When I was growing up, my family lived on the edge of poverty - and sometimes perhaps over that edge.
My father worked in a factory most of the time, when the factory wasn't struggling and laying people off for months at a time. Five people were supported on that factory wage - him, my mother, myself, and my two older brothers. In addition, we also provided housing for other people for long periods during my childhood - various uncles and cousins lived with us.
When the factory was closed down, my father did a number of things to keep food on the table. His primary side gig was commercial fishing - he'd keep enough for us to eat, sell some fish to individual clients, and sell the rest at a local fish market.
During my early childhood, my mother was a stay-at-home mom; later on, when that became completely financially untenable, she worked as a postal clerk to bring home additional income.
There were many times in my childhood when I felt the realities of this financial situation, even though my parents went to great lengths to shield me from it. I could tell when times were really tough. We scarcely went on any kind of vacation; the closest we came were a couple of two- or three-day trips to locales within a few hours' driving distance from home. I remember a couple of very lean holidays; my parents worked very hard to make them not seem lean, but I could feel it anyway. I remember never having a car that was anywhere close to "new" and that it was always under a vague fear of falling apart. I remember hushed disagreements and money-related conversations after I should have been asleep.
Why am I speaking about this past?
The truth is that an awful lot of my financial choices in my adult life have been driven by a fear of returning to that life, or of putting my children through it.
I was lucky enough to go to college, and upon graduation I had a strong desire to "appear" financially successful, even if I really wasn't. I wanted desperately to see myself and to present myself as financially successful. I wound up spending myself onto the precipice of financial disaster by doing so.
That experience of near financial disaster led me down a path of rather intense frugality coupled with absurd professional efforts, which was amplified by the birth of my children, a journey which led to the birth of The Simple Dollar.
Looking back, the one big consistent thing across all of this was that ever-present fear of becoming poor. I have dreaded the thought of ever returning to a state of anything close to poverty. I don't want my children to ever feel as though their parents were anything less than reliable. I don't want to ever feel like tomorrow will bring complete uncertainty into my life.
It's a deep fear and a painful one. It's driven me to make some less-than-productive choices over the years. It's caused me to work way too hard at various points, pushing myself into illness with the stress. It convinced me to dig so deep into frugality that I began to turn into a cheapskate.
Yet, even after all of that, the fear is still there. I don't know that the fear of poverty will ever really truly and completely go away.
It's a dangerous fear, too. When you are driven by a fear, you never make fully rational choices. Instead, you overvalue choices that alleviate that fear in the short term and thus undervalue choices that might lead to the best long-term life. It's like the person who is so afraid of heights that they won't fly across the country to meet the love of their life.
Isn't a fear of poverty helpful? One might believe that if a person is acting out of a fear of poverty, they're most likely aiming in a direction of better financial success. Isn't that a good thing?
Not really. As I pointed out above, something driven by fear isn't too good at aiming itself. For a while, that fear drove me into a comically exaggerated form of affluence, where I bought into the idea that if I appeared to have my financial life together, I did have my financial life together. That led me to the precipice of a financial collapse.
Later, that same fear led me down a path of hyper-frugality, where I was doing everything possible to avoid spending even a cent. That wasn't particularly healthy, either, as it actually began to impinge on my social life and free time.
When you are pushed by fear, you are operating emotionally, not rationally. This makes it incredibly easy to direct your efforts in directions that are very destructive to other elements of your life.
Over the last few years, I have made a number of conscious steps to help myself stop being driven by a fear of poverty and instead make more rational decisions about the various aspects of my life. Here are some of the steps that I have taken.
Forge a Self-Identity Unrelated to Money
For a long time, part of my identity was that I was proudly not anywhere near the poverty line, that I had escaped poverty, and I wanted to show that to the world. I wore expensive clothes, had nice gadgets, wore a stupidly expensive watch, drove a gorgeous vehicle. For me, a big part of my self-identity - and what I wanted to show to the world - was the fact that I was at least somewhat financially successful.
Here's the truth: Your finances really only exist to support the life you want to live and protect it from unfortunate events. A healthy self-identity is wrapped up in the life you want, not the financial underpinnings of that life.
Dress in clothes that feel comfortable and make you look good, but there's no reason to wear expensive clothes. Own a smartphone (and maybe a watch) that functionally do the tasks you need, but there's no reason to constantly chase the latest gadgets to show off your wealth.
(Yes, sure, there are some professions where dressing nice is part of the path to success, but that's a small minority of professions.)
Think of yourself in terms that have nothing to do with finances. I'm a good father (I hope) and a good husband (I hope). I'm a writer. I'm a hiker. I'm active in my community. I'm a gamer. I'm a volunteer. I'm a home brewer. Adopt terms like that for yourself and think of yourself in those ways. That's who you are. Finances just serve to support that.
This helps with the fear of poverty by building a self-identity that can't be taken away by financial winds of change. I can no longer fear like my identity as a person is damaged if my financial state changes direction. That makes it much easier to see finances as a tool for the life I want rather than some indication as to the quality of my life.
Recognize and Call Out Avoidance
Are there situations in my life where I'm unconsciously avoiding certain situations and opportunities because of my personal hang-ups about poverty avoidance?
For example, about three years ago, I recognized that my innate fear of poverty was keeping me from helping out at a local food pantry. On a conscious level, it was something that I wanted to do. When I thought about it, I felt extremely supportive of the food pantry. Yet, I kept avoiding doing anything about it.
I realized after a while that I was avoiding it because I somehow viewed it as a connection to poverty that I didn't want in my life. It was a completely foolish perspective, I know that, but that didn't stop me from having those thoughts in the back of my mind.
Choosing to volunteer for the food pantry was one of the best things I've done in a very long time. I got to build some great relationships with other volunteers and even with some of the regular customers of the pantry. I got a powerful sense of being able to directly help people.
On a similar note, most of my career (with the exception of the leap to working on The Simple Dollar as my primary employment) has been focused around avoiding risk, which has kept me from taking many risks and has pushed me to accept some pretty poor options in my career out of a fear of a pink slip or an unhappy supervisor. My fear of poverty kept me from being much of an advocate for myself at times.
This kept me from raises at my old job. This kept me from taking on some professional challenges. This kept me from jumping on board some professional opportunities. I was too busy looking at the ground below rather than the path in front of me.
Now, I gut check myself whenever I see myself shying away from a challenge or accepting a burden. Am I doing this out of fear? Or is this actually a good opportunity for me?
Don't Make Quick Financial Choices
Fear is an emotional response, and emotional responses often lead to quick decisions that are based on emotion rather than information and reasoning. The fear of poverty is no different.
A fear of poverty led me to spend money irrationally to make myself appear affluent, something that was often done as a snap decision. A fear of poverty also nearly turned me into a complete cheapskate that was damaging my personal relationships; again, it was a state mostly made up of snap decisions.
The best solution I've found to snap financial decisions is reflection. Give yourself genuine time to think about your financial choices, both before and after the fact. Are you making good money decisions? Was that spending choice you made a wise one? What could you be doing better to achieve your real life goals? Are you making "money-first" choices that are having negative repercussions in other areas of your life?
I work through these questions all the time in my spare thoughts and also in my journaling. I find that, quite often, my choices made in the heat of the moment are driven by emotions like fear and impulsive desire, and the best counter I have to those emotions is to understand them and know that they're driving me to decisions that aren't the best ones to make in the overall scheme of things. Gradually, those negative forces behind my decisions are ground down, leaving my decisions to better internal forces.
Allot Time (and a Little Money) for Self-Care
Whenever I feel stressed out or overwhelmed, I fall back on easy emotional responses to situations. It's a common thing that most people do in challenging situations - their emotions take over and guide them through to the other side. The problem, as discussed earlier, is that such emotional decisions are often poor ones.
One great way to avoid this entirely is to make sure you're taking care of yourself, no matter what's going on in your life. Devoting some time to self-care (and even a little money) makes it much easier to handle life's burdens effectively, without getting stressed out or overwhelmed.
Here are some of the simple things I do for self-care.
I meditate each day for at least 10 minutes. This can take a lot of different forms. For some, prayer to a higher power works best. For others, repeating a single word as a mantra works. For me, I've found the best technique is to shut off distractions, sit in a comfortable place, and focus on my natural breathing. Breathe in, breathe out. I do this for at least 10 minutes, and whenever I feel my mind wandering away, I gently guide it back to the breathing. I usually feel a little better after a session of this, but what I've found is that if I do this routinely, the effects gradually lower my overall stress level and make me feel less overwhelmed in busy situations. It's not a sea change, but it's a nice valuable step in the right direction.
I block off time for hobbies. I give myself at least one - and ideally two or three - multi-hour blocks each week that I dedicate to genuine leisure. I'll curl up with a book and get utterly lost in it. I'll play some giant multi-hour board game with a bunch of friends. I'll make a batch of home-brewed beer or make a batch of homemade sauerkraut. I'll go to Ledges State Park (my favorite park that's within reasonable distance of my home) and walk the trails on my own for a few hours. Doing that at least once a week - and ideally a couple of times - makes an enormous difference in my well being.
I get plenty of sleep. Rather than staying up late to catch up on a television show or to try to squeeze in a household chore, I go to bed early. That allows me to sleep until I naturally wake up most days rather than being forced awake by an alarm, which means I'm naturally rested and thus am less affected by stress and a sense of overwhelm.
I try to eat a balanced, healthy diet without overeating. I try to eat a variety of things, mostly plants, mostly unprocessed stuff if possible, and not too much. It's a diet that works well for me - the only part I struggle with is the "not too much" part as I tend to chow down on stuff that I really like. I feel worse - and much more prone to stress - when I'm not eating well.
I try to exercise every day. Usually, this takes the form of a brisk multi-mile walk or a bicycle ride or some sort of bodyweight exercises (think planks). The goal is to get myself breathing heavily and sweating but not completely killing myself, because the aftereffects of that not only leave me feeling good for at least a few hours afterwards, but doing it consistently leads to consistently better feelings and self-control.
All of those things do wonders for alleviating feelings of stress, and the end result of this type of stress reduction is that a much larger portion of my decisions are based on rational thinking rather than emotional thinking, meaning that I actually make forward progress on my long term goals and don't short-circuit my plans because of my fears.
Add Line Items to Your Budget for Things That Bring You Joy
One key part of our family's budget is that Sarah and I each have a line item for completely incidental spending. I usually refer to mine as my "hobby budget."
Money within that line item can be spent by each of us with no questions asked. We can use that money on anything that we personally desire - books, games, food items, whatever - without any question.
This is beneficial in a number of ways. For one, it gives a great sense of freedom, a feeling that my life isn't completely locked down. It lets me accentuate my hobbies and interests if I so choose.
Best of all, by having it as a line item in our budget, I know that the money I spend in this way is accounted for and isn't going to interfere with our family's financial future. It's money that I can spend without fear of pushing us back into poverty.
Remind Yourself of How Far You Really Are from Poverty
One final trick that I love to use is to simply sit down and calculate our family's net worth and then look at it in a few different ways.
Calculating one's net worth is simple - you just add up the value of all of your assets (your savings account, your checking account, your investments, your retirement account, your home, your car) and subtract from that all of your debts. This gives you a number representing how much cash you would have if you were to sell all of your major possessions and pay off all of your debts.
One thing I really like to do with that number is multiply it by 0.03. That little multiplication trick represents the idea, supported by a lot of studies, that if you have your money invested for the long term and withdraw only 3% of the value each year, the investment should last forever, allowing you to withdraw that amount every year for the rest of your life. I call this my "annual withdrawal number."
For me, one of the biggest thresholds of feeling like I was escaping poverty was when my annual withdrawal number began to respectably compare with the federal poverty line for a family of five, and then to pass it. In other words, unless I start pulling money out of the bank and spending it, there is no reason for my family to fall below the poverty line in almost any realistic situation.
Yes, I know that Sarah and I are not just going to fold up shop tomorrow and start living near the poverty line, but knowing that we could do this and be able to survive (even if the situation was threadbare) makes me feel a lot better. What makes me feel even better than that is that each time I re-calculate our "annual withdrawal number," we continue to inch upward over time.
I'm leaving poverty behind, for good.
It's Still Not Enough, But It Helps
As useful as all of these strategies are, they still don't add up to a perfect solution. I still sometimes worry about falling into poverty. I worry that I will lose my current job and be unable to find anything else. I worry that our spending will accelerate and leave us without money in the bank. I worry that something unforeseen will hit us like a freight train and put us in a bad situation.
Nothing will ever completely eliminate those worries, I don't think. They're part of who I am.
However, the exercises I've mentioned above have helped me greatly in terms of taking the emotion behind those worries out of my financial decision making. When I choose to spend money or save money, it's not driven by fears of imminent poverty, but of having a better life.