In my grandparents’ day there was a set path and limited choices.
It was generally accepted you would get a job, marry, buy a house, have at least two children, retire at 60 from the same company you started with, receive the old age pension and join the grey nomads in their caravans until the grandchildren arrived.
Today there are hundreds of paths and almost unlimited choices. With new paths appearing and disappearing daily.
These paths are affected by skyrocketing house prices, rising rents, ever-changing technology, artificial intelligence, globalisation, changes to the traditional family unit and the appearance and disappearance of jobs and careers. We can add to this mix easy access to credit, the ability to spend 24/7, a wanting to keep up with the joneses who now are simply names of accounts on the internet and a growing unease around what the future will hold for us and our children.
While all this choice can be a great thing, it can leave many of us feeling more than a little dazed and confused. Particularly when it comes to our finances.
The problem for many of us, is that money is already something we’re not comfortable talking about. Or thinking about. In a time of growing change and uncertainty, we need to have better conversations about money and receive more help with our finances.
Yet we’re doing less of both.
Some of us are stockpiling funds in a bank account and stressing about the less than 2% interest we’re receiving but scared to do anything else. Or we’re defaulting to what we think we should be doing which is often just paying down the mortgage and hoping desperately it will be enough. Or perhaps we’re spending and burying our head in the sand and choosing to have a great time now, because who knows what tomorrow will bring.
In other words, many of us are being reactive rather than proactive with our finances. And in a time of rapid change, this can be a recipe for financial disaster.
That’s because the media may call it mortgage stress but it’s so much more than that. It’s feeling as though you’re in a place that’s financially dire. That may be because you’re in over your head with the debt you’re carrying, it may be because you have six credit cards maxed to their limit, it may be because you’ve amassed a large amount of cash in a bank account and you’re scared to do anything with it or it may be because you’ve opted out financially because you feel you have no choice.
It all leads to a place where you’re feeling financially stuck.
Now, dealing with money may never be something that lights you up. Dealing with money may never be something you’re completely comfortable with. You may always feel overwhelmed by choice or frustrated by your lack of choice. It’s important to understand whether you make one consciously or not – there’s always choice.
How you whittle down the number of paths so you have meaningful choice is ultimately whether you can move from being financially dire to financially resilient and ultimately financially well.
Now financially dire or financially stuck we get. But what about financially resilient? Financial resilience may not sound particularly exciting but resilience or grit is incredibly important. It’s become something of a buzzword in 2018 and when it relates to your finances it means you have the ability to weather financial storms, without drowning.
It means when the car needs expensive repairs you’re not financially derailed because you have a buffer. If unexpected illness, change or jobs or change of circumstances happen you might not love it, but financially you can at least cope with it. It’s the thing that allows you to keep breathing when everything is going wrong and allows you choice because you have space.
Of course, financial resilience is important to have but it’s not a place we should be aiming for. Instead, I want you to aim for financial wellness. Sure, we need grit and resilience, but simply breathing isn’t living.
Instead, financial wellness is living a life by design instead of a life by default and having a financial plan in place so that you’re proactively working towards it.
You might compare financial wellness to physical wellness. It’s feeling financially fit, strong and robust so you feel that you could change career, start a business, go on a sabbatical, start a family, retire without wondering whether you can turn the heater on in winter or have choice around what path you might take.
The concept of moving from financially stressed/dire to financially resilient to financially well sounds great in theory, right? But I’m sure many of you are scratching your head trying to figure out exactly how that’s done. And you’re potentially bloody annoyed you don’t have the answer. Often this comes with a bunch of shame and judgement because we’re frustrated that we can’t financially sort ourselves out and we’re too proud to ask for help. Or if we’re honest, we’re not quite sure who to trust for help.
Because here’s the thing – and it’s something I know many of you suspect and are frustrated by – dealing with money should be simple.
It should be a simple equation of spend less than you earn, invest a percentage of your income at a rate that exceeds CPI for as long as you can and only use debt for assets that will appreciate in value. The problem is, many of us are too ashamed to ask for help because we think that we should just be able to sort ourselves out. We should be able to be financially adult.
The result being that many of us are paralysed or opting out when it comes to our finances.
This overwhelm isn’t restricted to our finances. I see it mirrored in so many areas of our lives, but let’s compare it to another everyday staple – food.
Again, when it comes to food and what we should eat, it really should be simple. The equation should be less or equal energy going into your body as that being expended in activities. The problem is, as a nation we’re becoming fatter and succumbing to weight-related diseases such as diabetes and heart attacks.
Why are we finding it so tough?
I believe a big part of the problem is our feelings of overwhelm at the myriad of choices but also, at its core, it’s about the psychology of food and money. Or mindfulness.
Before you start rolling your eyes and thinking I’m going to ask you to start eating kale while you sit in a circle and chant, stick with me.
First, let’s think about food. When it comes to food, many of us have a strange and twisted relationship with the food we eat. We eat when we’re sad, we eat when we’re stressed and we eat when we’re happy. Or we choose not to eat when any of those situations arise. We use food to fill a void and we’re not stuffing that hole with vegetables and fruit – we’re filling it with cakes, chips, fast food, processed food and deep-fried doughnuts. For many of us, the role of food is vastly different than the role it’s supposed to hold – something that nourishes us and gives us energy.
It’s no different when it comes to our finances.
Again, many of us have a strange and twisted (some would say toxic) relationship with money. We spend when we’re sad, we spend when we’re stressed and we spend when we’re happy. (Sensing a pattern here?). We use money to fill a void and thanks to 24/7 spending, easy access to credit and being bombarded with thousands of advertising messages every hour of the day. It’s easier than ever before to get ourselves into financial strife.
Or we hoard money in a bank account so we can look at it and feel a sense of stability in an ever-changing world. And the balance that account needs to be to give us that feeling isn’t something we can settle on. So, we do nothing and keep saving, which may seem sensible, but isn’t really a worthwhile plan.
It’s no wonder we’re so screwed up when it comes to our finances.
That’s why I believe it’s so important to recognise why you behave the way you do with your finances. This is the first step towards moving past the overwhelm so you can start to do something positive about it.
That means starting to understand what, how and why you think about money and then diluting the many choices you’re able to make down to the few that make sense to you.
The first step, before we figure out which financial path you should be taking, is starting to realise and appreciate how you think about money.
It’s important to understand there’s no judgement here. Instead, it’s the start of a movement away from unconsciously reacting to consciously and proactively managing your money in a way that gives you back control.
It’s a much better way, trust me.
We’re going to start by figuring out what your money story is. What’s the story in your head and how do you act as a result. Grab a piece of paper and answer the following questions
If you have a partner, encourage them to do this exercise too and then share your findings with each other. With a Relationship Australia survey showing money is the number one thing coupes fight about, it’s vital to be on the same financial page. If you don’t have a partner, encourage your friends to do this exercise and then share your findings so you can, as a group, start a positive dialogue around money.
It’s important as you do the exercises to look out for the inherited money beliefs you hold. They might be ones you’ve adopted from your parents, your peers or the media. Beliefs such as it’s important to own your own home, a single woman will always struggle financially in retirement, a man should always be the financial provider for their family or money has the power to corrupt.
It’s about you designing a new money story, a new money path. One that you’re excited about creating.
It’s about you designing a new money story, a new money path. One that you’re excited about creating.
Understanding what you believe about money and how that translates into your actions is incredibly powerful. It turns money from being something shameful, something you avoid, something on your ‘to do’ list to get to one day into something positive that you’re excited to do something about.
It’s the first step in your new financial mindset and approach to life and your first step moving from financially dire to financially resilient to financially well. It’s choosing not to put off thinking and dealing with money any longer. It’s about bringing clarity around how you’re thinking about money and how that’s causing you to act.
Hopefully, you’ll have a whole bunch of a-ha moments and start realising that the relationship you have with money is unhealthy and needs a do-over. Or for some of you, your money beliefs might not be bad but they could be a whole lot better.
This first chapter is all about helping you realise that perhaps it’s not the choice of path that’s the issue. Instead, perhaps the biggest handbrake when it comes to your finances is you. Your limiting and sabotaging beliefs. And for you to understand that with a bit of tweaking, you can easily lower the brake, choose a path and start driving.
After all, I want you to be driving down the financial path you’ve created feeling quietly confident that you can handle the financial side of life. Confident that you’re financially adulting. So that you are spending less time worrying about money, budgets and paperwork and more time worrying about the fun stuff such as what’s for dinner, where’s our next holiday and maybe even whether you should make paper airplanes or head to the park with your kids.
You may be over your head with debt because you have six credit cards maxed to their limit. Or, you may have just opted out of making financial decisions because you feel overwhelmed by choice or frustrated by lack of choice.