The Good, the Bad and the Ugly

It has been quite a while since I last watched that great 1966 film directed by Sergio Leone and starring Clint Eastwood but I was reminded of it last week when a new client of mine told me that if anyone was to ask her to describe what her financial situation was like with reference to the name of a movie, then The Good, the Bad and the Ugly would be the example she would use.

We laughed a bit when she said this and I never thought you could describe your finances by reference to the title of a movie, but in this instance I think she was absolutely right.

So, I asked her to tell me what part of her finances fell into each category and this is what she shared with me:

The Good:

• Her salary is €50,000
• She was with her present employer for the past 9 years and she liked them and liked her job
• She owed only €56,000 on her mortgage
• She inherited money from her deceased mother’s estate and used the majority to pay down her mortgage

The Bad was:

• She owed €24,000 on a car loan
• She used €30,000 of her inheritance towards home improvements and wished she hadn’t – the kitchen she had was fine and she spends no time in that sun room she got built on
• She spent the majority of her savings on getting married and going on honeymoon 18 months ago
• She owes €6,500 on her credit card
• She doesn’t save one cent of her monthly salary

And The Ugly was:

• Her husband lost his job shortly after they got married and hasn’t been able to get a job since
• Her husband does not receive job seekers benefit anymore so they are living off one income
• From a non-financial point of view, he needs to get a job for his and her sanity. She is beginning to resent him because he is contributing nothing to the household finances
• She owes €5,000 to the Revenue Commissioners
• She has less than one month’s income in her emergency fund so if anything happened to her employer or to her she would run out of money in 30 days
• She has no pension in place

And even though she initially made reference to the film linking it to the state of her finances in a light hearted way, I think it was her way of telling me her finances were not in a good place without being embarrassed, and that was absolutely fine, whatever works best for her is fine with me.

But it was actually a great way for us to start our conversation and a little bit easier for her to talk, think and reflect on each area of her finances and compartmentalise them into good, bad and ugly sections.

Because, sometimes, it is hard to know where to begin when it comes to you and your money, where do you start? Is there any point looking at the good things you have done? Does it matter what the value of your property is? Does it matter how much you owe in credit card debt? Does it matter how much you earn? And the answer is that they all matter because they are all linked and each area has a direct impact on the other so they are all important, but you need to take the step of putting down everything on paper, warts and all.

And whilst I am a big advocate of people completing a statement of what their net worth is so they benchmark themselves against what their peers have, along with using it as a method of recording how their finances are progressing against goals they set themselves i.e. save €X amount or reduce mortgage by €X amount over 12 months, it is only a measure of what they are financially worth, and that is a problem.

When this lady began talking about The Ugly part of her finances, she couldn’t record how she was feeling about her husband on a statement of net worth. So, it was good to talk about what she thought was one ugly part of her finances because up until she mentioned it, she didn’t consciously realise it existed.

The exercise we did together was very emotional for her because on the one hand she was very pleased she had a small mortgage and was aware that she was in a much better position than most and if anything ever did happen well she would always be able to earn enough to repay her mortgage so she was never going to be homeless and rather than taking that for granted, she became more grateful and was proud of herself for that.

When she spoke about her wedding and honeymoon and the amount they spent on it, she thought it shouldn’t be in The Bad section but more like The MAD section but then there is no movie I think called The Good, The Mad and The Ugly. Anyway, what was done was done, it couldn’t be taken back and no point beating, yourself, up about and when I asked her if she had her time all over again would she have done the same thing, she answered without hesitation – YES. They had incredible memories of it with friends and family and life can be short and often cruel so they will always remember that experience.

Talking about their wedding made her think of her husband and she joked that they got married for better and for worse and you know he had been trying incredibly hard to get a job, she realised that and if she was feeling under pressure god only knows how he must be feeling, so she resolved to move resentment off her ugly list simply by talking to him about how she is feeling.

And of course, doing this exercise wasn’t and isn’t all about the emotional aspects of her finances, they are absolutely important because they give her the why to make those changes so the ugly becomes the bad that eventually becomes the good. And she is going to have to do the things she doesn’t like doing like budgeting, planning her shopping trips, not going on holidays this year etc.

And I would encourage you to think about what’s good, bad and ugly about your finances (I think I sound like Father Trendy here) because only when you do, can you begin to see what’s really important and then resolve to do something positive about them.