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Continuing on in the series: In our society we place a lot of importance on money. It’s only logical. Money helps ensure our survival. It’s also seen as a status symbol. The more you have of it, the more important you are. Money itself doesn’t even exist. Money is just an idea. It’s a way of coming up with a generally-agreed-upon symbol of value. If you are paid, then you know basically how much value is placed on what you were paid for. The thing is, that money does not bring happiness. Indeed, money will flow into or out of your life based on your emotional state
Your emotional state equals your cashflow
One of my favorite personal finance authors, Suze Orman, is fond of saying that when you feel “less than” you spend “more than”. This means that when you are feeling down, you tend to spend more than you can afford. This is an attempt to buy happiness to help you feel better. The tragic truth of the matter is that doing so only makes you feel worse, and now your financial situation is not going to help matters either. I did a post on taking control of your life in order to overcome feelings of powerlessness. Ironically, that is what people are instinctively trying to do when they try to shop their sadness away.
Fear is also another emotion that can ruin your finances. Years ago I had a tough job with low pay that was slowly but surely ruining my health. I was so afraid of losing what little income I had that I couldn’t open my eyes to see the opportunities around me. If you have given in to fear, then you will be immobilized by it and that can be ruinous.
A good indicator of your emotional state in relation to money is your use of debt. Debt can be either good or bad depending on how it is used. Good debt is debt that is used to put you in a better financial situation, and bad debt is debt that will put you in a worse financial situation. I’m going to depart a tad from another one of my favorite writers on money, Robert Kiyosaki. Here are a few examples of what I mean by good debt:
- Student loans, so you can get a higher paying job.
- Taking on a mortgage or an investment property (assuming you’ve done your homework).
- The mortgage on your own home, so that when you get to retirement age, you can live comfortably on less.
- Medical expenses - Generally, it’s harder to generate income if you are physically unwell.
Bad debt can be any of the following:
- Using credit for doodads such as unnecessary clothing, electronics, or travel.
- Using debt to fund gambling (including investments for which you haven’t done your homework).
- Using debt to buy things that depreciate in value, such as cars, boats, airplanes, jewelry, etc.
If most of your debt is good debt, then you’re on the right track. If not, then you may have had some emotional issues with money in the past or maybe even still. In some cases it might be hard to tell if something is good debt or bad debt. Knowing the difference is a function of a higher level of awareness. As your awareness increases, that opens the door to gain greater financial education, and the greater your financial IQ gets, the more good debt you can use, and the better you are in the world of money.
Being happy in the world of money
The first step is to realize that it’s not the money, or the goods, or the lack thereof that determine whether or not you are happy. What you have to do is realize that the happiness you want comes from within. When you take control of your financial life and realize that you can do it, that will be a happy moment. The happiness will only continue as you get more and more skilled.
If you are already happy when it comes to your money, good for you! More power to you. Literally. Once you are happy with your financial life, you’re in a great spot because now you have what you need. If it becomes necessary to increase your income, you will be able to do it. Having the proper emotional relationship with money is the most critical aspect to a healthy financial life.
Here are some problems people seem to have with money and some ways to overcome.
If you feel that you overspend, one thing that helped me overcome that problem was when I was out shopping, I would ask myself “why am I buying this now?” This was my first real attempt at monitoring my internal state, and it has since paid off. I found it best to ask myself that before I got to the checkout stand. Less pressure that way. If you find yourself buying something that you don’t really need, ask yourself why you are really, truly buying the item. You’ll know whether or not the reason you get back is legit or not. If it turns out that you are buying from your emotions, now is a great time to do some digging so as to find out what is going on. What emotional need are you trying to fill? When you find that emotional need, ask yourself if the item will really fill it for you. I’d be willing to bet the answer is “no”. At that point, you can put the item down, and walk out. You may still feel compelled to buy it on some level, but the more times you assert control, the easier it gets. One thing that helped me is to realize that I don’t have to get it now, I can get it later. If you wind up caving, don’t beat yourself up if you can avoid it. Just keep in mind that you have made some progress. Each time you exercise your awareness and control, it gets easier. Now I can walk right by my favorite doodads, glance at them in passing, and just keep on going.
Moving on to the topic of fear. Robert Heinlein wrote “Courage is the compliment of fear. He who is fearless cannot be courageous. (He is also a fool)”. I use this quote because fear, in it’s proper place is a good thing. However, if left unchecked and unchallenged, fear will paralyze you and take away your control and your life. If you are living in fear, then you aren’t really living at all.
There are two big ways to deal with fear: Experience and education. Both of which work by replacing fear with knowledge. As you might guess, people like to try hitting the books first. That is one way to go, but I suggest a mix: Try challenging your fear in a small way. Just a small way to get your feet wet. While you are doing that, do your book learning to make your situation more comfortable. As you get adjusted to where you are, you can take another step, and then another, until you are much more at ease. When picking your first experience, it’s important that it’s not too much. You’re just getting your feet wet. When setting it up you want it to be a small learning experience that won’t cause any problems if you fail. Fear of failure is also to be avoided. Making mistakes is an important part of learning, and fear of mistakes has been ground into most of us by a misguided public education system. Make your mistakes small, often, and early during the process in an effort to avoid the big mistakes when you are further along in the process.
Do you have any methods or techs for improving your emotional relationship with money? Let us know in the comments!
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