How To Make a Big Purchase Without Panicking

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S1: So we did put in an offer on one house and we put in an offer at 30 thousand above asking, and they told us that ours was the lowest offer. OK, but it’s funny when we put it in, even though we loved the house, I just felt intense anxiety and I hope that we wouldn’t get it.

S2: Oh, interesting.

S1: Yeah. And I don’t know why that is,

S2: because then you’d have to pay for it.

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S1: That’s true.

S2: Welcome to How To I’m science writer David Epstein. When was the last time you made a big purchase? Even if it was a while ago, you remember how it felt. Were you maybe excited but also kind of stressed? I felt good when you received the keys to, say, your new car or maybe even your new house. Right. But maybe you also remember that brief moment of alarm when you saw your bank account and it was missing a zero or two or three hour listener this week dreads that feeling.

S1: Hi, my name is Alexandra. I’m from Southern California and I am an attorney.

S2: Alexander’s been an attorney for seven years now and she makes a good salary, but she has a really complicated relationship with money. And it started back when she was a child.

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S1: My dad left us when we were young. So my mom was a single mother. She actually was a teacher. She had a low, you know, a low income. And she also suffered from mental illness. And she was a wonderful mom and she loved us a lot. But there was a lot of instability and just a lot of times where we didn’t have enough food to eat or we couldn’t afford to pay the heating bill. So, you know, we lived in a hotel for a period. I just always had a lot of anxiety around becoming homeless and having to depend on other people and not having, you know, money.

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S2: And I mean, it’s obviously had this lasting effect on you. So are there any sort of moments you remember like that still stay with you in a very visceral way?

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S1: I don’t think there was anything so dramatic as like a Tiny Tim Christmas like that. But I mean, I think what stuck with me most was that there were times that we couldn’t afford food, like towards the end of the month, sometimes my mom maybe I shouldn’t say this, but she would have to write bad checks so that we could get food. But, of course, you know, like, she would just hope that they would wait to cash in or something like that. So that’s something that has really stuck with me.

S2: Alexandra never wants to write a bad check herself, and she’s not going to. In fact, if anything, she’s probably keeping too much money in her bank accounts.

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S1: Everyone I know is like, well, that’s not good. You’re just letting it sit there. It’s not doing anything for you. And that’s true. And that’s sort of why we’re thinking about should we buy another house. But it kind of does make me. Feel sick to think about spending money, because to me, money is security. My boyfriend grew up in very different circumstances, so we’ve had fights about money. He’s an engineer, so he’s also a saver, luckily, but maybe not to the same extent. And so I remember early on in our dating life, I wanted to buy a donut and I didn’t have cash. And he was like, oh, I’ll just pay for it on credit card. But there was a 50 cent charge and I was like, no, we can’t pay 50 cents. Like, we can’t waste that money. You know, we might need that 50 cents. And so we had a fight about it. And I realize that sounds so ridiculous. But to me, 50 cents is like you never know if you’re going to need that 50 cents.

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S2: If 50 cents was a problem, what’s Alexander going to do now that she and her boyfriend are looking to buy a house in the notoriously bonkers Bay Area real estate market? On today’s episode, how to be more confident and Smarter with your dollars. We’ve got an expert who really knows firsthand what it means to be anxious around money. Athena Lent answers all kinds of questions for Slate’s Financial Advice column. Pader, she has some surprising tips for how to manage your cash so you can sleep at night. Stick around. The Bay Area is one of the wildest housing markets in the U.S., if not the world, even relatively small homes can go for millions and a home inspection. Forget about that. You might have to actually commit to buying the house before you even know if you can get a mortgage.

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S1: And typically, there are a lot of all cash offers. They were selling literally like fallen down buildings for a million dollars. So when we looked at a condo that was listed at eight hundred thousand and it ended up going for one point two million.

S2: Wow. It was listed at eight hundred thousand. So it went for so it went for 50 percent more than it was listed for.

S1: Yes. So we’re on a limited budget, of course, because I work in the public interest and I have student loan debt. So, you know, that is part of the anxiety is like if we don’t get in now, when the market’s low or relatively low, will we ever be able to buy a house there?

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S2: And do you mind sharing, like the order of magnitude of your student loan debt?

S1: I owe two hundred and fifty thousand dollars.

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S2: OK, so it’s significant.

S1: Yes, but I’m lucky because I work in a public interest job. So eventually, assuming the public service loan forgiveness program still exists, eventually it will be paid off.

S2: Wow. Even that sounds like another sort of source of anxiety, just the way you just said that, assuming it still exists.

S3: Yeah, you never know. You never know. Congress can wake up one day and be like, we’re over this by and they can cancel it. And these people now are and your eight or nine and you have to make it to your 10 and they can cancel it tomorrow.

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S1: I thought it was here to make me feel better.

S3: Well, I

S2: think you got me because

S3: I am a realist.

S2: That’s Athena Lent. In addition to writing advice for Slate’s Paydirt column, Athena is the founder of Money Smart Latina. And as it happens, she’s a certified trauma specialist, which actually comes in handy.

S3: I am the resident asshole of my friend group. It’s out of love and it’s not to be a jerk to you. So I am here to motivate you and make you feel better. But I am always also a realist. So we can and that’s part of feeling better. If you can admit, hey, this situation is shit and I don’t know what to do. You had some pretty traumatic stuff that happened to you as a child. And just because you aren’t one of those people that are standing on the street corner asking for money that doesn’t take away from your childhood and your experience. And I just I want to share that, because it’s OK to say, hey, this bad thing happened to me and a lot of our trauma is admitting it.

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S1: Yeah, it feels disloyal to my mom, though, in a way.

S3: And you know what? It’s it’s going to

S2: Athena knows this from personal experience.

S3: I was homeless as well when I was growing up. My mom was a single mom and she passed away when I was a freshman in high school. And she unfortunately passed away right in front of me. And I was passed around from relative to relative to be used for my Social Security checks. And so as a result, I ended up living with friends off and on in high school. So I was truly homeless. And so that sucked. And I think in our culture right now, we have toxic positivity.

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S1: Yes.

S3: And everybody everybody is like, oh, it’s great. You just got to think positive. Everything’s fine, you know? And I think that adds to people’s guilt and it takes away from their experience and it takes away from admitting that something really shitty happen to them. And I just want to tell you, I’m sorry that happened to you. And it’s no wonder you you hear housing or you think money and you flinch. And so have you heard of a money script before?

S1: I read a lot of money advice columns. So I’ve heard about these scripts, but I. I don’t know that I heard of the money one.

S3: So a money script is basically your belief system and it is things you tell yourself about money and it doesn’t have to be right. It doesn’t have to be wrong. It’s just it’s just what you believe. Right. And so your money script, a lot of it, just like other beliefs you have in life, it comes a lot from when you’re younger. So you associate money with your living situation. Right. So you hear, oh, my gosh, like your mom didn’t have money to pay bills or she ended up you guys ended up living with a relative. So in your head, you’re automatically thinking, OK, if I don’t make this rent payment or I don’t make my mortgage, I’m going to have to go live with a relative.

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S1: Yes, that’s true.

S3: I’m hearing your boyfriend is an engineer, and I know you guys keep your finances separate, but I am going to assume that if for some reason you couldn’t make mortgage one month, he would be OK and he could cover you. Right.

S1: That is true, but a feeling of exactly the

S2: way you said that sounds like it doesn’t feel

S3: like it is true, but it doesn’t feel right and I get that. But I mean, so you don’t necessarily have to go live with a relative if for one reason you can’t make rent that month or your mortgage that month, but your mind is going to consistently tell you that because that’s what you believe, because that’s what happened when you were younger.

S1: Right. Right.

S3: But you are so resilient. You know, how many people are homeless or experience homeless when they’re younger and they end up turning to drugs?

S1: No, I didn’t.

S3: It’s it’s a ton of people. You are so resilient right now. And I just want you to give yourself a pat on the back, because I don’t think you give yourself enough credit for being homeless when you were younger and actually being able to turn it around and become a lawyer. Of all things. You know, your home, you are homeless. And how are you crying?

S1: Yes, I’m sorry.

S3: Oh, no, look, I’m a crier. I’m a crier.

S1: Yeah. That’s just so nice of you to say,

S3: but it’s true. And, you know, I said earlier I was the residential asshole my friend group, but that doesn’t mean I wasn’t going to motivate you and say nice things. But I mean, that’s true. Like, I don’t think you give yourself enough credit because you are so busy. You were so busy trying to survive when you were younger that now you’re thriving and it’s scary to you, right?

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S1: Yes. I feel like it will be taken away, like if I do something wrong or, you know, that I just disappear.

S2: Athena obviously what you were saying about the money obviously resonated deeply with Alexandra and some of your own story. So I was wondering if and if you had to work on your your own scripts to get to get to where you are now.

S3: Oh, my gosh. Did I ever so when I started actually making money, I couldn’t hold on to it because in my head it was going to be gone. It could be gone at any minute. And as a result of that, I developed a shopping addiction. And so when you have any addiction, your brain gets that hit and they’re happy for a minute and then it goes down and they’re constantly looking for the next thing. And so for me, that looked like going to Ross or going to Marshall’s or TJ Max and trying to find name brand stuff. And I would have a new purse all the time. Or it looked like spending money to get my hair done, spending money to do makeup instead of actually fixing what was wrong with me and why I needed that happy hit in the first place.

S1: That’s so funny. My sister is exactly the same way.

S3: And that’s funny because everyone is different and you’re either going to hoard your money or you’re either going to spend out of control. And so that’s what I did.

S2: What was the end game of that? I mean, did you get into debt or what?

S3: Oh, yeah. So the end game of it was so funny. So I went back to school and my Faster was approved, but I wasn’t going to get the money for I think three months and I needed to pay a thousand or two thousand dollars down for my tuition so I wouldn’t lose my place in my classes. And so I went to my ex at my boyfriend at the time, my ex and I was like, hey, can you spot me some money and I’ll pay you back? And he goes, No. And I’m like, What? Why not? And he was like, Where does your money go? And I’m like, I’ll I’ll know, where do you think? Oh, and he goes, When you figure that out, you tell me and maybe I’ll give you some money. And I was like, oh, crap. So that’s actually what made me go on personal finance. I start reading blogs and writing and just trying to figure it out because I didn’t know where my money was going. Wow.

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S2: OK, so you sort of reacted to your history with money in the polar opposite way that Alexandra did. But as you said, I think those are just sort of different manifestations of the same underlying issues where you develop some habitual response, whether it’s like the fear of spending it or or the the fear of keeping it, basically. But how can she sort of start changing her scripts, I guess, or sort of excavating the core problem?

S3: Yeah. So I already I already mentioned to you that you are resilient, right. You now how many you now have a career. You have a partner. I’m assuming again that loves you to bits. So the hardest part of your life is over and you survived it.

S2: How does it how’s it feel to sort of hear that I wonder if it’s it’s probably not easy to process that as reality.

S1: Yeah. So it’s sort of like having faith that you can overcome things just like you did before, even if they do happen.

S3: Yeah. Because you know what? Bad things have already happened to you. And where are you? Yeah, you’re sitting here with me and David and I are becoming best friends, even Latina.

S2: The first step is to look back at the obstacles you’ve overcome and realize that you got past them, you probably have even more tools now for grappling with adversity. You’ve made it before. You’ll make it again.

S1: I think the voice in my head has always been, you have been lucky and the luck could run out. So I think if I were to change the script to, you know, you overcame these things, making it more that I’m a direct actor, I think it would really help me.

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S3: Yeah. So one of the things I also recommend working when you work on the perception of yourself is to journal for 30 days and it can be like, I hate it here and then you’re done for the day am or it could just be writing whatever comes to mind.

S1: Athena made me do this.

S3: Yeah. Athena made me do this and I hate your day. Twenty three. You could ask yourself, why do I have this belief about money or why do I think money. Why do I, why do I hold onto money and no one’s judging you. And you know, the more you write you’ll be surprised at what your brain tells you. So what would a healthy relationship with money look like?

S1: Oh, my gosh, I can’t even imagine what I guess it would look like, knowing that when I have enough money, I don’t feel anxious spending it, but I am not living outside of my means.

S3: So you could start telling yourself I have enough. I have enough money, I’m good.

S2: Those are next steps. Once you identify what a healthy relationship with money looks like to you, actively change your money script. You can try affirmations or journaling to help reveal the buried emotions associated with money. Then, instead of worrying about losing money, try reassuring yourself that you can always make more of it. But what if something really bad or unexpected does happen? What then? When we come back, Athena has a plan. We’re back with Alexandra and our expert Athena Lent, next, Athena is going to help Alexandra better understand her fiscal safety net. It’ll serve as an emergency plan should the worst happen, but also as a reminder that she doesn’t have to hoard cash. Alexandra can learn to spend money without it making her feel physically ill.

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S3: So what are the things that are going to help you get through a bad time? I like to say, OK, tomorrow, if I lost my job, what is going to help me get through that? So is it. I have a savings account. Is it? I have numerous streams of income already, so I don’t have to rely on just one. I have a network that will support me professionally. I have a partner at home and I know if I have a bad day and I lose my job, he’s going to be there. I’m going to be able to talk to him about it and it’s going to be OK.

S1: I think that’s a great idea and I’m going to do that. But sometimes when I think about those things because of what happened with my dad and you get anxious. Yes. Because I’m like, well, I can’t I don’t want to teach myself to depend on people, because then what happens when they disappear or do something bad to you? Then, you know, my I guess my thinking my train of thought is you’re going to end up homeless.

S3: Yeah, but I mean, OK, so you can do two different things. You can do one where it’s I, I’m allowed to have people help me and you can do another exercise where it’s OK if if shit hit the fan tomorrow and this bad thing happens, what are the things that I can do to make sure I have my back? Because at the end of the day, you always have your own back, right?

S1: Yeah, I like that feeling of being prepared.

S2: This is our next step in order to feel prepared, play out emergency scenarios in your head. It’s obviously no fun to think of bad things happening, but if you don’t consider specific possibilities that it’s just like this amorphous blob of fear in your brain. So think about what you’d actually do if you lost your job or broke up with your partner and then in specific detail, plan your first five steps. What this does is break down a scary What-If situation into smaller tasks that actually feel achievable.

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S3: And I do this all the time whenever I have an anxious idea or if there is something that is happening and I’m like, oh my gosh, what am I going to do? And so one of the ways to deregulate when you are having a hard time with money is you look around the room. And so I’m looking around my room right now. I’m in my living room and I’m in my kitchen and my dining room. Am I safe? Yeah. Are there any immediate threats to me or my security right now? No, I’m OK. And so I tell myself that I’m OK. I’m safe. I’m here, OK. And so that helps with your money script because, you know, you can catch yourself doing something or maybe you have found a purse and you really like it and it’s one hundred dollars and you’re having a hard time purchasing that purse. You can tell yourself, you know what, I’m safe, I’m OK. I have X amount of money in my checking account. I’m good. I got this. This purse is not going to destroy me. I’m safe.

S1: OK, I like that. Thank you.

S2: The other thing that might help you feel more secure is knowing exactly where it is that your money’s going. If you don’t have a budget, you should have a budget. Athena recommends what’s called zero based budgeting.

S3: So with zero based budgeting, you give every dollar a job. And so you’re like, OK, I have five hundred dollars, I’ve got one hundred dollars for food. I got one hundred dollars for rent, I have one hundred dollars for my cat, I have one hundred dollars for my Internet and I have one hundred dollars for my food and so I can track my spending in each category. And you know, some people find it restrictive, but it can also be freeing because and you see oh you know what? I give myself one hundred dollars for my cat and I actually only spent seventy five. I get really good in that category and now I have twenty five dollars that I can put toward savings or that I can put towards money. And that’s OK because my money’s been allocated and anything left over is just about and

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S2: has a job. Interesting.

S1: And I know I’m not the expert, but one thing I have done to deal with my money anxiety because I notice that even though I had the money, I’d never I didn’t want to pay the bills because I was like, I don’t want to spend money. So I signed up for auto pay so that I never have to see the money going out.

S3: That that is smart. And I do I do recommend that, too. But I mean, sometimes people just aren’t there financially yet. Like I myself, I have some stuff on auto pay, but like stuff like big purchases. I don’t have an auto pay, like my rent and

S2: auto pay can be great, especially if you have a habit of forgetting when bills are due. But you also want to be careful that it doesn’t automatically overdraw your account or that you’re not just using it so that you don’t have to pay attention to when your money is going out. And that leads us to our next step. Besides a budget, you should have a rainy day fund to provide a financial cushion. Athena rule of thumb is three to six months of living expenses.

S1: So right now I have forty five months of emergency fund, so to speak, and I know that I only need to have six. So does that mean that if I spend the rest on, let’s say, a down payment, that I’m still sort of OK, I can tell myself you’re OK.

S3: So you said you have forty five months almost for a year. So is it possible that you diversify that? Forty five months, so maybe twelve months goes into a high yield savings account for an emergency fund and then maybe a twelve of those months you go and you open up a money market account or an index funds, get some index funds going and then maybe you can spend like one year or two years of that towards your down payment. OK, I would not have all your money tied up in real estate just end like. Yeah, you could probably turn around, sell the house. But my big thing is and you just said you’re a pessimistic thinker as well. What if you can’t write? What if you’re stuck with this house that you can’t get rid of and you need the money? And then I think you would be more mad at yourself if you ended up taking a second mortgage out on your home.

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S2: Like Athena said, it’s not smart to invest all of your savings in one thing, as anyone who was alive in 2008 knows the. Real estate market can go down and the stock market is famously volatile. There’s no such thing as risk free investing, so it’s often great in the long term to invest. If you can stand the ups and downs, just think about diversifying your funds.

S1: I mean, I think that diversification is a great idea because that will definitely give me more security or at least make me feel more secure.

S2: Alexander, you should never be made to feel stupid for not putting money in the market like you. You may give up future gains, but you’re obviously have a risk tolerance. That means you need to work on your relationship with potential losses as opposed to future gains. And markets go down right. Like there’s a lot of foma with investing, you know, especially when the market’s going up, when the market’s going down, not so much so. So I just personally, you know, having grappled with some of this when I first came to have some money that I can invest. Don’t beat yourself up about not investing every dollar that you can, you know, like live your life, live in your house. You are always going to forgo some potential future gains in order for some security. It’s just a question of what’s that best balance for you. Mm hmm. And finally, in addition to having a budget and a rainy day fund, figure out your net worth.

S3: Do you know your net worth, Alexandra?

S1: Sort of. I don’t know.

S3: So your net worth is all your assets and then minus your liabilities. And that is what your are at. That is your net worth. I think that is very good financial knowledge for anyone to know where they stand. And it’s really hard to make financial goals if you don’t already know where you’re at.

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S1: Oh, I see what you mean. Yes, I definitely know my net worth, but I feel like that’s a product of my anxiety.

S2: But if you had like a Google sheet or something that had your net worth and was sort of tracking what goes out and what comes in each month, obviously that is a net positive given that you have these savings. I wonder if that would make you feel, you know, if Athena is saying, like, let’s know this stuff more concretely, especially in your situation where the results have been good, maybe knowing what’s going in and what’s coming out on a monthly basis would say like, oh, I actually do have this cushion, which is why it’s growing.

S1: Oh, yeah, that’s that’s a good idea. That makes sense. I do think that would help.

S3: You know, I remember earlier in the conversation you were going on about that 50 Cent.

S1: Right.

S3: And you were like, no, I can’t we can’t spend that 50 cents that you felt bad afterwards. And I think when you catch yourself doing those kinds of things, you need to just be nicer to yourself a little bit, too, if you can, and just say, you know what, I’m sorry, I freaked out about that 50 cents, but to me that 50 cents would have helped. But I’m no longer need to worry about that. 50 cents. OK, I’m OK. I’m safe.

S2: Alexander, just wanted to ask for you, let you go if you found this helpful.

S1: Yes, definitely. I think I’m going to go start journaling. And I like the idea of laying out the steps that I will take if something bad happens. So I really appreciate both of your time. Thank you. Athena so much.

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S3: Yeah, I hope I was helpful. And you can also email me if you ever need to vent or just talk or be like, wow, today really sucked. And I could be like, yeah, yeah. You know, I’m here to help you and I’m here to support you.

S1: Thank you. I appreciate that.

S2: Thanks to Alexandra for sharing her story with us and to Athena Lent for all her tough love to catch her financial wisdom in Slate’s Pader column and on money smart Latina. And if you like this episode, check out another episode called How to Get Out of Debt Faster Than You Think. You can find that in all of our episodes by subscribing to our feet. Do you have a problem that’s burning a hole in your pocket? Send us a note and how to add slate dotcom or leave us a voicemail at six four six four nine five four zero zero one. We might have you on the show. Finally, if you want zero ads on how to or any Slate podcast, you can sign up for Slate plus Slate. Plus members get benefits like bonus episodes of shows like Slow Burn and Big Mood, Little Mood, unlimited reading on the Slate website. And you’ll be supporting the work we do here on how to. It’s only one dollar for the first month to sign up. Go to sleep dotcom. How to plus how TOS executive producers Derek John Rachael, Alan Margret, Kelly and Rosemary Belson produced the show. Our theme music is by Hannis Brown, remixed by Margret Jacob. Our technical director Charles Duhigg is host emeritus. I’m David Epstein. Thanks for listening.