Financial Code-of-Ethics
Guidelines are the same as a “code-of-ethics”. Gee whiz, if it were only as simple as saying, “I will” or “I won’t”. Maintaining financial integrity is a constant battle with many fronts. Attacks can come from any quarter seeking to exploit a weakness in your defense. For some reason, when we spend other people’s money, or, even borrowed money, as with the equity or credit card loans, we can become very cavalier in our attitude. This happens a lot in business and it requires great discipline to resist the temptation. I refer to it as the “easy money trap”. It is one of the most common and insidious ways we can fool ourselves and end up with a financial nightmare on our hands.
Many people never had a lot of money, and the money they acquired did not come easily. It used to be that people had no choice but to live within their means. During the last twenty-five years, the financial culture of most of the world has shifted dramatically. For the U.S., in 1975 an expensive house cost $30,000. Today, that house is probably selling for $300,000, or more, depending on where it is located. With this dramatic increase, banks have been in hot competition with each other to trade hard, cold cash for that equity.
During the same time, easy and fast credit became available to almost anyone with a job, or, even for those who have the potential of getting a job, such as college students. With the advent of plastic money or credit cards, having equity in a home was no longer necessary to acquire easy money. Millions of individuals, who never had enough money to buy a new car or take a vacation to a foreign country, now could. Big blocks of money were available as never before. Therefore, it is not too hard to understand why spending this money was, for many people, like binge drinking. Easy money is truly a psychological and emotional drug. It does give one a temporary high, but as with other drugs, if not judiciously administered, it can exact a devastating price in the future.
Easy come; easy go
When we are offered all this “easy money” through credit cards and home equity loans the temptation to spend can be overwhelming. The primary reason for this is because we do not have an established financial code-of-ethics to guide us. We don’t realize that the accumulated debt payments are going to eat us alive. We want to be gratified NOW. Why? Because we think we damn well deserve it. We have worked long and hard all our lives and we say it’s time for us to reap our rewards. Or, maybe we haven’t worked that long, but we see all these other people presented to us in movies, advertisements, television - and we deserve what they have, don’t we? Besides, if we don’t take advantage of these opportunities now, time is going to pass us by and we will be too old to enjoy ourselves.
How can we avoid the siren call of easy money? First, we must understand who we are and what drives us. Second, we must establish a well-defined financial code-of-ethics.
Who’s Driving the Bus?
Socrates’ two simple axioms for life were, “Know Thyself” and “Take Nothing in Excess”. He knew that without some understanding of who we are, we are left to the influences and forces of others who may not have our best interest at heart. He also knew that without some measure of self-control, we are left to the influences and forces within our own selves that may not be working toward our best interest. In either case, we can find ourselves swinging far out to one side of the pendulum or the other.
Beside “life” in general, these axioms are also applicable in context with developing and maintaining “financial integrity. Everyone has a financial code-of-ethics. However, a person can have a weak, ill-defined financial code-of-ethics, or a strong, clearly defined one.
How do we know whether our financial code-of-ethics is weak or strong? All we have to do is to look at the results of our lives. Are we driving ourselves crazy trying to make ends meet? Are past due bills showing up in the mail? Are we unable to do things we would like to do because most of our money is going to pay debt? Are arguments with our spouses or partners mainly over money? Like Enron, are we going bankrupt with people suing us left and right? There are myriad examples, but we are the ones who know whether our financial life is working or not.
The big question is, “Who’s driving the bus?” Surely, we have all noticed that there are a number of voices that argue inside our heads. One voice says, “I just have to have this new dress, or new tool box, today.” Another voice says, “This is not a good idea, you really can’t afford this right now.” Which one is right? Advertisers tell us that people buy first on the basis of emotion. Reasoning comes second. Often, reasoning becomes rationalizing or simply finding an acceptable justification for the purchase. The voice of reason doesn’t stand a chance, unless, there is an established “financial code-of-ethics” in place, guarding against impulse/emotional buying.
All of us seem to have a “Wise Mind” or a larger “Self” who knows best and watches out for us. When we are calm and have time to think, we can usually come up with a plan that makes sense and keeps us out of trouble. A financial plan is called a “budget”. Laying out a budget seems like a lot of work, so many people don’t take the time to bother with it. This can be a big mistake! Identifying our expenses and matching them to our income is essential if we want to stay on financial track. It is the fabric that makes up our financial code-of-ethics. The budget process is where we make all our financial decisions beforehand in an objective way.
These are “wise mind” decisions. These are the decisions that determine whether a purchase is really necessary or would just be nice to have.
Those of us who have children are familiar with how they try to break us down in a store to buy them something they don’t really need. They beg, cajole, throw fits, and do anything they can think of to see if we will cave in. If we show any sign of weakness, their persistence becomes stronger and stronger. Once that voice comes in that says, “Well, maybe it would be okay”, we are dead meat. Knowing in advance what we are willing to do and not willing to do, and sticking with it through the onslaught is our only salvation. Our kids can tell in a nano-second when we are starting to cave in.
It seems apparent that these voices we hear in our minds lobbying for this or that are simply parts of our own Self. Psychologists tell us that these parts can represent varying aspects of ourselves that still have unmet needs. The conflict we feel inside when trying to make a financial decision may be the result of certain competing factions within that are trying to get these needs met.
So what does this mean? How do we know which one to listen to? Do we all have to go into therapy in order to develop financial integrity? For some people, this may be necessary. Yet, for many of us, formulating a clear understanding of who we are, what our financial goals are, and a plan as to how we are going to arrive at those goals may be enough.
The idea is to get all these parts to work with you instead of against you. Include them in the overall financial integrity plan. At first it may seem strange to relate to parts of your own mind as independent beings but it feels very natural and is a common psychological phenomenon. Listen to their needs (they will tell you) and work out a solution so they don’t think their needs are being ignored. Remember how it is with your children if they think they are being ignored. They act out in other ways to get your attention.
This process is called “inner collaboration”. Instead of strong-arming all the parts and dominating them to your will, use compassion and understanding as you would with your own children to get them to cooperate with your plan. This way, you are acting out of confidence and wisdom rather than fear and desperation.
Since you have devised the master plan and “always” remember it, then you become the natural leader of all the parts. This is because they don’t have a plan. They only have needs. Eventually, your financial house will be in order. Things calm down and order is restored because you are now a team all pulling in the same direction. In short, you are finally driving the bus, not them!
Stumble Upon
