atch your behavior around Takira K. Hira. The professor of family and consumer sciences at Iowa State University in Ames, is a disciplinarian--the kind who could improve your personality while she betters your financial outlook.

A number of years ago, Dr. Hira wondered if there was a connection between personality and money management. In 1984, she began a 12-year study to find out if people declaring bankruptcy or who otherwise were poor personal-income managers shared any traits.

"I chose the city of Marshalltown, Iowa (present population, about 25,000), for the research because it is a mix of rural and urban and young and old," says Hira, who also is a certified financial planner. "I looked at the detailed financial and nonfinancial information of 200 families, then I checked back four years later and again eight years later to see how they were doing."

Among those weak at living on their income, Hira observed these characteristics:

  • Ignorance. Educated or not, these people had little or no idea of the amount of their income, expenses, assets, or liabilities. "Either they were unaware of their financial situation or they did not care to know," she says.

  • Procrastination. Many were willing to forget about the most crucial paperwork, even when dealing with the problem would take mere minutes. "I met one person who had been sitting on an important employee-benefit matter for three or four years," Hira notes.

  • Irresponsibility. "The poor money managers wanted other people to make their decisions for them," she says.

  • Impulsivity. A large number were compulsive buyers who were obsessed, Hira says, with "keeping up with the Joneses."

  • Being out of touch with financial reality. "Besides not being able to tell themselves no," she reports, "they wouldn't heed any fiscal advice."

  • The need to be accepted. Perhaps because they did not have high self-worth, the poor money managers believed they could spend themselves to a point where they'd be welcomed by whomever they met.

  • Stress. "Many were angry because they were not in control of matters. The reason they were not in control is because they could not deal with facts," she says.

  • Insecurity. "They were anxious and therefore could be adversely affected by others," according to Hira.

"We also saw that many of the poor money managers had low self-esteem," she says. "Low self-esteem appears to be related to impulsive spending behavior, and we are looking more deeply into that."

Everyone shows a few of these symptoms from time to time, but there's a difference between an occasional impulse purchase and the constant need to exhaust all buying power.

       The people at
       your credit union
       can advise you
       about mending
       money management

Poor money
managers want
other people
to make
their decisions
for them.
Bankruptcies surge
Unfortunately, personal bankruptcies in the U.S. are growing. In 1985, for example, 297,885 people sought bankruptcy protection when their debts overwhelmed their finances. But in 1996, the most recent year for which federal figures are available, 989,172 individuals went bankrupt. That's an increase of 332% in 11 years--less time than it took to conduct the Marshalltown study. There's talk in Washington of making bankruptcy harder to file as a way to improve fiscal responsibility, but reform efforts failed in the last Congress.

Hira, a native of Pakistan with degrees in several areas of economics, has been "trying most of my working life to look at the people who were filing bankruptcy. Since 1977, when bankruptcy was not so much of a concern, I've wondered about those who failed economically."

One of the revelations from the Marshalltown study is that neither males nor females hold the upper hand where personal financial management is concerned. Men and women can be equally irresponsible; the higher average wages males typically enjoy did not necessarily correlate with increased fiscal well-being.

Gender aside, one of the most important factors appears to be age, Hira points out. Younger people are less aware and less concerned about financial health, a fact that recently was reinforced through a study conducted in 1995 at Iowa State University.

While addressing a college class, Hira says, "I asked how many of them had credit cards. All of them had more than one. One young woman said, 'The card I have from J.C. Penney--is that a credit card?' None of them knew their credit card balance, interest rate, or monthly payment--most did not pay off the bill. It was mind-boggling," she says.

Being oblivious to the amount one owes is strange, Hira continues, because younger people tend to have been more involved with financial tasks as children than were older adults. They also were more likely to have had jobs as children for which they were paid regular wages. Hira notes, however, that there's a big difference in talking about finances and having real knowledge.

Born to buy
"Younger people, those younger than 40, were more likely to have had a savings account or a loan as a child. They were more involved with debt, yet they're more oblivious [to their financial situation]. It's due to the environment in which they were born and raised."

Part of the problem, according to Hira, is the nature of credit today. Credit cards are easy to obtain, multiple cards make totaling one's debt difficult, and "the payment is always the minimum due. A credit card makes it hard to recognize that money is being borrowed at a high cost."

"The younger generation has stopped hearing the term 'debt,' they have 'credit,' " she believes. "Now, they're not 'bankrupt,' they're 'delinquent.' Older people, on the other hand, place a higher priority on savings."

Hira admits that she's from the old school, noting that when she wanted her first car she opened a savings account and began to put money away for the vehicle. She says that seldom occurs today, even among America's newest citizens. First-generation Americans, those born abroad, tend to be as thrifty as their native-born counterparts. The children of the first generation, however, are more influenced by their environment. "They think having a number of credit cards and a large debt is 'being American,' " Hira says.

With this research in mind, should people in debt see a financial planner or a therapist? Hira believes debt-plagued consumers can emerge in one piece by taking a few simple steps.

         332% in
         11 years.

One person had been
sitting on an important
employee-benefit matter
for three or four years.
"What do I spend?"
"People need to get a grasp on cash-flow management," she indicates. " 'What is it I take home, what do I spend?' Those who don't know, extend their income with credit cards. They have to get a handle on net income flow and where it's going. Keep a record. If you lose track of $20 of every $100, you're in trouble."

Hira advises adopting a 70-20-10 formula for living within net income. That is, use 70% of net for cash or regular purchases such as groceries, mortgage, or clothing; set aside 20% for purchases that cost large sums of money--anything from a new car to a college education. Save the remaining 10%; better yet, prudently invest it--for long-term goals, such as accumulating some wealth--and don't touch it.

"That 10% really is an investment in freedom," she says. "Borrowing is important, but what are you borrowing for? Borrowing for durable items is all right. There should be a beginning and an end to borrowing, such as the money needed to finance a car. Try never to borrow for purchases such as food or clothing that do not last."

Debt, she says, is an important part of life. But it is only one aspect of the life of a contemporary adult. Crushing debt may be brought on by personal weaknesses or flaws, and crushing debt can so affect a borrower's life that it alters personality, and relationships.

©1998 Credit Union National Association, Inc.