Cultural Guess Work
[This is an ongoing series called My Money Story. To Read the rest of the series click here]
I’ve been trying to remember where I learned how to spend money.
I started by telling you where I didn’t learn about money. Then I talked about how the only money lesson I got was from my youth pastor. But even that wasn’t very good. He taught a good way to break up a paycheck between savings, giving, emergency funding, and spending but it had no way of teaching me how to use each of those categories.
- What’s an emergency?
- Who should I give to?
- What are reasonable monthly expenses?
- How much should I save?
None of the big questions were answered.
Cultural Guess Work
As I thought about it, I realized most of my money knowledge came from cultural guess work.
What is cultural guess work? It is using television, credit card offers, and car salesman to learn how to use money. You take all the bits of information the media dolls out and use it to make a some-what educated guess on how money should be used.
Here are a few cultural guesses I made:
- Everyone I knew had car payments so I decided car payments are a necessity (they’re not).
- At the store, I would hear couples say, “Should we use cash or our card for this?” and I assumed cash and credit are equally good ways to pay for things (they’re not).
- I noticed that even cheaper things like computers could be purchased on payments and decided that payments were a way of life (not true).
- I saw the world always had enough money to pay for the things they needed so I assumed I needed to out earn my payments (always a bad idea).
As I think more and more on my bad guesses, I realize it’s a miracle I didn’t go massively into debt.
Wait a second…I did go massively into debt!
My Biggest Money Mistake
In 2008 I purchased an (almost) new Toyota Corolla.
I ended up paying about $4,000 dollars more than it was worth. But I got a “really good deal” on the payments and interest rate. (editor’s note: it was a bad deal).
In 2008 I was a full-time student and part-time employee of a law firm. I barely made $16,000 bucks a year. And the car salesman decided I qualified for a loan for $16,000 dollars! That is 100% of my yearly income in debt!
I assumed the dealership wouldn’t give me something I couldn’t afford. I was very very wrong.
Yes, I was stupid and it would be several years before I could get the thing paid off (I almost sold it, but that’s a story for another day).
I’m not angry. It was the best decision I could make with the information I had at the time.
What you need to know
I needed a lot of help, and maybe you do too.
Some of the lessons cultural guess work taught me were good. I was better with money than my friends, but the really important things like investing, saving for emergencies, and paying down debts were completely outside my understanding.
I was without a clue until one faithful day in December when everything I thought I new about money was challenged.
But more on that next week.
What stupid thing did you learn through cultural guess work? How did you figure out you were doing it wrong?
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I pretty much went about learning about money the same way — the hard way. Dad tried to teach me. But I wasn’t having it (much better about this today than before btw). My biggest mistake in the car department was leasing a 2006 Mustang. Thankfully, I am out of that car now, and into a solid, sturdy, respectable-looking cash vehicle. Next step is Crissy’s 2009 Versa payment. And then we are free! No car payment ever again!
Ouch, a lease. I’ll write about that eventually but the short version is: they’re not fun.
lol.
Glad to hear you’re almost debt free! And with two very nice cars!
Cultural guesswork is a good way to think of it. We all learn about money in some way — and if our parents or other good influences don’t teach us, we’ll just pick it up from the culture.
My dad had a pretty good job, so I never saw my parents budgeting or anything. If they just wanted something, they bought it — or so at least it seemed to me growing up. So as a teen and college kid, I just spent and never really thought about it. Fortunately, I didn’t really care about flashy stuff or lots of belongings, so I didn’t really do much damage.
You were lucky. A lot of people I know have blown tens of thousands of dollars like that.
The biggest piece of “cultural guess work” I’ve had to contend with has been the notion of having good credit. This is the only reason I got a credit card in 2003 and the only reason I renewed it in 2005. I had been told by many sources that the only way I was ever going to win financially was to have good credit, and the best way to do that is to have two or three credit cards, use them and pay them off at the end of the month. At the time, the idea seemed bizarre to me but I figured Society Knows Best.
I had a certain mistrust of the power wielded in that small piece of plastic. My credit limit was eventually raised to $5000, which I thought was weird since I hadn’t made more than $15000 a year in my working life to that point. Then I found out more about how the FICO score worked and how much of one’s destiny it can really control, if one lets it. I read about how employers are using it to hire people and how apartment managers are using it to determine rent-worthiness. It kind of made me sick that one’s entire destiny in life can be decided on by a secret cabal of FICO Overlords. The whole thing reeked of bullcrap to me, so that’s when I changed my outlook to looking at good credit as something stupid one just has to deal with, like paying taxes. I kept the credit card, but only ever used it for gas.
Then I discovered Dave Ramsey. It only took a few of his rants against the FICO score to make me realize that not only is the FICO score meaningless to those who don’t borrow, it is also powerless against those who are smart and able to work around it. It took me a year, but I finally closed the credit card and cut the bad boy up. I had fully decided then that society was just wrong in this instance, but I still get to contend with people (family included) who keep telling me that I need a good credit score. Just par for the course, I suppose.
“At the time, the idea seemed bizarre to me but I figured Society Knows Best.”
Isn’t that the way it always goes? It seems weird and unnecessary but if everyone is doing it there must be something we don’t know.
Like you I still deal with those who tell me I need a good credit score. I think part of it is mob mentality. If you don’t have a credit score and are doing well (or better than most) you must be lucky or cheating the system, because otherwise it would make the credit users foolish.
No one wants to be foolish.
And yet, few people understand the credit score, what it means, or why it is suppose to be important.
Thanks for the comment!