The P and J come from the Myers-Briggs type indicator. You might have taken this test at some point for “self-realization” or as part of workplace training. I was a strong P (Perceiving). The difference between the J (Judging) and Perceiving personality types is basically one of planning ahead vs. winging it. J's typically like planning details in advance, tend to focus on task-related items, work best when keeping ahead of deadlines, and naturally use targets, dates, and routines to manage life. (My source for this information is here.) P's, on the other hand, don't see anything wrong with moving ahead without a plan, like to mix work and play, work best under pressure, and instinctively avoid commitments which get in the way of flexibility, freedom, and variety.
I don't think there's a financial planner in the world that would recommend attacking your finances without a plan or getting things done at the last minute. Looking back, though, I've shown signs of doing this. I rarely make goals, and usually don't follow up on the ones I do make. I procrastinate on my taxes, and like the flexibility of getting a big refund so that I can have a withholding cushion. I miss out on some free money for not wanting to follow through with rebates or not wanting to forget to cancel free subscriptions for magazines or forget to pay off the 0% balance transfer offers I'm earning interest off of. I have a warm fuzzy that we're on track for retirement, mainly based on knowing that we are living within our means, but if you ask me how my net worth has changed over the past year, I couldn't tell you without sitting down and figuring it out.
This is what I tend to do, left to my own devices. But it's not the desirable way to go about personal finance. I need to work at being a J with personal finance even though my knitting screams P.
My wife has been thinking about a larger house for a while. Last night she told me that she was thinking about it, and wanted to discuss it. We bought our house 5 years ago and the market has since put the house almost out of our price range. Moving to a larger house closer to town would double our mortgage payment, roughly. Since buying a house and deciding to move “reduces my flexibility,” I'm loathe to do it. But when my wife counters with reasonable-sounding statements like “We can afford the larger payment if we do this, this, this, and this,” I don't know whether they're reasonable or not because I haven't done the numbers.
So, biting the bullet, I said “We need to monitor our net worth.” (Yikes! Organization, planning, details!) The first step to fixing your personal finance habits is admitting that you have a problem!
That's the first thing on a list of things to do — another thing that grates against my P nature! — to get a handle on our personal finance health. Many other money bloggers do this but somehow I've gotten by without doing it that often. Luckily, it shouldn't be that difficult. We don't have a huge number of assets and liabilities to go through.
The next thing to do is to monitor inflows and outflows. This might be a tougher one to do with complete accuracy. I haven't found a system yet that was easy to stick with. Credit card statements and bank statements do most of the work because we can categorize what went where from the itemized lists. But I usually can't remember to monitor every cash transaction for a whole month. Cash transactions aren't a huge part of our monthly money flow, but nonetheless being able to categorize these cash transactions as well will reveal opportunities for cutting back on spending.
Probably the most important thing to do, which J's do naturally but P's don't, is to set financial goals. This will be especially important to making a decision on when, where, and how to buy a larger house. There's a perceived income gap that I have with regard to a larger house. OK, so what net income would make me feel comfortable going for a better house? How would that be accomplished — by making more, spending less, or both? How would I make more money? How quickly could I generate this extra income? What do I need to do to set up these extra income streams? And so forth.
Does anyone know where I'm coming from? Anyone have any extra tips for a poor P? 😉
I'm more of a "J" (INTJ to be precise), but I'm also lazy – far too lazy to do things like enter grocery bills into Quicken! I use Excel and it works fine: my spreadsheet has the following:
o Tax-advantaged accounts
o After tax accounts
o Mortgage and equity estimate
We have about 20 entries for Roth IRA, 401Ks, rollover IRAs, partnerships, e-fund accounts, savings accounts, etc. Once a month – for me, in the middle of the month after my second paycheck – I visit the websites for my bank, brokerage, 401K provider, etc and update all the entries. My spreadsheet is set up so I can track month-to-month changes and changes since the first of the year.
For the mortgage and equity estimate, I use a "hard" estimate from a few years ago from our last house appraisal. I've never counted cars and such in net worth calculations, although if you have a carloan, you will need to so you can get a useful estimate.
Thanks for the suggestions Foobarista!
I have a similar problem when planning. I've slowly over the years been convincing myself to track my spending… and I mean down to the last penny.
You would be very surprised just how much of the money you bring in each month ends up going out. If you happen to be frugal then you won't be too surprised; but if you're not then you might be. I know that I was.
Good Luck
A few more ideas, from another lazybones:
1. Don't use cash, unless you absolutely have to. Use a debit card or credit card (obviously one you pay off every month) from a bank or credit union that has a good online banking website. This way, you don't have to fiddle with receipts, and can go online to enter stuff into categories if you want, or at least get a summary. While this won't let you know how much you spent on bread last month, it _will_ let you know how much you spent at grocery stores and such, since it will say "$X spent at Location Y". Do NOT use a bank that only lets you get online a fixed number of times per month – you should be able to get on it daily.
Simplifying the payment methods you use and being able to look at them in one place will greatly help you to be lazy and still get a handle on your finances.
2. My approach is to "budget" from the "top line". That is, we pick the amount I feel we should save every month, and if we don't save that amount, we figure out why and deal with it. It isn't as precise as fully accounted budgeting, but it's a heck of a lot easier and doesn't feel quite as "oppressive".
3. The most obvious places to target are things you pay every month. A useful exercise is to take those things, organize them into categories (ie, cellphone + internet + landline = total fee for communications), to see how much you spend on various areas each month. If you haven't done this before, it is likely there is a surprising area in there somewhere.
OK, I'm an ISTJ, to the max!
Personally, I cannot imagine not measuring every aspect of my money in every detail: income; expenses; balance sheet; first and second derivatives of same. However, I know more than a few Ps. One of whom I've spent a lot of time with, helping to repair f*cked up credit and a miserable future if his ways didn't change. So, I have a little experience here.
One of the things you have done, a similar thing I taught my P friend is the benefit of knowing what one's financial condition actually is. It was so bad when I arrived on the scene that he said that on any given trip to the ATM, it was uncertain if any money would be available to him. … Oye!
Getting him to actually do the instrumentation and measurement took a while. Doing it on paper first required teaching him double entry bookkeeping. He hated the chore of the paperwork. I set him on Quicken (for some value of double entry bookkeeping). The automation made things quite a bit better. Once he got comfortable with it, made a ritual of it, he was comfortable with it. The ritual became: sit to Quicken every Sunday morning and just do it. I had him review various reports monthly and quarterly.
At this point, he is solvent, knows his financial condition and has a plan for his future. Although behind in calendar time, there's time to make up for what time he's lost.
You can do this too.