What if we weren't so private about our personal financial lives?

Consumerism has run amok, most of us can agree on this.  Americans, on the whole, buy things we cannot afford.  We buy nice cars, clothes, eat at fancy places, drink fine wines, pretentious coffees, and $12 martinis.  We stretch to afford the apartment, condo, townhouse, or house that is probably not within our budget.  We covet electonic gadgets, like ipods, and pda phones, brand name watches, and TVs.

Few would dispute this.  So, I guess the question is, why?

What are we trying to accomplish?  What void are we trying to fulfill?  Who are we trying to impress?

Ahhh... I think that last question is the most important one.  Especially for the twenty and thirty somethings among us.  We have all read, heard and experienced the phenomenon that goes on after college.  Some of our friends go on to Med School, Law School, B-School.  Some get entry level jobs, others get jobs that somehow pay much better than the rest of us.  Suddenly, we go from all being poor college students to varying levels of economic means.

We get together on the weekends to ogle at each other's cars, compliment their shoes, and go out for drinks at the latest trendy hot spot.  All the while competing to see who can run up higher credit card debts.

What if we did something different when we got together?  Many of us have moved past some of the pretentious stuff that I just talked about, and instead have dinner parties, game night, and other inexpensive ways to gather.  But let's take it a step further.

What if we got together with our friends once a month and compared our balance sheets?  What if this was the social norm?  What if EVERYONE, not just us whacky personal finance bloggers, posted our net worth statements every month?

How would that change our spending habits?  Would we be less ready to compliments our buddy's hot new sports car if we knew he could not afford it?  What if our friend just got some trendy new Gucci shoes for $300, and put it on his already maxed out Nordstrom card?  And we all knew it!  Would he even do it in the first place?

It's funny how private we are about our financial lives.  Are we embarassed by how bad it is?  Or are we more embarassed by how good it is?

We talk with our friends about our most personal and private feelings.  Dreams, fears, drugs, fantasies, and even love.  Nothing is off limits.  Except money.

Disagree?  Who are your five closest friends?  What is their favorite kind of food?  Are they drinkers?  Where are the last three places they have traveled?  What is their net worth?

Comments

[Tim]

LAmg, you bring up some valid points. I bet if people weren't trying to "keep up with the Jones'" things would be different. But then all the companies whose propaganda tells us we need more, bigger, better, newer things might get upset. :)

[Financial Freedumb]

Great post! How odd would that be...it would make things different...we'd have to learn a whole new set of social rules...initially it'd be kind of awkward. I can imagine some of my friends saying, "wow, you have that much money? Can I have some?" I think even us bloggers aren't really at that level...I mean we have the cloak of anonymity (sp?). Now if everyone in the room had no jealousy, and the honest of intent of helping each other improve...it'd be great.

[lamoneyguy]

Exactly. That is what we all fear. As Tim says, keeping up with the Jones, but also if I don't have any money, will my friends with money worry that I will ask for a loan? Or, if I have money, will my friends want to borrow some?

Or worst of all, if my friends know I don't have money, will they stop inviting me when they do "nice things?" (as they probably should).

The anonymity is a funny thing. I've been thinking about a post about that. Kind of tied in with this post.

[my new self]

Awesome thought there. It is pretty amazing that we know all about our friends except how they are doing financially.

But the same could also be said for our families I think. My mom and I sat down a couple of months ago and she showed me her retirement account info. It was interesting in a good way. But it took many years to get to that point.

That reminds me, I need to do the same with my son.

[Finance Junkie]

I believe that it's a by-product of individual needs for instant gratification.

Those that are satisfied in a majority of areas in their life have less of a need to compensate by gratifying themselves by spending in excess.

[jim]

Perhaps our "generation" will be the one that helps break down the taboo surrounding the discussion of money.

[Tim]

I hope we do "break down the taboo" as Jim puts it. I think a lot of social problems are caused by people not talking about money, not knowing how to invest, not knowing how to manage finances. This was a fun read.

[claire]

You're asking a really important question. Most of my friends know that I am into saving money. In some cases, this has led to a really open and supportive friendship where money is concerned. I have at least a couple of friends with whom I compare investment ideas, give and receive encouragment, and even talk in a quite detailed way about account balances and so on.

With some other friends, though, my mentioning that I like reading personal finance stuff etc has made them feel sort of guilty and resentful. When they mention a vacation they're taking, they look at me and say "I know, I know, I can't afford it".

I am trying to make talking about money less of a taboo, but I am also wary of bringing it up. I'm too afraid of appearing sanctimonious. It's not my job to remind people of what they'd rather not think about: that they're spending is over-the-top and they're going to be living on catfood.

[Todd]

I kind of like your idea, however I'll have to admit that it is intimidating. We grow up in a society where people are not allowed or most likely willing to talk about finances. I think it because of a fear that we don’t want to acknowledge we are not making the right choices. Having your finances looked over by your friends would cut out a lot of impulse spending.

[Ryan Williams]

I like where you're going with this. All of you personal finance bloggers are blazing a trail in making this subject less taboo.

This was one of the motivations behind NetworthIQ (http://www.networthiq.com). That by tracking and sharing your balance sheet with your "internet" friends you will become more accountable with your financial decisions and therefore put more thought into them. That's the theory anyway.

[Rob Carlson]

I've thought this should be the case for a long time. When I talk to my friends and co-workers about how they handle their money, I inevitably come out better educated and more confident. I've made choices about my 401(k), savings, and credit cards that I never would have made if I hadn't had the experience of others to call on.

[brcmapgirl]

As kids, we're taught not to speak in polite company about money, religion or politics. However, I've found that those are my three favorite topics. I do try to talk to my close friends about money since I have a lot of fears about not having enough for retirement. But I've found since starting my blog that a lot my more casual friends disagree about the level of detail I put out there. I can only say to each their own. When I've talked about these topics with my closest friends, I've always learned something useful from them. Because I admire and respect my friends for their happiness and successes, I take their advice very seriously. It's also brought me closer. (Plus some of them are just plain better at the math than I am.)

Great post!

[Frugal Homemaker]

Very interesting post. It is realy making me think a lot. Thanks!

[Jane Dough]

Money can be such a touchy thing to talk about with friends and family. I recently sat and listened sympathetically to a friend moan about lack of money during lunch. When it came time for the bill to arrive I automatically grabbed the check and said I would take care of it (because I was the one who initiated the lunch invite). This turned into an awkward "Just because I complain about money doesn't mean I want you buying me lunch". My friend ended up paying for both of us and then on the car ride back to the office I had to hear how "It is not like we are poor, things are just a bit tight. But we are fine, just fine." So I think even when you do share it can lead to regret and feelings of "money paranoia".

We all want to be perceived as successful. Admitting to money problems is generally viewed as admitting to failure - even if the person you are confessing to does not see it that way.

[Jennifer]

I liked your comment about the 20-somethings right out of college who find good-paying jobs. I am one of them. However, I feel like a lot of people out there who are buying the nice clothes, cars, etc still have rich parents who will pay for vacations, down payments on houses/cars, etc. One of my co-worker's dads still pays for her gas. It's nice that I am self-sufficient and live completely independent from my parents. However, no matter how much I save, I will never reach the same level as the co-worker who gets "help" along the way.

[moomioid]

My main concern is that less well off friends will ask for money when they know how much I have... this does tend to happen if they get an idea. I have a detailed knowledge of my Mom's finances as I advise her. I am a bit wary of however, telling her exactly how well I am doing. Maybe she'd reduce the amount she will leave to me in her will? I am gradually letting my girlfriend in on the picture... she is so far I have found the most well-adjusted person regarding money that I have come across... don't know how that is... she grew up in PR China....

[pamphyila]

Ha! I hope your friends are really that good. Here in L.A./Hollywood there is a definite monetary class system. Don't make enuf $ & you don't make the social cut, either. & everything socially is done on a level you will find it hard to participate on- & so you will gradually be frozen out. Your GENUINE good friends won't care - but funny enuf - they often turn out to be those with as little money as you who are also following their dreams - Just food for thought from one who's been there - (& graduated from an Ivy, too).

[Rob Bennett]

This is a fine thought-provoking post.

The taboo about discussions of one's personal financial situation serves some good purposes. But there are some big downsides too. I agree with the idea that the taboo needs to be broken down a bit. I also agree that the time may not be far off when this begins to happen.

The taboo doesn't really seem to make complete sense in today's world. It's young people who see that because their heads are not caught up in old ways of thinking about things.

Rob

[penty]

Close but it would limit freedom too not just spending.

There are other taboo this woudl work against.

-you boss/friends/church mates could see what your buying and harass/discriminate against you.

Your idea of "controling spending" just became the morality police.

way to just hand over your rights.

[lamoneyguy]

Penty, I'm not actually suggesting that this should happen, or even worse, be required. It's just a reminder to think about how people would respond to your cool new stuff if they knew your full financial situation, and to think twice about how you are trying to impress your friends.

[Anonymous]

Peer pressure instead of education. Wrong path.

[penty]

Rob,

Even so your hypothesis/thought experiment only works if the reason for buying things is to impress the "jones". If you're buying it for yourself(internal need) this idea still doesn't work.

Freedom of Choice is just that, even when it leaves some choosing badly. The cure though is NOT removing "Freedom of Choice".

[mapgirl]

Penty,

I think you're missing the whole point of this conversation. It's not about limiting anyone's freedom to do anything. It's about opening yourself up to a conversation so that you and your friends can have financial freedom. Ultimately most people find themselved shackled to jobs they hate because they have overspent and are working to pay off debts, i.e. get out of a whole they are in.

I think some folks out there would rather be guided by the judgements of their friends into prosperity rather than be left to their own devices and fall into ruin.

It's also called having some tact, taste, and diplomacy. You don't talk about this subject if you think it's going to have a chilling effect on your friendship. That's not what LAMG is suggesting here. It's not about damaging friendships. It's about finding a supportive community amongst the people you already know.

Stop freaking out about freedom and choice as if this was a political/human rights conversation. It's not. It's about relationships and people. Most of the commenters seem to have personal experience where opening about personal finances has drawn them closer to their friends. No one here is suggesting removing freedom of choice. It's about making better personal choices for financial freedom and finding guidance for it.

mapgirl

[penty]

mapgirl,

### you said,"It's about opening yourself up to a conversation so that you and your friends can have financial freedom."

"Discussing" is one thing, letting others go through your actual statements commenting AND judging is quite another. IF you think people don't judge read your post to me, it's full of judgemenets.

##"I think some folks out there would rather be guided by the judgements of their friends into prosperity rather than be left to their own devices and fall into ruin."

Yeah, not to sound mean but you don't think, or atleast you haven't thought it through.

But let me get this straight. The idea is to have a bunch of people who are bad with money (credit max'ed and whatnot) get together and somehow the right thing happens? Might as well say "hey we're all bad at fixing cars, lets get together, that should work." It doesn't follow, period.

###"It's also called having some tact, taste, and diplomacy."

No. Taste is subjective. Your disguising peer pressure as diplomacy. As for tact this is throw out the window in a case like this.

Mapgirl, look at the column here, "What if our friend just got some trendy new Gucci shoes for $300, and put it on his already maxed out Nordstrom card? And we all knew it! Would he even do it in the first place?"

What is that BUT peer pressure? Peer pressure to do "what seems to be the right thing" is still peer pressure.

If you don't see it there is probably alot of other stuff you don't "see" as well.

[penty]

mapgirl,

To put it another way:

Would you rant against a religious community that helped enforce its moral code on members that had joined it willingly.

Say this religion prohibits abortion or gay marriage, for example. The members of the church band together to make sure each stays on the straigh and narrow letting them into thier bedrooms and the like all "tactful and diplomatic". Is this a bad thing?

This is the same thing only with money.

Both are voluntary and "friends", isn't it wonderful.