There are more opinions on money then we think. In our encounters with various people, one of the things we need to understand is their perspective on money. It is integral to understand when creating their financial life plan. Face it, we all have different intellectual and emotional money motivators. These can range from needing more security to wanting the prestige of wealth. By understanding what drives your decisions, or creates your challenges, you can be more financially aware and healthy, and operate more effectively and in tune with your money personality.
Managing your money mindset starts with understanding it. This is a necessary step before implementing changes where required. Part of the journey to understanding is discovering the core drivers that motivate people financially. Here are the primary money motivators.
Money Motivators
Having Prestige – Those who are motivated by prestige want a better quality of life. They don’t want to budget or limit where they can spend their money. They perceive budgeting as a sign that they haven’t quite made it yet; the problem with this motivator is that spending for prestige may lead to significant debt. It is important to have other financial motivators to balance this one.
Seeking Security – Those seeking security want protection and certainty. They want to create enough savings for the future, and are disciplined with their money. The problem comes when they limit themselves to investments that are too conservative; they struggle with the unpredictability of the market.
Future Growth – A related motivator for saving is the pursuit of future growth. Investments are very important to these savers, but this motivator can lead people to take undue risk as they seek the next deal. The motivation of growth can be one of the most beneficial as long as there are some controls in place; this saver, as well as those motivated by security, would benefit from a written financial life plan to keep their decisions balanced and appropriate.
Having Spontaneity – In reality, saving money can provide the funding for freedom and spontaneity. However, those with the sspontaneity motives won’t necessarily save for the long-term; their focus is usually on the shorter-term goals which can lead to debt. Balancing spontaneity with other motives can help impulse purchases from becoming a problem.
We assist in showing you your dominant internal priorities. Partners and families enjoy having the language and data to discuss similar and different approaches to money to better understand how to work together. Of course, once you understand your money motivators we need to then understand them and, if necessary, change them. Behaviour modification, or change, is hard in general. When it comes to managing your money, they can be especially challenging. So here is how we can begin that transformation.
Managing Your Mindset
We all feel out of sorts with money, from those of us struggling with debt to the successful business owners we work with on a weekly basis. People are programmed to avoid things that cause fear. Sure, we may pop into the movie theater to catch the latest horror flick, but when it comes to living our day-to-day lives, most of us go out of our way to avoid scary things.
Unfortunately for many, budgets are the things that go bump in the night. Many of us have been taught to think of a budget as a weapon of mass destruction, a tool that sets us up for self-flagellation. The self-defeating thought process is often, “I’m going to set a budget and beat myself up if I can’t keep to it, so I’m not going to do it at all.” It is like a diet that you ignore and instead of altering your approach, you mentally destroy yourself as you reach for a doughnut or some candy. That must stop.
We need to change our mental approach to finance. I think of a budget as a diagnostic tool. It is no different from going to the doctor and having the nurse take your temperature and blood pressure. They are establishing a baseline for your health. A budget is a baseline for your financial wellness. The doctor doesn’t beat you up if you have high blood pressure. It is discovery. It gives the doctor the information needed to fix the problem. Look at a budget the same way – it’s diagnostic. If a doctor told you to exercise regularly or reduce your sodium intake, you would listen. Well, I am not a doctor, and I don’t play one on TV, but listen when I urge you to look at your soon-to-be-born budget a different way. It is not a setup for failure; it is a prescription for long-term success.
Creating a budget allows you to get an understanding of where your money is allocated and what changes will help you get what you most want out of life. That’s right, creating a budget can cause happiness, not stress.
So how do you get started? Before you get going on the details of creating a budget, I have found it very helpful to focus on shifting the mindset first. While changing, your mind is not always easy, it is possible, and you can start by following these steps:
Be Aware – Before we can make any significant changes in our lives, we need to become aware of our money challenges. We need to look at them for what they really are, even if they are not pretty. When we really allow ourselves to feel a bad feeling for what it is, we usually want to get rid of it more than we want to keep holding onto it. That is when we’ll know were ready to start making some changes.
One example is the realization of the discomfort experienced when avoiding things like filing taxes by the deadline. Instead of taking care of the issue in a timely way, prolonging the problem causes greater stress later, not to mention financial penalties. Becoming aware of the habitual approach taken when it comes to money responsibilities allows us to feel whatever we are resisting and see that it isn’t as bad as we thought.
Accept What Is – Acceptance must come from deep inside even if that means feeling uncomfortable. By allowing our feelings to exist and giving ourselves permission to experience pain, we open the door to acceptance. Money often brings up feelings of guilt, shame, greed, anger, and frustration, which are all emotions we work very hard to avoid feeling.
Understanding our natural resistance to these feelings is useful, as it takes the emotional charge out of the resistance and allows us to think more objectively. Seeing how whatever we resist has a funny way of persisting helps us to step back and accept what is. It may have felt like avoidance was the safest option in the past when it came to money, however as we shift into acceptance, we see how important it is to have a way to diagnostically understand our money and our feelings about it.
Allow Change – When we diffuse our emotions, we can step back and shift our attention towards discovering the deeper cause of our feelings. This allows us to recognize our money patterns, as well as the root cause of our avoidance. I have used this process for years, as it helps find the underlying cause of why we do the things we do.
Avoiding money-planning tools often connects into fears of not having enough. Once we discover our secret feelings, we can recognize that while this may have been a past tendency, it doesn’t have to be our long-term reality. Seeing that change is not only a possible but necessary step for taking responsibility for our own happiness allows us to realize how budgeting can be a great way to learn about the numbers and our personal tendencies at the same time.
Take Action – By the time you arrive at this step, there will be much less resistance to creating and maintaining a livable budget. In fact, you may feel a sense of excitement because you see that your old way of thinking has shifted into wanting to create your own path to success by harnessing greater control of your money. Using the budget as a diagnostic tool makes a lot of sense and is clearly the best way to move forward.
Knowing where you are with your money helps you take action if, and when, change is necessary, so you can live proactively versus reactively. Too little money coming in represents an opportunity to either cut expenses or to earn more money. In fact, I have met several people who had so much fun being creatively frugal that they made businesses out of their hobby, proving that you never know what may come from changing your mindset.
Let’s take a real example. One client I worked with to create a budget realized she was running a deficit every month of several hundred dollars which was causing her to increase her debt load substantially. By proactively controlling some of her expenses, she could not only stop adding to her credit card debt, she found ways to begin paying it down which led to less stress and less impulse spending. She also decided to start a side business selling jewelry which gave her the opportunity to splurge from time to time. In the end, she found that having a budget made life a lot easier and more enjoyable because when you know the facts about your money, anything is possible.
So now you have some ideas for managing your mindset so that budgeting becomes easier and more enjoyable. Seeing it as a diagnostic tool, rather than a painful weapon, places you in control of your money rather than it being in control of you. By following these tips, you can easily create a livable budget, one that will help you achieve peace of mind and get rid of many financial worries.
Changing your money mindset is a not an overnight process, but the rewards are worth every bit of effort you put into it. Do you have a process in place to create greater levels of wealth and joy in your life? Self knowledge will help you make good decisions not just about spending and saving, but in other aspects of your personal and business life.
Northern River Financial helps clients identify their money personality and improve their relationship with money. Money is a conduit, a tool and not a destination. We help create a life plan that keeps clients motivated on the long, and sometimes difficult, journey of financial responsibility. The journey is a necessary route to Keeping Life Current.
