In a new book, the behavioral economist talks about the role credit cards play in the financial tales we tell ourselves
Were it not for a fear of money, though, Newcomb might well be a famous opera singer. Her angst over that lost opportunity, plus concerns that money would make her greedy and that it would control her life, led her to earn that degree and write “Loaded.” The April 2016 release is subtitled “Money, Psychology, and How To Get Ahead Without Leaving Your Values Behind.”
In the book, part memoir, part self-help manual, Newcomb discusses how she repaired her relationship with money, and how others might do the same. She also introduces the “Loaded” budget, which Newcomb says comes with rules-of-thumb guidelines, rather than hard-and-fast rules.
In a telephone interview, Newcomb answered questions about her research and her own life, prevailing attitudes toward money and why the “Loaded” approach to finances might save people from their worst financial fears.
Author Sarah Newcomb
Q: How did you arrive at the title?
A:Money is the most loaded topic of conversation, yet everyone seems to want to be loaded. It touches on the conflict we feel sometimes – money becomes a necessary evil. We need it, we lust after it, but we fear it.
Q: During research, what’s the most compelling thing you learned about yourself?
A:My biggest “aha” moment was when I realized my financial issues were rooted in a fear of money, more than anything else. I was afraid money would corrupt me. I grew up with the philosophy that money is the root of all evil and that it engenders greed. I no longer believe that. Greed engenders greed.
Q: If it weren’t for those feelings, you’d be a famous singer, right?
A:At age 19, I was accepted into a New England conservatory for opera. I was later contacted by an independently wealthy music lover who wanted to produce my original music. We were just about to the point where he was going to pay me a stipend and I freaked out. He was talking to me about being comfortable riding in a limousine – he wanted to make $12 million profit on four records.
Q: What’s the most interesting thing you learned about other people?
A:Whether they’re a teacher, or a hedge-fund manager, they all have their own story. I have been really surprised about the level of vulnerability – how this resonates from top to bottom.
Q: What role does credit play in these stories?
A:Credit can be a partner in crime. Think about the stories we tell each other about our financial situation: People see what you buy and display. They don’t see your savings or your credit card bills, so if you believe stories like, “People will like me more if I have better furniture or a nicer car,” then credit cards can be a way to tell that story while hiding the truth – debt – from view.
The word “credit” is misleading. We easily think of it as something we’ve earned because the word is usually associated with having won, gained, or earned a right to something. I prefer to think of credit cards as loan cards, because that’s what they are.
Q: The book discusses one reason for unhealthy relationships with money: Most people are not taught about money. How do you talk to your daughter about money?
A:I give her a window into my own financial decisions. We decided not to buy a new car right now – our car is great, there’s really no need. We also talk about privilege – she sees how we live, how other people live. I try to make talk about money a safe thing. I don’t preach to her.
Q: In the “Loaded” budget, you talk about “need versus strategy” rather than “need versus want.” What’s the difference?
A:The need is the goal. The strategy is how you get to the goal. For example: You ‘need’ a new interview suit. The goal is to look and feel your best at a job interview. That might entail borrowing a nice suit. It doesn’t necessarily mean buying a new suit. If you get to the need underneath, you can find all sorts of ways to get needs met with strategies that cost a lot less money.
Q: What role does credit play in the “Loaded” budget?
A:If you are generally able to keep from overspending, then credit cards can be a good way to build your credit score, and earn points and discounts on travel or other things. If, on the other hand, you tend toward being impulsive, then avoiding credit might be one of the best things you can do to get yourself in shape financially. Really, you have to know yourself.
Q: If a reader took away only one thing from this book, what would you want that to be?
A:Underneath every financial decision we make is a story we’re telling ourselves. The story might be true or not true, healthy or unhealthy, but it’s affecting our choices.