Rafael lives in a luxurious two-bedroom brownstone in a trendy part of Boston. The 30-year-old lawyer has a penchant for elegant designer suits and sleek Italian leather shoes, and he drives a BMW to work. The walls of his office are decorated with diplomas from Ivy League schools. By all appearances, Rafael is rolling in it.
“The truth is really that I’m broke,” he admits to me. “Okay, not broke, since I’m not struggling with genuine poverty and I don’t want to insult anyone in that situation. My paycheck is substantial, but so is the amount of debt I’m in.”
He has tens of thousands of dollars in credit card debt, along with six-figure school loans. He has car payments, loan payments, credit card payments and back payments on his income taxes. He has no real savings in the bank outside of the automated retirement savings taken out of his paycheck — though he admits he’s siphoned off some of that fund to pay off some pressing bills, incurring significant tax penalties.
Rafael is deeply embarrassed and ashamed of his financial status. It’s his “big secret.” He’s told very few people about it — and the ones he did tell reacted badly. “I fell in love with a woman who I knew I wanted to marry, and about a year in, I told her the truth about how much in debt I was,” he says. “She ended up dumping me.”
He knows sharing this invites judgment. “It’d be easier for me to come out as gay than to come out as broke with some of my loved ones,” he adds. “I know people will have a lot of assumptions and judgments about me. But it’s nowhere near the judgment and shame I have about myself. I’m a smart guy, I work hard — I know I should have been smarter about my finances. And yet I’m not. It’s the one area of my life that has eluded me.”
After the breakup, Rafael knew he had clean up his debt — and the feelings he had around it. So he buckled down and met with a financial planner and debt counselor. They would come up with a plan, he thought — a set of steps he could methodically follow that would put him in the clear, and then he’d be on his way to real wealth, or at least solvency.
The reality, though, wasn’t so straight-forward. He was about to embark on an odyssey he was ill-prepared for, but with a much richer inner reward he wouldn’t expect. He had allies in his journey — mainly, in the form of his iPhone, which played a surprisingly important supporting role in changing his literal fortunes.
Rafael is an extreme example of how financial realities can be different from the surfaces, but he isn’t alone in the struggle with money. The average card-carrying U.S. adult has about $5,600 in credit card debt, contributing to the over $3 trillion in total consumer debt in the country, according to NASDAQ.
The conventional advice to solvency is deceptively simple: experts generally counsel making a list of all the debts and paying off the ones with the highest interest rates. Then, they advise socking away a certain part of the income — ideally 10 to 20 percent, depending on the goals — into savings. Once there’s a stockpile, they then recommend saving for retirement, and then, investing in stocks or bonds. And of course, nearly everyone advises spending less than earned.
Rafael knew all this. “I’ve read all the books and the blogs,” he says. “It’s all logical.”
But logic and reality don’t necessarily align in practice. Rafael downsized to a smaller apartment, but he found it harder to lower his lifestyle. His law firm, for example, expected a certain amount of panache when it came to employees. “It’s the type of place where everyone who works there drives a flashy or fancy car,” Rafael says. “And if you don’t, there’s a subtle condescension directed towards you — you’re left out of invitations and socializing.”
If Rafael eventually hoped to make partner, he not only had to work brutal hours, but he was expected to socialize and present himself in a certain way. And often, that meant laying down his platinum Amex card for a client or firm dinner — which only dug him deeper in his financial hole.
“At first I’d be like, ‘Well, this is just one round of drinks’.” he says. “That’s how you justify it. But then, it would add up over the month, and then, you’d get your statement and realize how much you actually spent — and realize you are nowhere near your goal.”
“But what could I do?” he asks. “I can’t quit my job, right? How could I give up an admittedly high income that’s supposed to help me pay off these debts and put me in the clear?”
He felt trapped: he knew the culture at his job wasn’t conducive to frugality, and yet he felt he couldn’t quit because he needed the money.
Compounding the problem was his sense of embarrassment and isolation. “It’s not something I could talk to anyone about,” he says. “I couldn’t tell my brothers or sisters, or my parents. Even my closest friends, I couldn’t tell. There’s often more of a stigma and shame talking about money than there is about, say, sex.”
So he took drastic measures: he took out a consolidation loan to pay off his high-interest credit cards, calculating that — if he lived frugally enough — he’d be able to pay it off within the six-month low interest rate window.
It was a disaster. His spending proved his downfall, and once the introductory interest rate jumped, he owed even more money. Rafael thought about filing for bankruptcy.
“I really wanted to give up,” he says. He lost sleep at night, running numbers in his mind, trying to plan how he’d make the next payment or what to do next. But complicated emotions always stymied him. “I wanted to pay off debt, but I knew it would take me a few years — and then I’d remember every year you put off saving for retirement, you screw yourself even further. So what should I do, save for retirement and pay off debt slower? Or vice versa? On and on and on in my head it’d go. It drove me nuts. But more dangerously, it paralyzed me. I just couldn’t act — scared I’d make another costly mistake.”
At the low point, he read about a Seattle woman who killed herself as her home went into foreclosure.
“Maybe years ago I wouldn’t understand why you’d kill yourself over losing your house, but now I did,” Rafael says, becoming surprisingly emotional. “It’s so stressful, the pain and the silence and the shame around struggling with money. It really ate away at me inside. I didn’t go so far as contemplating suicide. But the fact that I could understand that woman’s frame of mind — just feeling like you’ve gone through all your options and have nowhere left to go — well, let’s just say it was a sign that something drastic had to happen.”
Rafael readied himself to call a bankruptcy lawyer, but then, he came across something that changed his mindset and opened a doorway out of his morass. While researching bankruptcy options, he came across an interview with a personal finance coach. “Normally, I would dismiss that kind of stuff as New-Age or self-help whatever, but maybe it was because I had nothing left to lose that I finally listened,” he says.
The interview was with a woman, Monica Shah, whose story echoed his own in some ways: she was a businesswoman who found herself in a mountain of debt, despite all her professional and personal training. “I found it reassuring that someone so well-spoken and educated still made money mistakes,” he says.
Shah explained her methodology of personal money management and finance, which begins with finding out what type of “money personality” we are. She divides people up into savers, spenders, avoiders and martyrs — each of whom has a different temperament regarding finances.
Savers, on the surface, look very together, but they tend to hoard money to form a sense of security. Spenders buy for emotional reasons — usually around love, friendship and approval, which makes them feel good about themselves — without keeping an eye on long-term goals. Martyrs, meanwhile, feel doing a good job is more important than receiving money for it, and have a difficult time accepting and asserting their own value. They’d rather give than receive, and often resent money. Lastly, avoiders simply try to avoid the subject altogether — to the point where bills are left unopened, and balances are unchecked, often because finances can make them feel worthless, anxious or depressed.
These personalities were a revelation to Rafael because they tied money to individual emotional temperaments.
“I knew what savers and spenders were, but I had never heard about the other personalities,” he says. “Hearing each personality tied to an emotional approach switched something in me.” Rafael was an avoider, and not the spender he thought. “Money made me feel ashamed and anxious, and so despite all my anxiety, I actually avoided looking and dealing with it,” he says.
Money experts often counsel understanding our personal “money story” to help us understand why we spend or save the way we do. For Rafael, this meant connecting the dots between his present-day spending and the inner poverty he felt as a child.
“I come from a family of savers, immigrants from Guatemala who scrounged and saved for every penny. That’s a good thing, normally, and they were able to put money down on a house as soon as they could,” Rafael says. “The problem was the decision-making behind money was invisible, so we didn’t really see their non-spending as a choice or a strategy. Me and my brothers and sisters never really saw them dealing with money or had explained why they chose to buy clothes at the Salvation Army or made us eat school lunch instead of a packed lunch. Instead, we grew up thinking we were just poor, and being ashamed, embarrassed and made fun of because of that.”
As a result, Rafael and his siblings grew up into spenders: when they got into college and had a taste of independence, they all applied for credit cards and spent wildly, in compensation for the perceived privations of their childhood.
“I remember buying what I thought was upscale stuff — J. Crew, fancy sports and designer stuff, stuff my parents would never let me get before — and just feeling rich for the first time,” Rafael says. “The problem, of course, is that those feelings don’t last, and you need spend again to feel that way.”
The reason money advice didn’t work for him, he believes, is because so much of it evoked this early sense of deprivation. “I’d think, ‘Yes, I need to cut spending,’ but when I would do it, I just felt like that poor dirty immigrant kid that other kids used to make fun of,” he notes.
He also realized that his picture of success and wealth was also tied to his family history. “I spent for myself, of course, and as part of my work,” he says. “But I also realized that it was also for my parents. To me, to look visibly rich was my way of fulfilling my parents’ big reason for uprooting their lives and coming to America. They gave up a lot just so their kids could have more opportunities in life. I always felt like if I didn’t succeed in a certain way, I’d be letting them down.”
Rafael says he’s just beginning to unravel his early childhood ideas and their impact on his money habits and mindset, but the process is already changing the way he spends and thinks about his finances. “Sometimes, when I’m faced with the impulse to spend extravagantly, I slow down and I ask, ‘Is this really me? Or is this because I’m trying to live up to something outside myself?'” he says.
Slowing down and spending more thoughtfully has also led to more self-knowledge and insight. “I am just beginning to realize sometimes I truly don’t know what I like or genuinely find pleasurable or valuable enough to spend real money on,” Rafael muses. “But I do notice that when I spend now — and it’s aligned to something deeper inside me — I feel more satisfied than just lavishing money on the most impressive thing.”
He didn’t know exactly what roadmap to follow, but he knew as an avoider, he needed to up his comfort level and lower his anxiety when it came to finances.
“The first step as an avoider was to look at my accounts every day,” he says. “I know, it sounds simple, but if you’re an avoider by nature, it’s hard,” especially if, like Rafael, we have a habit of never looking at statements, balances and bills until the last minute, if at all. But he had no excuse — especially since he could check his bank accounts online and on his phone.
Rafael began to track his habits with his iPhone — subtle at first, and then, revelatory. He began to see the impact of his spending right away in his accounts, and once he desensitized himself to his initial avoidance and fear of money, he took other small yet significant steps like tracing his expenses.
“It was finding a balance and trying things out,” he says. “I needed something simple, something that wouldn’t overwhelm me. Otherwise I could easily avoid it.”
Tracking gave him not only real-time awareness of his spending, but also a sense of where he was indulging himself — and where he was “cheaping out.” He also realized where he was actually smart about money, which gave him a boost of confidence where he had none before.
Simple habit changes like checking in and tracking soon led to other, deeper insights that transformed Rafael’s whole relationship to finances, spending and money. Once he began to develop an honest, open sense of his spending and saving, he saw how his patterns were connected to his early family training, and why money was so deeply emotional and difficult to unravel for him.
“The phone was the biggest difference maker,” he says.
He made a deal with himself: if he looked at his accounts in the morning, he would allow himself to order a special latte at his favorite cafe every other day. If not, he would stick to regular coffee. He even set himself a daily reminder and alarm.
“I couldn’t imagine going the whole day without my iPhone. And while that’s kind of weird from a tech perspective, from my financial perspective, it gave me no excuses to at least check in with my bank account. If I had a moment, I could just pull it out and look up my accounts. The best app I ever downloaded was my bank’s app.”
We’re not all avoiders, of course, but tackling the challenge can start with a simple step for all money personality. For savers, the challenge is to spend money to improve life or work, so the first step is to setup a small “fun” account and spend money on themselves. Spenders, however, need to begin by coming up with a budget for spending, which forces them to think about spending beyond their own gratitude or short-term pleasure. A good start is to recognize that spending decisions come from a need for love, approval and acceptance. For martyrs, the big challenge is asking what they are worth, so they need to say no to lending money to friends or paying for everyone at dinner. It also helps to understand that the more you can make, the more you can do.
Rafael says rarely in the personal finance world do experts and books account for emotions, much less personalities. “Most financial advice and books are written for ‘one size fits all’, without much regard for the different range of human personalities and emotions,” he adds. “It’s as if we’re supposed to leave our feelings and humanity behind when we deal with money, and see it completely objectively.”
But is this even possible?
He points out that nothing gets people more emotional than money. “Look at how it can upset and destroy marriages and families,” he says. “Look at how people like me are so secretive about it. Some people get way more intense over money than they do over even sex. People get divorced over money over nearly everything else. If that’s not emotion, what is?”
Rafael is right: couples that argue about money at least once a week, according to the New York Times, were more than 30 percent likely to divorce.
The link between money and emotion was a simple realization, but it opened a realm of possibility for Rafael, one that gave him hope he could turn his situation around — or at least achieve a sense of peace and empowerment. “I realized that I needed to find my own approach to turning around my finances. I needed something tailored to my own temperament, my own personality. I didn’t know where I was going to find it, but I knew it was out there somewhere.”
Slowly but surely, Rafael’s bank balances are growing more stable. “It’s hard because, with money, you can dig yourself in a hole real fast,” he says. “But digging your way out is a lot longer process, and sometimes I struggle with how slow the recovery is going to be. I remind myself it takes time.”
But now, Rafael finds consolation when he checks in with his balances on his phone — the simple yet transformative habit he still keeps up with, even as he gets back on the right track in terms of money. “It’s all about small victories,” he says. “Another day when the balance doesn’t drop, or when I see all my purchases in the past week have been smart and well-thought-out, that feels good now. It’s like a game: how long can I keep the money in the bank?”
More than anything, he feels proud of the progress he’s made and says he’s actually enjoying the journey of getting out of debt. “I’m learning a lot about myself,” he says. “I know my specific solutions aren’t going to help everyone in the same position as me, but I feel the bigger moral of the story is you have to know and be honest with yourself. And that isn’t easy in a world that tells you wealth and richness looks a certain way, or that there’s only one way to deal with money.”
His biggest victory, though, is that he feels wealthier now than when he was flush with mindless spending. “Now I try to look at the ways I already am ‘rich’ — family, friends, living in a city I love, doing work that fulfills me, having freedom to travel. That’s real wealth for me,” Rafael says. “You hear it again and again, but backing that up with your actual finances — and not frittering it away on stupid things that society tells us we should do or buy — that’s the real challenge. But I feel up for it, finally.” ♦