Wallet Wisdom

Lu Bauer, of Standish, says Mainers are too shy about dealing with their money. A Certified Public Accountant for twenty-three years, she specializes in helping people come to grips with their money and in "right-sizing" their lives to make their money match their lifestyle. She's a combination of financial adviser, life coach, and the high-school business teacher who always made you do your homework. Bauer lives the life she preaches; in the past few years she has downsized herself by closing an office in Falmouth, consolidating her work and living spaces, and cutting back on some of her public speaking to concentrate on other areas that interest her, such as politics.

Why do people come to you?

They get to me after several people have told them they need to see Lu Bauer. People think they're supposed to know innately how to manage their money well, and if they don't they feel it's a congenital problem and they write it off as "I'm not good with money. I'm not good with numbers." It's a judgment about themselves that puts them at a dead end.

So what do people need help with?

I find a lot of it happens in life transitions — divorce, marriage, deaths. People come to me before they get married. They're starting to live together, starting to share money, finances, and the wise ones recognize there are dynamics floating around that need to be sorted out. Each person has a money operating system that's unique to his or her experience, and that's important to have out on the table in a relationship.

What about the way money management is taught or not taught in schools?

It's not taught. We have more sex education than we have financial education. I find it just amazing that finances are not taught, because money is probably the one consistent factor throughout our lives. Money is involved when we're born, when we die, when we get married, and we're not giving young people any training about it. It's just assumed they will know what to do, and if they don't then they have to live in shame. In courses and classes and sessions with individuals, I find this wonderful relief from people to finally be able to talk about it. My goal is to help people step up to it and own it, whether it be a difficult situation or an abundance, to think about money management just as easily as they think about their furniture.

Do you find people are more or less money wise today than they were ten or fifteen years ago?

I'd say less money wise. The pressure for unwise consumption is out of control, absolutely. Buying the new car, buying the new house. It's not anything that looks frivolous; it's just the expectation of what life should be like. "Maine: the way life should be" is a car for each person who can drive, multiple television sets, kids participating in every program they want to participate in — sports, enrichment activities — all of which cost money. Then there's the clothing, the electronic things.

It's not that they are taking massive trips to Europe or eating out all the time, it's just the lifestyle, which is reflected to them every day in the millions of hours of television. Everything that you see on TV becomes the standard, and you're not frivolous unless you go beyond what you see on TV.

Is the situation getting worse?

It's escalating, just by the very nature of our economic system. Our economic system is based on constant growth. Everything has to be about having a growing market share, in order to keep stock values up. So the investment in advertising is a reflection of that growing.

And all of this trickles down to the individual person's budget. You are absolutely not immune unless you become very conscious. I've chosen to keep myself free of that influence, but there's a price to pay.

You mentioned earlier that one of the things you do is get people to start tracking their spending. How do you go about doing that?

Most people have gotten to the point where they use their debit cards and checking accounts. So I get them to download the data into a program like Quicken. The idea is to categorize the spending and summarize so they can see at least once a month how much money they spent on dining out, kids' activities, cars, utilities, all those things, because that's the information they need to make intelligent decisions. Carrying a little book around and writing down every little purchase, that comes when you really get into it.

I was teaching a money management course at Northern Pines [in Raymond] during a health retreat. There was this couple sitting in the back and they had these grins on their faces. Finally I asked, "What do you do?" They were clearly retired. They said, "We've been writing everything down since we got married." They were very proud of the fact that they had accomplished that by managing their money very closely.

What are the stakes?

I'm really concerned, very concerned that people will not be able to retire the way their parents did. There's a huge segment of the population that is going to hit the wall. They're not going to be able to keep their good jobs because they'll be replaced by younger people. In order to meet the gap between Social Security and their lifestyle, they'll have to work. And what kind of work can they get? That's going to happen big time with the baby boomers. Those of us who are self-employed are just planning to keep on keeping on.

What are the slots that are a cut above Wal-Mart greeter? We need a new class of employment. How can we use that talent that's going to become available in a few years? It's important to take a look at that.

What are some of the most common money myths you run across in Maine?

Number One: I'm not good with money. We've talked about that.

Number Two: I can save money by buying things on sale. In my book the only way you save money is if you have money in your pocket. And if you're buying something you're not saving money. If you buy things on sale, you're buying something. Unless it's something you would have bought otherwise, you're not saving money.

Another real curious one is: it's worth it. When we're buying something or making financial decisions, we'll say it's worth it. It may be the decision to move to Maine and take a cut in pay. We'll say it's worth it. But what is worth what? There are two "its" in that phrase, and we fail to identify them. I challenge people about that. What are they really saying?

In the case of moving to Maine and downsizing, they're saying having less money is worth the improved lifestyle. And people coming into Maine have to make it their new reality; they have to make the alignment that's necessary for it to be a satisfactory experience. If they try to maintain the lifestyle and earnings experience from Massachusetts, they won't make the adjustment.

How many people are actually in trouble at any one time, living paycheck to paycheck and just barely making the minimum payments on their credit cards?

In trouble means to me debt they're on the verge of not being able to pay. I'd say it's very widespread — perhaps 30 percent of the households in Maine. I don't see a lot of them because they're just treading water, but I see enough of them. As clients I see their tax returns. I can see they're just one big medical bill or a car wreck away from serious trouble. Their expectations are way out of line. They expect to have these huge houses, and to send everybody to college. College is at least twenty thousand dollars a year. And when the kids weren't going to college they couldn't come up with an extra twenty thousand dollars to save. So where's it going to come from? What's happening is it's coming out of the equity of their homes and coming out of their retirement. People are pulling back, not necessarily taking money out of retirement accounts but not putting money in. So they're exacerbating that other problem of getting to retirement and not having enough.

What would you change to help people manage their money better?

I've had dreams about this. Every junior in high school taking a money management course would certainly help. Even younger. But more, there has to be an attitude shift. There has to be a value placed on frugality, on being smart about your money and valuing personal knowledge of the flow of money through your life. You need a cultural shift.