Money can be stressful, but guess what? Not knowing how money works is a nightmare that lives with you night and day. Here’s the rub.
The financial industry has made a killing out of confusing people. Don’t get me wrong, there are some good people out there. But, many people don’t have your best interests in mind. They use difficult jargon and poorly structured plans and websites to obstruct your path to financial independence. Who wants to deal with that?
The wellness industry does not care about money. So, if you are sweating it out in hot yoga, lighting those damn candles, and spending money to find peace but not feeling better, I get it. No matter how zen you are, you won’t feel well if you can't pay your rent or make ends meet.
This is your journey into financial wellness and freedom. I work at the intersection of finance and wellness. These are the basics to help you build an unshakable financial core.
So, let's ditch the jargon, shake off that anxiety, and take things one step at a time.
1. Discover Your Money Feelings
Every financial decision is rooted deeply in emotion. Our complex emotional relationship with money is influenced by intergenerational beliefs and habits which dictates our spending, saving, and investing behaviors. Recognizing these emotional triggers is paramount in a world where the brightest minds in advertising, technology, and marketing focus on evoking feelings to encourage spending. Unraveling your family's financial legacy, understanding its unconscious and conscious impact on you, and being proactive rather than reactive are the cornerstones of sound financial decision-making.
What to Know:
Emotional Spending: Top-tier marketers craft strategies to tap into our deepest emotions. They tap into our desire to celebrate and our despair convincing us that money will fix emotional struggles. We broke up “A trip, new clothes, or car” will heal my heartbreak. Recognizing these triggers is your first line of defense against impulsive purchases.
Loss Aversion & Overconfidence: These powerful biases impact our financial choices. The fear of losses can keep us tethered to underperforming investments, unsatisfactory jobs, or even relationships. Overconfidence might lead us to make rash decisions, banking on unrealistic future windfalls, or overestimate our financial acumen.
The Myth of Self-Control: It's essential to understand that our financial behaviors are a culmination of influences from our family of origin to our peer group and the broader economic culture. Recognizing these profound influences sets the stage for genuine financial empowerment.
Family Financial Legacy: At Outset Financial, we emphasize the importance of understanding your family's financial history and its potential influence on your current behaviors. Our "family money tree" exploration can be a transformative journey into your financial DNA.
Questions To Consider:
1. Can you trace back any of your current financial beliefs or habits to your family's legacy?
2. Are there specific marketing tactics or emotional triggers that have led you to make impulsive financial decisions in the past?
Next Steps:
- Dedicate time to explore the “family money tree” on Outset Financial's website.
- Journal about past financial decisions, trying to pinpoint any that may have been driven by loss aversion, overconfidence, or other emotional triggers.
- Consider setting a waiting period (like 24 hours) before making significant purchases to ensure they're not impulsive.
Completed:
- Engaged in introspection to understand inherited financial behaviors.
- Identified personal emotional triggers influencing financial decisions.
2. Know Your Financial Identity
Before we can master our money, it's crucial to understand where our financial behaviors, beliefs, and attitudes originate. Our financial identity is not just shaped by the dollars in our bank accounts, but by stories, lessons, biases, and experiences passed down through generations. By diving into our financial genealogy, we gain insight into the subconscious patterns driving our decisions today. This self-awareness is a cornerstone of financial success. When we discern where our money beliefs come from, we empower ourselves to challenge, adapt, or strengthen these beliefs to build a prosperous future.
Why It's Key to Money Success: Our relationship with money is multifaceted. It's not just about numbers; it's deeply psychological and emotional. The dynamics, narratives, and feelings we've inherited can either propel us forward or hold us back. By identifying and understanding these, we take the driver's seat in our financial journey. Unraveling our financial identity helps us create a money story that aligns with our goals, ambitions, and the life we aspire to lead.
What to Know:
Intergenerational Money Patterns: Just as habits and beliefs get passed down through generations, so do financial behaviors and attitudes. Understand your family's financial past to make informed decisions for your future.
Financial Trees: Visualize your family's financial history. Chart out how previous generations earned, spent, saved, and talked about money.
Gender Biases & Money Languages: Gender roles can often dictate financial behaviors. Recognize and challenge gendered expectations or biases that may have influenced your family's financial dynamics.
Money as Power & Control: In many relationships, money can be wielded as a tool for control. Reflect on dynamics within your family and see if financial power played a role.
Cultural Influences: Cultural beliefs around money, from saving habits to ideas of prosperity, can shape financial behaviors.
Major Life Events: Understand how significant events, like bankruptcies or economic downturns, influenced your family's financial choices.
Financial Education: Reflect on the financial literacy imparted within your family. Did it come from structured lessons, or was it learned through experiences?
Questions To Consider:
1. What are the most prevalent money attitudes you've inherited from your family?
2. How have gender roles and biases influenced your family's financial behaviors?
3. In what ways have cultural beliefs shaped your family's approach to money?
4. Can you identify any significant financial events in your family history that influenced money behaviors?
5. How did your family handle financial education, and how has that shaped your own understanding?
Next Steps:
- Build your family money tree. Include grandparents, parents, and other influential family members. Reflect on their behaviors and note any patterns you observe.
- Engage in conversations. Talk to family members about their financial histories, beliefs, and any lessons they've learned.
- Challenge and reassess. Identify any unhelpful financial beliefs you may have inherited and work to develop healthier patterns.
Completed:
- Created a family money tree.
- Engaged in conversations about family financial history.
- Identified and began addressing unhelpful financial beliefs.
3. Evaluate Your Daily Financial Influencers
The digital world is loud, with multiple voices pulling you in different directions. It's imperative to identify and discern the financial influences shaping your decisions. Make sure they align with your goals and financial well-being.
What to Know:
Friends & Finances: Peer pressure isn't limited to school; it extends to spending habits and lifestyle choices. Know if your social circle nudges you toward financial decisions that might not be in your best interest.
Influence of Social Media: From 'get-rich-quick' schemes to genuine financial advice, social media has it all. Learn to filter the noise and identify reliable sources.
Value of a Money Mentor: An experienced guide, free from emotional biases related to your life, can offer sound financial advice tailored to your situation.
Power of Association: Remember, "you are the average of the five people you spend the most time with." This reflects not only in personality but also in financial habits.
Emotional & Financial Health: Emotional triggers can often lead to impulsive financial decisions. Recognizing and managing them is key to maintaining financial stability.
Questions To Consider:
1. Do you feel any social pressures when it comes to financial decisions? Is there a recent purchase you made purely based on social influence?
2. When was the last time you cross-referenced financial advice from social media with other reliable sources?
3. How might a money mentor benefit your current financial situation? What qualities would you look for in such a mentor?
4. Thinking about your closest friends, are their financial habits influencing yours positively or negatively?
5. Can you recall when an emotional event directly led to a financial decision? Was it beneficial in the long run?
Next Steps:
- Inventory Check: List the main financial voices and influencers in your life. Are they more beneficial or harmful to your financial journey?
- Educate Yourself: Subscribe or follow credible financial sources or platforms that resonate with your goals. Vet their credentials and cross-check their advice.
- Seek Mentorship: Identify a potential money mentor or financial coach. Even casual conversations with someone financially savvy can offer insights you hadn't considered before.
- Reflect on Associations: Assess the financial habits of your closest circle. Expand your network to include those with financial behaviors you aspire to.
- Understand Your Triggers: Take some quiet reflection time to identify any emotional triggers tied to spending. Develop strategies or habits to counteract or manage these triggers effectively.
Completed:
- Created an inventory of the main financial influencers in my life.
- Subscribed/followed a minimum of three credible financial advice sources.
- Engaged in discussions or consultations about finances with a knowledgeable individual.
- Evaluated and reflected upon the financial habits of my close circle.
- Identified personal emotional triggers related to spending and devised management strategies.
4. Embrace Charitable Giving
Sharing, whether time or money, enriches the soul and strengthens community ties. Charitable acts offer a humbling perspective on money's value and foster a positive financial flow.
What to Know:
Tax Benefits: Many charitable donations can be tax-deductible, further enhancing the financial benefit of giving back.
Good Money Karma: Engage in the give-and-take cycle. Today's giver can be tomorrow's recipient.
Community Impact: Your contributions, no matter how small, can create ripples of positive change.
Questions To Consider:
1. What causes resonate with you?
2. How can you integrate charitable acts into your routine?
3. Imagine how you will feel after you donate money?
Next Steps:
- Set aside a small portion of your budget for charity or consider volunteering once a month.
- Document your feelings in your money journal
Completed:
- Donated Money
- Wrote about my experience and money feelings in my money journal
5. Practice Gratitude
Contentment lies in appreciating what you have. While ambitions drive growth, gratitude grounds you, keeping materialistic tendencies in check. Continually seeking more can lead to unnecessary spending. Gratitude reduces the urge to keep up with societal pressures, fostering healthier financial habits. Find joy in what you've got. It's the perfect way to curb that endless "I want more" loop. Live in the now, but keep an eye on building for tomorrow.
Tip: focus on the small tangible things that come up in your daily life. For example, I am grateful my friend called to see how I was. I am grateful for my warm shower and the water pressure in my home. I am grateful I could buy fresh meat for dinner tonight. The more intimate your gratitude list and focus the more you feel how blessed your life is.
What to Know:
Curb Materialism: Constantly wanting more can lead to unnecessary spending and discontent.
Live in the Present: Relish today's joys while prudently planning for the future.
Financial Stability: Individuals practicing gratitude are less likely to make impulse purchases, contributing to better savings.
Questions To Consider:
1. What are three things you're grateful for right now?
2. How can you cultivate a daily gratitude practice?
Next Steps:
- Consider starting a daily gratitude journal or take a moment each day to reflect on your blessings.
- Write a week of journal entries on the small and big things you are grateful for.
Completed:
- Wrote a gratitude list
- Created a gratitude practice that works for you
