02 Feb Take Control of Your Finances
“Rarely in our life is money a place of genuine freedom, joy, or clarity, yet we routinely allow it to dictate the terms of our lives and often to be the single most important factor in the decisions we make about work, love, family, and friendship.”
Lynne Twist, The Soul of Money: Transforming Your Relationship with Money and Life
Everyone has a money story, a set of beliefs which either limit us—keeping us in a constant state of fear about money—or help us to live in abundance with it.
Many of the stories that we tell ourselves about money are centered on our upbringing and our parent’s relationship with it. If you ask yourself the question “what is my first memory of money?” you will be astounded at what you come up with. Chances are your first memory of money shapes how you feel about it today. I once asked a client this question and she told me that when she was young she was given an allowance for doing chores around her house. In her mind the list of chores was very long and the money she received was not equal to the work. She has carried that money story with her into adulthood always working hard for others and never expecting to be paid what she is worth.
The second influence on your relationship with money is how your brain works. To put it simply your brain is made up of two parts; one controls emotions and the other rational thought. The emotional part of your brain wants the new shoes even though you know you can’t afford them and you have several pairs at home already. The rational part of your brain justifies the purchase because they were on sale. Money does not equal math if it did then we would all do the right things with it, like save. Money is emotional your brain and your heart are always in a constant battle over it.
The third influencer on how you spend your money is your life and particularly those you surround yourself with. We have all heard the saying “keeping up with the Jones” In this day and age of social media bombardment we are keeping up with the Jones on steroids! All the carefully curated photos we post of ourselves on Face book and Instagram are having an effect on us and our spending behaviours. When you see your neighbour post a picture on Face book of their spring break trip to Hawaii you start to ask yourself, “Why can’t I take a trip like that?” and off you go booking a trip on Expedia. I am here to tell you that chances are your neighbour can not afford their trip either and that the whole thing is being financed by Visa or MasterCard.
So how do we take control of our finances? The first step is to change your mind set about money. Be aware of your spending habits. Try tracking your spending for a month to see where your traps are. Typically behavioural spending happens in: retail purchases, convenience foods, restaurants, alcohol, personal grooming and entertainment. Next accept where you are. There is absolutely no use in feeling shame and guilt around what you have done so far with your finances. Accept where you are and be willing to change. If old habits have put you in a place where you do not feel in control of your finances than be open and willing to look for new ways. Once you have a plan in place you must then take action. By changing your mindset about you money you are on your way to better financial health.
The secound step is to improve your financial literacy. We are not taught about money at school and chances are your parents did not teach you about it either. There are several great books on financial literacy and money mindset. As well as podcasts, ted talks and online courses. Seek out a money coach or financial advisor that specializes in money mindset. Self education is always the best education.
Third, take a holistic approach to your finances and financial plan. Start with your cash flow and spending behaviours. Have a strategy as to how you are going to tackle your spending. Next get unwanted debt under control by smoothing out payments to your lines of credit, loans and credit cards. Put a safety net in place in case life doesn’t go according to plan and finally start funding for your future. Again a financial coach or advisor that specializes in holistic planning can help.
Finally start talking about money with your partner, your children and your friends. We need to end the taboo around talking about money. Out of control finances are affecting our mental and physical health as well as our relationships. In fact according to the 2018 ManuBank survey on Canadian debt 40% of mental health issues are tied to money stress and fighting over money is the top reason for divorce in this country. We need to end the stigma around talking about money.
It takes more than willpower to change any habit including money mindset but with the right tools, the desire and willingness to change you can take control of your finances.