How can they afford that?
Photo by: nickobec
My wife and I have started watching re-runs of crime shows. We particularly enjoy Cold Case, Law & Order, and Law & Order SVU (Special Victims Unit). Last night we were watching an episode of Law and Order: Criminal Intent and it contained a really great dialog that involved a question I hear frequently “How can you afford that?” I’m quoting from memory here, so the dialog and story line isn’t exact, but hopefully I’ll capture the essence.
A police officer was being investigated by Detectives Robert Goren (played by Vincent D’Onofrio) and Detective Alexandra Eames for using the police computer systems to illegally retrieve criminal records on drug dealers and other “rich” criminals. She would then kill them and steal their money, using it to to live a better than the average cop lifestyle with her mother and two children. The relevant part of the story is when the two detectives are interviewing the officer at her home before they had any hard evidence to convict her. Detective Detective Goren is convinced she is guilty but can’t prove it just yet:
Det. Goren: “What I can’t figure out is how you can afford such a nice house and to send your girls to private school?”
Officer: “I’m frugal”
Det. Goren: “I don’t spend a lot, and I couldn’t afford this house”
Officer: “You aren’t frugal enough”
Det. Goren: “Sure I am”
Officer: “You dress to impress. You are a big man and therefore finding clothes at discount stores that fit you is hard. You use this as an excuse to purchase high-dollar name brand clothing. You’re single and therefore date often. You take your dates to expensive restaurants and drive a nice car to impress them…I buy bargain clothing, don’t date, never go out and live very frugally. I use my money to buy my home instead.”
Det. Gorn: Looking stunned he says “That’s very good, but you still haven’t answered the question.”
Detective Goren has a common problem that many people have: he has no clue where his money goes. He only knows he doesn’t have enough. He thinks he’s frugal and that he doesn’t spend much, but he does.
Here are a few tips for people like Detective Goren:
Track your spending
For the first month we started getting control of our finances, I tracked every expenditure we made. At the end of the month, we totaled up everything and were frankly pretty surprised at how much things like eating out, coffee, convenience store drinks, etc add up. We found a number of areas where we could cut back. Doing so was like getting an immediate raise. Buy a cheap little pocket note book and keep it with you. Record every expense and categorize it. Use that to feed into the next tip and reduce your expenses.
Create a budget and manage your finances rather than your finances managing you. Tell your money where to go. Use the notebook from the previous tip as input into your budget process. Find areas where you can cut back on your expenses and put a cap on them. Currently spending $50/month on Starbucks coffees? Create a coffee budget category and cap it at $10. Make your coffee at home instead. This will allow you to treat yourself to a Starbucks coffee without spending more than you want. I’d recommend using an excel spreadsheet or You Need A Budget to track and manage your budget.
Make an effort to find the lowest price and be patient
Too many people decide they need something, say a new pair of shoes or a new sport jacket, and just run out to the local mall and get them. Sure you get what you need, but you most likely paid way too much for it. Instead shop around at the various stores. Bring a small notebook and write the prices down. Shop around online as well and see how online prices compare (don’t forget to factor in shipping). Most importantly, be patient.
I had been wanting to purchase a couple of sport jackets for at least 6 months or so. Everything I saw was $60 and up. While $60 for a sport coat isn’t too bad, it was more than I wanted to spend. While walking through Wal-Mart one evening, I saw some sport coats on the rack and thought I’d take a look. Turned out there were marked WAY down. I got them for $19.99 each! I saved $40.00. I bought two of them, and have been very happy with the quality and look. Dressing to impress doesn’t mean you have to buy your clothes from Brooks Brothers.
Prioritize your spending
Detective Goren was a bit jealous that he wasn’t able to afford a nice home, yet continued to spend his money on expensive clothes, dates and car. While the officer stayed at home, lived frugally (or so it seemed) and had a nice home. If Detective Goren wanted a home that bad, he needed to make it a priority and set a goal. What are your financial goals and what expenditures are keeping you from reaching those goals? Make a plan of how and when you are going to reach your financial goal and make that a priority when doing your budget and managing your finances.
Turns out Detective Goren was right. The officer was in fact stealing money to support her “above average police officer lifestyle”, but I think the basic principles she shared with Detective Goren were dead on. So next time you say to yourself “How can they afford that?“, consider that maybe they’ve made it a priority.
We have 6 children, and constantly get asked how in the world we afford them. I don’t ever really have a good answer, except that we just do. I know my wife and I make them a priority and adjust our expenses accordingly. I am sure that’s a big part of it. It’s truely amazing how much you can stretch each dollar when you have to.
Do you budget and track your expenses? Do you know where your money goes? Do you know where your money leaks are? What tips can you share to help people manage their money better and live more frugally?