Has anyone ever told you that you need to “meet them where they are and not where you want them to be”? It is a simple concept but sometimes easier said than done don’t you think? I come across this all of the time when having financial discussions. It is one of those critical things you have to keep in mind, not only as a coach but also for yourself. We are going to dive deeper into the importance of understanding yourself so you can be prepared to tackle any obstacles that come your way either through adjusting existing behaviors and ways of thinking or implementing proactive and creative solutions.
As a basic principle, there is a psychology to your relationship with money. This relationship is a direct connection to the logic, path and application of your money management, investing and prosperity knowledge and behaviors. I want to challenge you to take a look at prosperity and wealth building not in terms of material wealth or assets but as a root layer that serves as a foundation to all of those things. It is called self understanding. In order to understand your relationship with money, it is good to have an understanding of self. A Psychology Today publication highlights some great points that I want to touch on in this issue of Fancy Finance.
Less Inner Conflict
It is important to understand how much value you place on money/wealth vs other things in your life. What role does it serve in your life and to what means? What would you do or not do in order to acquire it? How much of your actions and thoughts are reliant upon or revolving around it? How does it motivate you or discourage you? How much of your “happiness” is dictated by it? What does wealth look like for you?
Understanding the value, position and interdependency of your inner values and feelings in relation to money will shed light on what inclinations you have towards a certain characteristic or behavior in your money management. If these things are not aligned or unproductive, it can lead to some self destructive behaviors effecting your ability to manage and maintain your path to financial health.
An example of this would be a person who was not properly educated on debt or credit management. This person has an internal belief that “you can’t take money with you when you die” or “money is meant to be spent” or “I can always take care of this bill later when I get more money”. This person is in a ton of debt and continues to live beyond their means due to lack of knowledge and social pressures. This same person has dreams of being debt free, owning a big house and hoping their debt is forgiven. What conclusions would you draw from this and how would you structure your discussion with this person? They have goals but are their inner feelings of money in alignment with saving instead of spending or wealth accumulation instead of wealth depletion? How productive do you feel that conversation will be? One must understand self before they can work on making those changes to behaviors and attitudes which are counterproductive to their growth.
Better Decision Making
When you are able to take an honest look at self, you can more readily identify those areas that are productive vs unproductive for your financial goals. When you identify these areas, you have clarity around which behaviors and ways of thinking you need to adjust or strengthen to get you to where you want to be. This can come in many forms.
The greatest example I can think of is the first time I had to work a temporary job. I had just moved to a new state. I wanted to get my foot in the door with my career in this new place and gain some experience. I was used to the job security provided in my previous role and being placed in a job where no benefits or job security whatsoever were provided, I was forced to change my views about my relationship with money and how I managed it. It wasn’t until then that I started a budget and stuck to it. The value I placed on material wealth decreased and the value I placed on being debt free increased. So, as a result, I taught myself to be content living within my means, save and budget.
At that moment I realized that my relationship with money was directly tied to, to be transparent, a history of struggling financially or witnessing others manage their money poorly themselves. When you are in a position where the facade of security is provided, you can take for granted how it can easily be stripped from you and you are left picking up the pieces and figuring out how to get by. This is one of the most powerful misconceptions regarding younger adults that I have witnessed. Failing to have a solid plan and being ok with “figuring it out later”, hoping things take care of themselves or hoping things will fall into place. This is a mindset and a pattern of behavior that one has the control to change no matter where they are in their financial journey.
I learned over the years to become more strategic with my money. Due to my relationship with money changing, I was able to make better financial decisions years later.
The Psychology Times article states it perfectly.
“When you know yourself, you understand what motivates you to resist bad habits and develop good ones. You’ll have the insight to know which values and goals activate your willpower”.
The ability to have self control is definitely a learned behavior and not innate. On your journey to a more financially fit you, you have to understand how the motivators of your life feed or filter into your money habits, how you view success and what it means to have wealth. These visions and meanings are different for everyone. How does your current financial situation make you feel? Do you feel you are on the right path to financial health you are striving for or do you feel stuck? When you feel overwhelmed financially, how do you typically respond? Are you solution driven or do you look to others to tell you what you need to do? What things make you feel empowered on your journey to financial fitness?
It wasn’t until I created a budget and stuck to it that I learned the importance of self control in my spending. Instead of “hoping” I will be able to pay it off, I spoke words of confirmation that I “will” pay it off and put myself on a plan to achieve just that. Those behaviors that were counterproductive to me paying off debt were the very one’s tackled first. I achieved this by growing an understanding of self, what motivates me, what my fears with money were, what patterns weren’t conducive to success and how I could change them. I totally changed my definition of what wealth looked like to me at that particular life stage and it will change as I progress on my journey and so will yours.
Resistance to Social Pressure
When you have developed a solid sense of who you are, where you stand, where you’ve been vs where you are going on your path to financial health, it gets easier to bypass those things that hold no meaning for your short term or long term success. We are blind sided by a lot of “doc dads”, those things that just pop up and look quite attractive. Those stylish clothes that pop up in your facebook newsfeed as a sponsored ad, you see the thousands of comments so it must be important to have. Then you look at online reviews on how people were duped into spending their hard earned money on cheap knock offs that don’t even fit properly or have cheap material. Yeah, those ads are like the road blockers on standby slowly drifting from your peripheral directly into your line of sight for consumption.
At this point, you know what your goals are, you have identified those thoughts and behaviors that are counterproductive to your financial goals and you have totally changed your relationship with money. So you might think twice about indulging on those doo dads. Instead you might be more interested in taking that $20 for that shirt you don’t need and putting it in your IRA or buy a cheap stock commission free in your Robinhood account or take that spare change from your purchases and invest them via Acorns Investing.
There are a ton of options for you to be creative.
But it all starts with you.
Understand Yourself. Understand Your Relationship to Money. Create a Plan. Influence Outcomes.