How To Improve My Relationship With Money

How To Improve My Relationship With Money

It always made me question, why lives of people of similar backgrounds and circumstances might be so vastly different.

I will give you an example of what I mean:

– Meet Kate – smart young lady, working in the office, responsible position, good income for a start-up – say $40,000. Kate loves fun, friends, going out, partying, socialising, girly shopping, makeup, great shoes and handbags – well you get the picture – typical young girl having fun. Nothing wrong with that you might say, but after 10 years of working, with that lifestyle, Kate not only does not have any savings, but she is $20,000 in debt on credit card.

– Now, here is John – same age, same income, similar circumstances. For 5 years John saves 20% of his income – that’s approx. $40,000. After 5 years John found a small 1 bedroom flat in a poorer area of his town for $160,000. All his friends laugh, why would he live in such a dump of the place. But after another 5 years of extra repayments – John decided he has enough equity in that little dump place and now he is ready to buy a bigger apartment in a better area. All his friends are shocked and jealous, thinking – how is that possible that  John can afford such a place.

So, compare the pair, after 10 years of work – same income, same responsibilities – Kate is $20,000 in debt on her credit card while John just purchased his new property with total equity of over $400,000

Kate has no chance to catch up with John.

So why am I telling you this story?

Because all those little choices that you make daily, this what will create your life – success or failure. 

There are a lot of reasons why we behave in a certain way, but most of our behaviour is completely unconscious and unless we stop, and start analysing our character and why we act in a certain way, we will always react like little machines – unconscious and with no barriers.

Those are just a few examples of emotions that impact our money behaviour:

– Fear – you always worry you don’t have enough, or any investment is too high risk, it is best to keep money in cash – fear gives you internal anxiety and panic.

– Emotional spendings – irrational, emotional spending to make yourself feel better – exactly the same as overeating or drinking.

– Emotional hoarding – the opposite to the emotional spending – you might think that such a person is financially responsible by not spending money, but then this person will have lots of emotional blocks to make any purchasing decisions. Unable to buy the right course, book, seminar, property, investments, those are the people that tend to procrastinate due to the need to hoard money.

– Some people will justify any decision we make, good or bad, at the end of the day, whatever you tell yourself becomes your belief and your truth. Example of excuses:

1. The economy is bad – that’s why I struggle with money

2. Money is evil

3. The competition in my field is too high

– Some people when they realise that they made a mistake, will start feeling anger and regret about their decisions.

– Which often is followed by shame and embarrassment – about the mistake made.

The good news is that you can change that. You can review your behaviour and adjust it to your advantage. Money is all about your emotions. But first, you have to recognise your own source of destruction.

You need to analyse your past:

– Did your parents agree about money or they were fighting about money?

– Maybe they both agreed, but they both believed that money was difficult to earn

– Or maybe it was quite the opposite, your parents only lived with “today” in mind, having fun, spending money and not really giving a second thought about tomorrow

Now, that you are an adult two things will happen:

– You either follow the pattern behaviour of your parents

– Or you become a rebel and you do the opposite

Have you ever found yourself in a situation when you were really angry with your kid and you said something and then you stop and in your head there is this voice – who just said that? I sound just like my mother!!! – and you remember how much you hated when your mother was speaking to you in that tone, and yet somehow you pick that up.

So if you really want to become financially successful, and you recognised some of those behaviours, and blocks in yourself, this is a helpful exercise:

1. Review your family money behaviour pattern. Can you find similarities in yourself? Or maybe right the opposite?

2. Are you an emotional spender or emotional hoarder?

3. What triggers you?

4. Are you in constant fear that you don’t have enough?

5. Do you justify your extravagant spendings or being a scrooge?

6. Do you feel anger or regret or feel shame and resentment?

7. Or do you just simply leave it in a too hard basket thinking: “I cannot be bothered, it will resolve itself one day”.

Answering those questions honestly might help you understand your own behaviour around money and the way you make all your decisions.

By understanding your money psychology you can start making adjustments to your behaviour and with the time change your habits to your benefit not only for easier and more enjoyable life but also more profitable by introducing new money habits that will benefit your financial position in the long run.

by:  Katherine Isbrandt CFP®
Money Strategist & Retirement Planner
Principal of About Retirement