• courtesy of www.nancytrejos.com
• Nancy Trejos

"It is impossible to take the personal out of personal finance."

Those words are among the first you see in Nancy Trejos' new book, Hot (broke) Messes: How to Have Your Latte and Drink It Too. It's a statement that rings no less true due to its simplicity. People talk about money, the saving, the spending, as if our interactions with cash are based purely on logic -- and yet, if they were, the advertising industry wouldn't exist. No one would be overdrawn or in debt. Matter-of-factly is the last way in which most of us approach money. Unfortunately, it's the first way we need to, no matter how much (or how little) we make, regardless of how high the bills and/or desires stack up. In the following conversation, Trejos, who also writes on personal finance for the Washington Post, offers some advice on how to do just that.

Jennifer Savage: You reference your bulimia/anorexia along with the emotional high successful shopping provided... You share the story of someone addicted to shopping, who also uses alcohol "to feel better." Problems often overlap -- from self-esteem and impulse issues to food disorders and functional alcoholism, those who struggle with money often struggle with related challenges... Even when we know, utterly know, the right thing to do, doing it can still be so hard -- on that emotional/gut level, how did you make yourself change?

Nancy Trejos: Many people are emotional spenders. You have a bad day at work and you go out and drop a lot of cash on cocktails with friends because you want to have fun... Or you go through a breakup and you go out and buy new outfits so you can look better and feel better about yourself. I would do those kinds of things. And I often knew they were wrong, but I wanted to feel better about myself. In the end, through talking to my financial planner, my friends and therapists, I realized that I was being self-destructive. It did take a behavioral change overall to get my financial house in order. Oddly enough, I had to stop making personal finance so personal. I learned how to think before I spend. If I see something that I want, I actually have a conversation with myself. Do you need it? Do you already own something that looks like it? Will you make good use of it? And, most importantly, do you have the cash for it? And do you realize that if you buy that, it means that you can't buy that ticket to that concert you want to see? It's all about setting priorities and making tradeoffs.   

*JS Health insurance -- so many "young invincibles" still shy away from that expense. How would you convince them to look toward the future?*

NT At the very least, they have to get enough insurance to cover them in the case of an emergency. You can't predict what will happen to you. You could get hit by a car, you could fall down a flight of stairs, and a hospital stay could bankrupt you. I hope the health care reform will encourage these young invincibles to take their health seriously. One provision that could help them is that they will be able to stay on their parents' health plans up to age 26. If they are unemployed, or don't make much money, I would also urge them to see if they qualify for Medicaid or to turn to a community health center.

*JS For folks who've already made major financial mistakes -- accumulated credit card debt, defaulted on student loans, owe too much on a car -- the idea of recovery can seem so hopeless. People can be paralyzed by their financial situation or, worse yet, so unable to face it they keep spending money as if somehow everything will sort itself out. How can someone who already feels like they'll never get it together find a starting point?   *

NT They have to sit down and figure out exactly how they're spending their money. There's no way you can solve your cash flow problem if you don't know where that cash is flowing. Keep your receipts and use a Web site like Mint.com to track your spending.... From there, come up with a spending plan. It's all about crunching numbers, and if you can't do it yourself, you can find a financial planner or credit counselor to do it. I know it's scary, but being in debt is so stressful. I sleep so much better now that my finances are better. 

*JS What factors do you think influence children when it comes to how they'll manage money as adults? Your book is aimed at people in their 20s and 30s, but how would you advise the younger crowd to establish good habits and prevent drifting into financial disaster?*

NT I've talked to psychologists about this and they basically said that children can go either way: They can emulate their parents' financial behavior or they can rebel against it. But I do think more can be done to give children a better financial foundation. I think schools need to do a better job of teaching kids financial literacy. And I think parents do too. They should sit them down and have financial talks with them and get them used to dealing with money early on. Give them an allowance, and make them earn it by giving them chores around the house. Let them get part-time jobs. There are creative ways to teach kids about money. 

*JS Finally: love and money... Money remains such an awkward discussion topic in polite conversation, and love rarely makes room for rational decisions. Is there any way to interject common sense into what is often an infatuation zone?*

NT It is very difficult. My ex-fiancé and I were so in love we made the decision to move in with each other without knowing how much debt we were each in. But you have to protect yourself, especially as a woman, because you're often making less money than your partner. I think women should be taught early on that they have to maintain their financial independence. I know it's not romantic to have the money talk with your partner, but you have to realize that if you don't, it could potentially create problems for your relationship later on.

For more on Nancy, see nancytrejos.com.