By Essie Bester
Money. Apart from the fact that you can pay your accounts with it and that it allows you to function in a capitalistic world, you don’t associate any positive emotions with it. To you it is something that belongs in your future. Every time you spend money on yourself you feel guilty and selfish about it.
Our feelings about money are generally confusing and extremely complicated. It stirs many emotions in us. The financial expert Ramit Sethi explains that it is because our relationship with money is just as personal and valuable as any other relationship in our lives.
However, the psychology behind our relationship with money is much underrated, he says. Our feelings are almost never related to the financial decisions we make and points to something much deeper.
It is a misconception that money is just about sums, says Ramit. Financial calculations will definitely help you to answer questions such as should you buy a house or not, but there is no magic formula that will help you make a money decision like this.
A rational decision, such as taking out a study loan, could for instance feel like a stumbling block as time goes by. Although the loan paid for your university training, you may feel ashamed and guilty when you think about your debts and it makes you anxious when you look at what you earn compared to how much you save and invest.
You begin to think about what you had to offer as security to get the loan, the interest on the loan, the amount of money you will have to set aside every month as an instalment, and the type of work you have to do to achieve what you want to achieve.
Your negative feelings become worse when you look around and compare yourself to others and even your own life before you incurred debt. You begin to ask yourself whether it was worth your while and think that without it you could have been more free in your choices and would have been happier.
Feelings like these are not related to your debt, says Ramit. You may think that paying off your debt will make you happy, but there will always be something else to worry about. This does not mean that your feelings are invalid. Your emotions prevent you from getting the full picture of your financial situation.
The above is a classical example of a scarcity mindset where you focus on what you don’t have, and that makes you act from a place of fear, explains Ramit.
How does one change your mindset?
Reformulate your thinking: Reverse the way in which you think about your financial decisions. Instead of thinking about what your loan cannot do for you, ask yourself what you got from it and will still get.
Examine your ideas, thoughts and feelings about money: What do you see as the perfect life for yourself? Bear in mind that each of us will define it differently. Comparing yourself to others is useless. Get as specific as possible. If you want to travel, where do you want to travel to and when?
This will help you understand who you are and what you want your life to be like. Do not hesitate to change this vision. Some of your values and priorities will probably also change as time goes by.
How do you develop a healthier, happier relationship with money?
Money need not be stressful and terrifying. Understanding money can be pleasant and joyful. It can make you feel self-assured – as if you have achieved something.
- You must realise that emotions are good for you. You do not have to separate your emotions from the financial decisions you make. Use it to understand your values, your fears, your needs and your desires. This does not make you wavering or stingy. It makes you human.
- Learn to speak the money of language fluently. It means that you have to understand the meaning of terms such as compound interest, investments, etc. Educate yourself about these concepts. Money sometimes looks frightening because we simply don’t understand it. The more specific and organised you get about your money matters, the more in control and the less anxious you will be.
- Become inspired by money. Money does not have to be something that worries you. It can also motivate you. It can help you create joy. When you eat in a restaurant, buy a present for a friend or support your parents, you do not only pay the bill. You feel something. Each of these gestures has a much bigger meaning than a price tag.
How do you evaluate which financial advice works for you?
There are lots of advice – especially regarding personal finance – that is not representative of all of us. Ramit believes that empathy separates good financial advice from the rest. It is easy to tell people the right things, especially if you have the expertise.
Empathy, on the other hand, is to understand that everybody – regardless of their age, gender, race, identity – has a vision of what they want their lives to look like. Because of a number of factors the financial decisions of a 20-year-old man will be very different from the financial decisions of a single mother in her 30s.
Financial advice that is worth its while listening to, will be aimed at helping you to use the money to achieve your unique visions and goals.