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Money – A Tool or a Noose?

Uncategorized Feb 26, 2019

Over this past year Alberta has seen many challenges with oil dropping and so many being laid off. What I’ve found most fascinating is not so much the person that earns $50K a year and struggles but the executive earning six figures selling off his/her possessions to make next months mortgage payment. How do we get into these financial positions? Why are so many living pay-cheque to pay-cheque?

An interesting thing happens with money. While it is only a tool, the exchange made for goods and services purchased or provided, we in society have attached many emotions to it. To most, money represents… power, greed, pleasure, guilt, freedom, happiness, and to some even self-worth.

The psychology of money is deeply rooted from a young age. There are a few major theories on our spending/saving behaviors. Our childhood experiences and environment are the reason behind our ability to save, invest and spend wisely and that of pain and pleasure. I believe it’s a mixture of both. We carry forward the emotions gifted to us by our family and that of our surroundings. Pain is an experience due to lack of money or, the pleasure of abundance.

I was middle class growing up until my mom, a single mother of four, decided to go back to school. This resulted in going on welfare and moving into low-income housing. A standard response to any material requests was

“We can’t afford that.”

“It’s too expensive.”

“We can buy something cheaper”

and just flat out “NO”

These statements created strong emotional ties I associated with money. There was never enough. This could have taken me two ways – save everything due to scarcity or spend it all because “not enough” needed to be quenched.

My mother said something with a lot of power, she taught me to earn what I wanted.

“If you want something, get a job, and buy it yourself.”

As a teenager that’s exactly what I did. I got a job. I paid for the designer clothes I wanted to wear and the car I drove. I bought what I wanted with what I made.

Here lies the problem. I didn’t learn to how to use money; to use it to my advantage, how to save it, invest it or make it grow. I didn’t learn how to use the powerful tool I had gained. Instead I was swept up in the messages I receive from the social norm – You can afford this. This can be yours. You deserve this (this is definitely my favorite and one of the most powerful messages delivered in advertising today). And best of all, get it now, why wait?

Sure, you may be able to afford this. Yes it can be yours and you might even deserve this after all your hard work BUT, should you? Getting into debt to own something isn’t the right answer. Most debt we carry pertains to spending on wants not debt that pays us. Smart debt is something we understand, research and invest in (businesses, stocks, real estate, even collectible like classic cars or painting) paying us some dividend later. What do we gain from these purchases and why do we want them?

The Marshmallow Experiment (a Stanford experiment create in the late 60’s, early 70’s) offers some insight into this theory. This experiment offered children (ages 4-6) an option – eat the marshmallow right away or wait 15 minutes and get a second marshmallow. Instant gratification or deferred gratification. The children that held off would do everything they could to avoid the sight of the marshmallow by turning away from it or covering their eyes. The results show that children who were able to defer gratification had a better life outcome later in life with results such as higher SAT scores, education attained, and lower body mass index (BMI).

Today, our society is full of instant gratification advertising. To deny it has gotten more difficult when products are always there to greet you and say you need it. And it is so easy to now satiate that desire with the swipe of a credit card.

What would you choose? Why do you choose it?

In my quest to fill a need – there isn’t enough (we can’t afford this) – I’ve come to realize this need wasn’t about enough money. The true nature of my relationship with money had derived from my inner fear that I wasn’t enough. What a revelation!

To feed the “I’m enough” everything was about appearances; clothes were designer, cars got better, houses bigger and something to be proud of. What was missing was just being proud of accomplishments not the reward. And like that first marshmallow, I didn’t wait. Instant gratification was what I chased.

Powerful questions to ask yourself; How do you spend? Does money burn a hole in your pocket? Do you feel better with retail therapy? What are you feeding? There are fundamental needs in life and wants that can help enrich us, grow us or placate us. What happens – habits are formed, attachments are made and we carry out this underlying belief we’ve developed throughout our lives without even realizing we are caught in a pattern.

Here are some ways to calm your impulses, delay eating your first marshmallow and allow you to achieve what you really want – you controlling money not it controlling you.

  1. Pay your self first. The 10% rule. Put 10% of your income into investments and insurance. Investments can be guaranteed. Insurance protects your money so if something like a serious illness (cancer) strikes, you won’t spend all the money you’ve worked so hard to save and build.
  1. Use a budgeting program. This allows you to see your monthly balance reduce with each expenditure. I personally use You Need A Budget (YNAB). YouNeedABudget.com It is the best budgeting program I’ve found. I advise using this program to my clients. It even comes with tutorials.
  1. Know your differences between Needs and Wants. Write a list of the things you want. What are you using your wants for? Instant gratitude or long term gain?
  1. Set a savings goal, declare this with people you know will keep you accountable.
  1. Don’t use Credit Cards or only use what you can pay off at the end of each month.
  1. Get out of your comfort zone and ask the hard questions – How do I spend? What are my beliefs around money? What was my relationship to it when I was growing up?
  1. Lastly, start putting away for retirement. Less than 30% of people have enough to retire. It may seem a long way off but saving early will help you retire when you want, not when you have to.

Once you achieve a goal set another. The sense of accomplishment will spur on the next goal and before you know it, you’ve created new habits and your relationship with money is better.

Break free from the attachments to money and use it for what it is – a tool.

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