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Money matters of the mind: your cash-management problems just may be in your head

Personal-finance guides are based on the premise that people act rationally about money-earning, spending and investing it in a manner befitting their species. Homo economicus is, after all, a rational animal motivated by self-interest, who quite naturally subjects dollars-and-cents questions to logical, abstract, impersonal thinking.

Which crazy philosopher thought that up? In fact, irrationality and the mighty greenback (or gold card, as the case may be) frequently go hand in hand. In the words of San Francisco psychiatrist Carla Perez, a specialist in compulsive behavior: "Money, like food, can stand for anything else"-from love and security to power and rebellion. Consider, for instance, the case of two sisters in their 20s who squandered their 400,000 inheritance on an opportunistic husband and an accused criminal with such conviction that "it was as if they wanted to be rid of it," their broker says. Another broker tells of a client who has a personal fortune of $ 1 0 million yet dresses like a vagrant rather than pop for a clean shirt.

Somewhere in the middle

Surely, most people are teetering on the brink neither of spendaholism nor terminal penny-pinching but are muddling along in between, letting their emotions sign a few too many checks now and then and occasionally caring more for their money than for other people. As a result, they don't get nearly the satisfaction they could from what they earn and save, and often they don't know why. By looking at the way extremists such as compulsive spenders deal with cash management, as well as taking a closer look at your own personality type, you may be able to crack the code to your money-behavior pattern.

Take the daily-diary approach, the heart of the Debtor's Anonymous self-help program. The purpose of writing down what you spend each day seems obvious: You'll find you indulge too many wants. But in fact, "you are likely to find you are spending money on what you don't want rather than on what you do," says Adriane Berg, author of Your Wealth-building Years (Newmarket, 1990, $10.95). And you probably think a strict cash diet is meant to curb your spending by simply limiting your funds. But its real purpose, again, is to make your purchases sink in. "Human beings evolved depending on visual reality," says New York psychologist Georgia Witkin. "With credit cards, you can't see the money go, so it isn't real."

Those little kinks in your personality may also get in your way. Perfectionists, for example, get particularly rattled when the goals-such as saving for a child's education get big. One slip and they conclude all discipline is hopeless. The solution: Approach goals on a more short-term basis, say month to month, so they don't seem so overwhelming.

Busy, busy, busy

Then there are those folks with an authority problem. For them, a budget is not a plan but a wicked stepmother determined not to let them have what they want. The solution: Include some impulse buys in your budget. That way, it becomes a stimulant, not a stranglehold.

One of the most dangerous traps people fall into is using their investments-and the promise of quick gains-as an excuse to ignore day-to-day cash management. "That's an easy out that doesn't work," says John Blankinship, a financial planner at Blankinship & Foster in Del Mar, Calif. When expected windfalls don't materialize, for example, these poor planners come up short.

True to the times, there is also the we're-too-busy-making-money-to-manage-it approach, particularly popular these days with two-income couples. Although many of these high earners sock away sizable amounts, they don't adequately monitor their spending or investments and often don't get the returns on their money that they could. "Just setting aside 2 hours a week to manage your own money makes all the difference," says attorney Berg.

Once you take a first step toward better cash management-paying bills on time, setting a budget, meeting a savings goal-financial rectitude can supply its own kind of high. "People feel they are in control," says Blankinship. "It gives them new serenity."