good-enough budget will accept that for now.

The good-enough budget gives you room to work on your financial awareness and behavior without requiring perfection. It is a low-pressure but consistent connection with your money where you give yourself structure, but still enough wiggle room for this to be a work in progress.

Because you, my darling, are a beautiful snowflake and you deserve to have your money be a source of happiness instead of shame. Mama loves you.

Friday, August 17, 2012

Women and Money: The Sky Is Falling

Hey, girl. I know that money and investing topics are "intimidating" and "boring" to you, so you "tune out" when your advisor tries in vain to show you a PowerPoint on market returns. But you need to get it together, because according to USA Today, "Women's financial responsibility grows faster than knowledge."

And ladies, we all need to care about this "lack of knowledge" because everyone, not just women, "will have to bear the burden" of the repercussions of our ignorance. Don't believe me? This warning comes straight from "personal finance experts." Says one:

I can't even understand Post-Its! How
can I possibly read a quarterly statement?
"If we find ourselves in a position 15 years from now where the husbands start to pass away and the wife doesn't know what to do in terms of managing money, there's going to be a lot of bad decisions made, a lot of economic waste and a lot of scared people," says Justin Reckers, a certified financial planner who runs weath management and divorce management practices in San Diego.

We'd better get on this, before we collectively crash the economy.

Just a couple of things to consider, though, before you run sobbing to your husband and beg his forgiveness for not rushing to open the brokerage statement every month:

1) Women are not bad investors. When it comes to making decisions about investment holdings, women consistently outperform men* over the long term. Some experts think this is because we are more risk-averse, others think it's our understanding of our own emotions that allow us to process feelings before acting on them. Whichever the case, we generally have a much more critical assessment of our skills than the results would bear out.

2) Every article of this type that I read laments the fact that women feel intimidated by jargon. We feel concerned about being bag ladies in our old age. We want to feel confident in meetings with our financial planner. We have got to stop being so distracted by how we feel about situations and pay more attention to the facts. How much are you saving, where are you investing it, how are those investments performing, and what future considerations do you need to keep in mind? Period. You can have all kinds of feelings about it, but don't make those feelings your focus.

3) That said, there is something valuable in what your gut is telling you -- as long as you turn that feeling into action instead of a whole narrative about how terrible you are with money. If you don't have a good rapport with your financial planner, find a better one. If you can't read the latest personal finance best seller without slipping into a coma, join an investment group or take a class. We have got to stop complaining that we don't like the way the financial services industry is currently set up, and start supporting -- with our attention, dollars, and voices -- those types of financial services that do work for us.

The bottom line is that women are great with money. What we do poorly is interface with a system that wasn't originally set up to engage us. But that doesn't give us a bye to just sit on the sidelines and complain about it, or wait for some man to show up and serve as our liaison to money world. Stop thinking the problem is you, your inability, and your ignorance. And by all means, don't take articles like this too seriously.

* This finding only relates when comparing decision-to-decision, not balance-to-balance. According to the Employee Benefit Research Institute, though roughly the same number of full-time employed men and women participate in retirement plans, men on average have a balance of $31,388 where women on average have a balance of $20,877. Men contribute more to their plans.

ETA: For a much more helpful take on this topic, check out Geraldine Sealey's article in the September issue of Real Simple titled, "Women & Money: Why You Need to Take Control Now." I can't find a digital version, but it's on newsstands now, and I am quoted in it along with Amanda Steinberg of DailyWorth, Galia Gichon of Down-to-Earth Finance, and Laura Vanderkam, author of All the Money in the World: What the Happiest People Know About Getting and Spending.