Happy New Year everyone!
I don’t know about you, but 2021 was a helluva ride for me! As I look back, I realize that I’ve had a lot to be thankful for, and to look forward to in 2022. All my kids are in a great place. My wife is starting her career journey. Finally, I started this blog to help all you fine people on your way to achieving financial independence.
It’s a new year with new challenges to conquer, new promises to create, and new goals to achieve….. together!
To get 2022 off on the right foot, let’s talk today about our money relationship.
What Is A Money Relationship?
For many people, improving your relationship with money is the single biggest thing that can be done to improve their financial situation in 2022.
For many of us, our relationship with money began at an early age. The stories we heard, the examples our parents set for us, and the behaviors we learned will impact us every day of our life.
Those who have had positive examples set for them at an early age are more likely to grow up with a healthy money mindset. A healthy money mindset allows for people to happily co-exist with money and to have a great relationship with it.
However, there are many people whose upbringing resulted in them having a fractured relationship with money.
Everyone has a complex relationship with money. How a person acquires, spends, and manages money is largely dependent upon 2 factors: childhood nurturing about money & values and the way a person processes this information in their everyday life. What truly makes each person unique is the way each of us organize & process money messages and how we model money behaviors.
A person’s money relationship lies on a spectrum. On either end are the financially insecure. On one end, you have people who are extremely frugal and have a scarcity mindset. These are the people who save and scrimp every penny possible to live within their means, who abhor debt in all its forms, and who always believe they will never have enough.
I was like this. My parents grew up during the Great Depression and had a scarcity mindset. They saved EVERYTHING! Nothing was wasted and nothing was thrown out. When times became tough, they never looked for ways to produce more. Instead, they learned to do without it. I saw that growing up time & time again and that has stuck with me to this day.
On the other end of the spectrum is the financially irresponsible. These people spend money like a drunken sailor on their 1st shore leave in 6 months.
They have an abundance, maybe even overabundance mindset. They believe there is plenty of money to go around. Unfortunately, they also live like they have champagne tastes but only a beer budget. These people rack up tens of thousands of dollars in credit card debt because they feel they will always be in debt so why bother paying it back?
My wife was like this. I thought I dated a financially responsible woman, but I didn’t realize that it was a façade until after we were married. When times became tough, she went on shopping sprees to “find good deals”. She racked up thousands of dollars in debt. When I confronted her about this, she literally told me that she never ever could see herself getting out of debt so why bother trying?
Being on either end of the spectrum is unhealthy. The ideal situation is more like somewhere in-between.
If not liking your current money relationship, fear not. There is hope. A person’s money relationship can change because we can change our thoughts and behaviors towards money. After you determine where you fall on the money spectrum, unhealthy habits can be identified and worked on to turn into healthy habits.
Today, we’ll go thru 5 steps to improve your money relationship.
ID Current Money Relationship
To do this, you need to ask yourself, do you know what your money relationship is?
If not, don’t worry. There are a few ways to do this. For example, below is a list of exploratory questions you can ask yourself to find out your money relationship.
- What beliefs did you inherit from your parents?
- What do you remember the most from your childhood in regards to money?
- How important is money in your life? Why do you feel that way?
- Do you attach monetary worth to your being? Why is that?
- What do you value more, money or material things?
- How comfortable are you with money?
- How are decisions made to spend money?
- How do you feel about and react towards financially privileged people?
- How do you feel about and react towards financially deprived people?
It’s funny how we deal with money every day. Seldom do we ask ourselves these questions or stop to comprehend our feelings towards money…. food for thought. 😊
Another way that I have used to explore my money relationship is to use the Wealth Factory’s Money Persona Quiz. This helped me to identify my money relationship when I am under stress, to determine what my best money traits are, and to look out for certain danger points. Really eye-opening stuff!
Lastly, you can simply ask other people their impression of you when dealing with money. Your friends and family see things we tend to overlook. Our internal perception can be different than the external perceptions we convey to others. Getting their input can help to identify areas where help is needed.
Make A Promise To Change
Now that you have identified your current money relationship, next figure out if this is the type of relationship you want with money. If not, a good place to start is to create promises to change that relationship.
First, why create a promise instead of a goal? A promise is defined as a declaration that something will or will not be done.
A promise is a commitment to meet your objective. It is a commitment to follow through on your word. Keeping promises holds a lot of emotional value and is much more personal. Only you can make or break them. The reason for this is making a promise usually involves hard work, commitment, and is taken very seriously.
On the other hand and at its core, goals are simply ways to measure progress. Setting goals is a way to measure and track success or failure, that’s it.
Therefore, it is important to make promises and set goals. A promise is the commitment while a goal will measure progress.
But where to start making changes? A good first place to start is by practicing forgiveness for past indiscretions. Let’s face it. We all make mistakes. What’s important is that we learn from them and do not repeat those mistakes. It doesn’t serve you to sit in misery because of past money mistakes. Own them, learn from them, and move on.
Odds on, you did the best you could with the information you had at that time. Mistakes make us better IF we learn from them. Focus on why that decision was made and how you would change it next time if it happened again.
Another good place to go to make changes is to practice gratitude. Too often, we are hard on ourselves for past mistakes and don’t take a moment to appreciate all the good thing we have.
Being grateful for what you have is a surprisingly powerful tool for attracting more good things into your life. Focus on the good things in your life no matter how big or small. Write them down daily.
Here are a few: “I am grateful for my family.”; “I am grateful for having enough food to eat.”; “I am grateful for this cup of coffee.”
It doesn’t matter what you are grateful for so long as you appreciate what you have. Being grateful will help you feel more positive about not only money but life in general. This in turn will help you see that you can change any situation you’re in for the better.
Lastly, identify and list what you think a healthy money relationship looks like. If you don’t like what you have been doing, do you have any role models you want to emulate? What does a positive money relationship look like to you? Asking these and other questions will help you visualize what a positive money relationship will look like.
Learn About Money
I am a firm believer that the single greatest thing you can do this year for your finances is to educate yourself. The reason is that I was raised by parents who grew up during the Great Depression. While they were good savers, they had a scarcity mindset and when things went south, they did without. My family didn’t talk about finances. My parents knew nothing about personal finance and how to evaluate a business. I had to find ways to change that.
I started reading every book and blog article I could find on personal finance. I have spent countless hours poring over information trying to figure out how to evaluate a business and find good deals. I learned about setting up various income streams to minimize risk in retirement. I learned how to estimate retirement expenses, set a budget, and figure out how much I needed to retire.
Educating myself has enabled me to take control of my financial destiny and it can help you do the same. Odds on, this is not something we ever learned in school (even business school) or your parents. It’s just not talked about because it’s seen as taboo. To break the cycle, attack what’s taboo and educate yourself.
There is a plethora of resources available. YouTube has literally hundreds of videos on personal finance. There are literally hundreds of personal finance blogs, podcasts, and seminars available to improve your knowledge.
If you don’t know where to start, that’s ok. I didn’t either. I focused on what interested me (stock market and real estate) and developed my skills from there.
If looking for great resources to learn how to invest, try the following:
Stock Market Investing: Rule 1 Investing, Motley Fool, and Financial Mentor
Real Estate: Fundrise, Bigger Pockets
Crypto: Token Metrics
Basic Personal Finance: Robert Kiyosaki’s book, “Rich Dad, Poor Dad”, ESI Money, and M1 Finance
Podcasts: Bigger Pockets, Rule 1 Investing, Robert Kiyosaki
How to Start A Side Hustle: I Like To Dabble
Develop and Implement a Plan
While building my financial skills and developing good financial habits, I also started building a plan.
A plan provides the guard rails to your financial journey. A plan also provides the path to achieving success. If goals are checkpoints along a journey, a plan is the path the person travels along on their journey.
A plan is high level and process driven. It involved thinking through the steps it takes to achieve both the promise and the goal. Finally, a plan involves creating metrics for assessing progress along the journey.
First write down your goals for the coming year and the metrics for measuring progress towards those goals. Then develop the action plan to achieve the goals.
For example, if your goal for the coming year is to payoff $10,000 in debt, how will it be accomplished? Through cutting back on expenses? Adding a side hustle? Both?
Here are other examples of goals:
- Start a Roth IRA
- Start a side hustle and make $500 a month
- Start a savings account and save up 3 months of expenses
The action plan should start small and progressively work towards the big goals. I am a firm believer in micro-habits and talk more about that here.
Finally, you need to act. A plan without immediate action is a plan for failure. Make sure to not only create an action plan but identify the steps to be taken immediately to enact it. All the planning in the world does you no good if you don’t take action on it. It’s better to act, learn from mistakes, and repeat than to over-analyze the situation and avoid immediate action to do it perfectly.
Seek Help
If still struggling to improve your money relationship, then it’s time to get help. Getting help is ok. We all need it and there is no shame in getting help. Professional athletes do it all the time by hiring coaches. Financial coaching is no different.
Fortunately, there are several ways to see help. You can:
- Find mentors
- Hire a financial coach
- Join a mastermind group
Whether it be for your career or your life, finding mentors can help lead to success. It’s always better to learn from people who have already done what you want to accomplish than to beat your head against a wall while trying to figure it out on your own.
Mentors can be sounding boards for ideas you want to try but are afraid to. Mentors can help you assess situations, develop plans, and hold you accountable for your performance.
A financial coach can also be a great tool to drive success. Let me be clear, a financial coach is different than a financial advisor. A financial coach is part psychologist and part strategist who can help you understand the why behind your past decisions as well as help you plan for future success.
A mastermind group can also be a great avenue for finding successful, like-minded people who help each other achieve their goals. Mastermind groups are also a great way to hold each other accountable and to share both successes as well as challenges. These groups also share feedback, ideas, and are a great way to collaborate for making timely decisions.
There You Have It…….
5 ways to improve your money relationship this year. By identifying your current money relationship, making a promise to change, educating yourself, creating an action plan, and seeking help when needed you too can improve your money relationship this year.
Embracing your money relationship will go a long way toward achieving your goal of financial independence. Start the New Year off on the right foot by tackling your money demons head on and embracing change.
Until next time…….
Live The Life You Love, Want, And Deserve