The relationship between us and our money is often a very complicated one and is one of the most significant factors in the success (or failure) of our financial goals and dreams. Our behaviors with and around money are often more significant in the ultimate success of our financial plans than the returns we get on our investment accounts. As a financial planner, one of the most important services I provide is helping people better understand and manage their relationship with money in order to help them achieve the goals and dreams. This post will be the first of what I expect will be many on the relationship between our behaviors and our money (aka Behavioral Finance) and discusses the importance of beginning to understand the role our money has in our lives.
You have probably heard the phrase “You Just Don’t Understand Me” at one point or another. Well, if our money could talk, that is it would say to many of us, and it would be probably be an accurate statement. Just as in our personal relationships, hearing that phrase from our money is generally not a good thing, at least if you want to continue that relationship in a positive manner. Money has a powerful influence in all of our lives and can be our best friend, or our worst enemy, depending on how we relate to it. Unfortunately, for many of us, money is something that we take for granted and just go through life without giving it the attention it deserves. This inattention and mis-understanding leads to more harm than good in most cases, derailing our plans and making our lives more complicated than they need to be.
One of the best ways to improve our relationship with money is to make sure we understand what role it has in our lives. That way, when our money talks to us we will know what it is saying.
What is “understanding” your money? Understanding, when it comes to money, is not simply knowing that you have money but knowing how much you have, how you got it, why you spend it the way you do, and what you really want it to do for you. Think of money as a box full of various tools we can use to build the lives that we have always wanted, however we want to build it. If you learn what those tools are and how to use those tools effectively you will be well on your way to building the life you’ve always wanted to build.
We all know that before you can build anything of significance it’s usually best to have a plan. So, with that toolbox picture in your mind, take some time to sit down with anyone else in you your family (spouse/partner, etc.) that is in this with you and start to consider the big picture. Think of yourself as being the architects of your money who are just starting the process of planning the ideal “financial house”. Try to gain some perspective on your overall situation and begin to think about what’s really important to you, and what tools you will need to build the house. Don’t worry about setting any particular goals at this point, just think in broad generalities. Things like “why do I work”, “how would I spend my money if I could wave a magic wand”, “what do we want our money to do for us” all might be good places to start. Think back to some times in your life where you haven’t understood your money as well as you could have. What was the cause, what was the result, how did it impact you and what would you do differently next time? Be honest with yourself and be willing to admit that we’re not perfect.
The idea is to start to build a more honest and open relationship with money, instead of having money control your life. Once we do that we are setting ourselves on a path of continual improvement and growth. Our current day-to-day challenges become less stressful and our future goals and dreams become much more realistic and achievable.
Remember money is just a tool, use it to build the life you want.
If you would like some help understanding and strengthening your relationship with money we would be honored to tell you more about our services. All of our clients have access to a comprehensive set of tools to help them successfully manage their relationship with money, helping them increase the odds of success in their financial plans. You can CLICK HERE to set up a no obligation initial call to learn more about our services. In the meantime, feel free to take a quick WEALTH POTENTIAL ASSESSMENT to see where you fall on the scale of wealth building potential. This is just a short informational survey, not the complete predictive assessment that our clients get access to. That said, it is still a useful tool.