1. Managing Economic Resources
Chapter 8

2. Stresses of Family Finances
Financial issues #1 stressor across life cycle
Good financial management associated with happier marriages
Wealth and happiness are unrelated:
As money increases—expectations increase
Comparison not based on possessions but of those who have the most
Money distracts from other aspects of life

3. Financial Management Concerns
Major stressor for individuals and families
Garman 2002 study:
1/3 of workers report financial stress high to the extreme
hampers job performance
53% dissatisfaction with personal financial situation
54% worry about personal debt

4. Financial Management Strengths
Happy Couples
Unhappy Couples
Agree on how to spend money
89%
41%
No concerns about how partner spends money
80%
32%
Satisfied with decision on savings
73%
29%
Major debts not a problem
76%
35%
Financial decisions not a problem
Olson & Olson, 2000

5. Top Five Financial Management Issues for Married Couples
Percentage with Issue
Wish partner more careful spending money
72 %
Having trouble saving money
Problems deciding what is more important to purchase
66 %
Major debts are a problem
56 %
Partner tries to control the money
51 %
Source: Adapted from Olson, Fye & Olson, 1999
n=21,501 couples

6. Coping with Financial Stress
Financial stress associated with family stress and conflict
Most difficult periods of family life cycle financially:
Child bearing stage
Adolescent stage—peak stress period
Launching stage
Retirement stage
Coping resources and behaviors influential

7. Coping Resources Personal Family Social Self esteem Mastery Cohesion
Adaptability
Nontraditional roles
Social
Instrumental
Emotional
Informational

8. Coping Strategies Ineffective or Problematic Effective Reframing
Finding family support
Family service agencies
Ineffective or Problematic
Avoidance
Keeping feelings to self

9. Why Do Finances Cause Problems?
Money taboo topic of discussion
Unrealistic expectations about finances
No budget or adherence to budget
Overspend or reliance on credit
Styles of spending and saving
Use of money as tool to gain power and control
Conflicts over meaning of money

10. Meaning of Money Status Security Enjoyment Control
Source of power—means of keeping ahead
Security
Conservative in spending—focus on saving
Enjoyment
Satisfaction draw from spending for self and others
Control
Means of control over life and maintaining independence
Around & Pauker, 1987

11. Living in Poverty…Means
Inadequate food and decent shelter
Inadequate health care
Limited transportation
No telephone
Substandard schools

12. Ethnic Income Differences

13. Family Income and Expenses
Most families in the U.S. are in the middle-income range ($15-75,000 per year)
Low-income < $15,000
High-income > $75,000

14. Distribution of Families By Income
Middle Income
Represents
58.9% of
Families
Lower Income
Represents
16% of
Families
Upper Income
Middle Income
Lower Income

15. Family Income and Expenses
Ethnic Differences
Whites tend to earn more
Gender Differences
Males earn more
Discrepancy is smaller for Blacks and Hispanic families
Clear relationship between income and education

16. Income Discrepancy in Salary Between Men and Women
Dollar Amount Men Earn Over Women at the Same
Educational Level

17. Life Time Earnings by Degree

18. Family Net Worth Net worth Assets – Liabilities = Net worth Assets:
Cash on hand or in savings
Equity in a home
Value of the family car
Liabilities:
Credit debt
Mortgage
Car loans

19. Managing Financial Resources
Organizing and Planning:
Values clarification
Goal setting
Resource allocating
Implementing Decisions:
Facilitating
Checking
Adjusting

20. Guidelines to Saving Money
Don’t buy on impulse
Avoid buying on credit
Buy at the right time
Don’t pay extra for name brand
Recognize that convenience costs money
Question the need to go first class
Raymond & Forgue, 1997

21. College Years…Credit Danger
54% of freshmen students carry credit card—by sophomore year 92%
Over course of college life students double credit card debt and triple number of credit cards they carry
Approximately 75% used student loans to pay credit card bills
60% reached or exceeded their credit card limits during freshmen year
Lazarony, 2002

22. Credit: Advantages & Disadvantages
Enjoying it while paying for it
Advantage of sales prices
Convenience
Emergencies
Disadvantages
Interest charges
Overuse

23. Credit Overextension Credit overextension Signs of overextension
a situation in which debts make repayment difficult
Signs of overextension
Spending more than 15% to 20% of disposable income to repay debts.

24. Select Signs of Credit Overextension
Debt exceeds normal limits
Running out of money most months
Paying only the minimum balance due on bills
Can’t pay all the monthly bills
Borrowing to pay for things they used to purchase with cash
At limit on their various lines of credit
Asking for credit limit extensions
Picking creditors to pay
Borrowing from one source to pay another

25. Spending Patterns Associated with Debt
Credit spending
Purchases utilizing credit
Crisis spending
Purchases associated with unexpected life events
Careless or Impulsive spending
Overpaying
Purchasing inferior products
Purchasing unneeded items
Compulsive spending
Inability to refrain from purchasing