Money management is simple, right?
We all know what to do: spend less than you make, invest 15-20% of your income and avoid debt like the plague.
Simple in theory, yes.
In everyday life… not so much.
Our relationship with money is hard coded into our identity, as research shows that our money habits are established by age 7. The good news is that if you have young children, you can start teaching them about money early on, as they are able to grasp money basic money concepts by age 3.
(I tried this with my 18 month old and told her: “Zoe, money comes from work. If you can remember that,life will be much easier. When I test her with the question: “Where does money come from?”, she shouts “work!” without thinking. If only we all had this lesson before we could dress ourselves!)
This is at the core of unraveling our current tenuous relationship with money – the roots are hidden deep in our subconscious. We can mentally assent to all the things that we know we should do with money but until we connect our hearts with our heads, we will continue to see the perpetuate the same frustrating and self-sabotaging behaviours with money.
There is some work involved in digging deep beneath the surface, to assess what we’re really believing about money – and then to test whether those core beliefs are helping or hurting us.
- Know yourself
How did you arrive at your current financial reality? What are the key factors dictating the way that you work with money? If our parents never talked about money but we knew it was a source of tension in the home, it has build in the prevailing financial approach. Your personality, culture, religious beliefs and repeated experiences also have strong influences in your beliefs about money, work and worth.
What you spend your money on is a good indicator of what you currently value.
2. Connect your head with you heart
There are four money scripts that dictate the role of money in our lives: a) money avoidance, b) money worship, c) money status and d) money vigilance. For example, if you really believe, at your core, that rich people are bad, or evil, then you will subconsciously prevent yourself from falling into the ‘rich’ trap. Also, riches are relative, depending on where you live. You might not count yourself in the rich category, but compared with other economic environments around the world, you might be surprised at where you end up on the prosperity spectrum!
Becoming clear on what we’re really believing about money requires time and intention. These are hard wired beliefs that have ‘served’ us up to this point, so we need to build alternate possibilities before we can consider revising our current patterns.
3. Get a vision for your life
We’re told as we grow up: finish school, get a degree and get a job. The goal with this process is financial stability, yet this rite of passage into adulthood fails to help us identity our ‘why’: why am I here? What kind of work makes me come alive? What if work was not just a means to an end (earning an income) but the end in itself (doing meaningful work that will leave a lasting legacy on the world?).
People who experience a deep sense of fulfillment in life, are those who are invested in close relationships (less time at the desk, more time with those who matter).
4. Connect your financial goals to your vision
“If I just make more money, then all my money problems will be over.”
We’ve all indulged in this form of magical thinking at some point in our lives and then when we do earn more money, we’re baffled by the persistent challenges of keeping our money in check (pun intended).
What is the amount of money that you will need in order to be financially independent? Let me ask this question another way: how much money do you need from passive income that can cover your basic expenses, so that you can choose the work you’d like to do?
Imagine if we pose this question to high school students and help them discover out what kind of work they’d live to pursue and what they would need in order to do that. Imagine if we teach them about the cost of debt versus smart saving and investment options? There will obviously be a stage when work is necessary to build a sustainable income – but imagine if we all started out with this end in mind?
5. Build strong financial habits
Tapping into our true selves to create meaning in our lives will require practical steps. We need to be brave enough to face the stark reality in black and white (and yes, the red too). Once we know where we are and can dream of where we want to be, we need to devise a plan to get there.
This will be a unique (and challenging) journey to reset our financial ‘set point’. Ultimately, we want to establish healthier patterns for our children (and their children) and in order to change vicious cycles into virtuous cycles, we need to start with ourselves. Our daily habits have to change to shift financial patterns in the long term.
We could start to shift things today – and see a massive change in our future. Or we can delay facing the financial truth – and regret not acting sooner.