In our last blog, we looked at the beliefs that cause us to behave in the way that we do about money. If you’ve read through the beliefs, you may have recognised some of your own actions. That’s a great first step, but understanding why you do what you do is only the beginning. If you want to develop a better relationship with money, you need to work through the beliefs that are preventing you from building a secure financial future and from being content in the present.
We spoke to Stuart Kantor, wealth manager at Kanan Wealth, to find out how you should think about money in order to get the best results for yourself and your bank balance. He considered the beliefs in the four areas of the Klonz Money Script Inventory, and suggested that people should try to understand the root causes of their beliefs about money, and provided practical steps to overcoming them. Here’s what he had to say:
Money avoidanceThe Indicator suggests that for money avoidance types, the idea of money often stirs up fear, anxiety or disgust. As a result of these negative associations, these types don’t plan for the future and often don’t know what their current financial situation is.
Stuart says that these people need to work out the root causes of their financial insecurity and open their minds to seeing money as a force for good and not a source of negativity. He says that this can be done by pinpointing a wish or goal, and thinking of ways in which money can enable that through planning.
It’s also important to let go of the negative associations with money by being aware that ensuring your own security makes you less likely to be a burden on your family and society, and that wealth is a justifiable reward for hard work and empowers you to do good in the world if you believe that’s important.
Money worshipWhile money worshipers believe that money will solve their problems, research has shown that after the initial excitement, a financial windfall doesn’t make things better for them at all. There is no link between money and happiness once a person’s basic needs are met.
Stuart says that again, it’s important for people with these beliefs to unravel the root causes of their perceptions and understand their motivations or triggers. Why do they equate money with love, power or happiness? Then they should consider their answers and try to look beyond money for what will make them happy.
Money statusMoney status types believe that accumulating wealth and displaying wealth are important because they show the world your financial status. But research shows that being over-concerned with financial success and being materialistic often result in lower levels of wellbeing, vitality and happiness, and higher levels of anxiety, illness and unhappiness.
Research has also shown that the greatest joy people derive from material possessions is buying them. Once they own the possession, it quickly loses its appeal. At the same time, those who buy experiences or education tend to get far more joy out of their spending. Finally, those who save up and spend cautiously on the things that are really important to them, enjoy their purchases far more than those who seek immediate gratification. This all indicates that spending for the sake of spending is a direct cause of dissatisfaction, instead of creating feelings of wellbeing.
Stuart says that when he sees this belief in his clients, he tries to help them understand that money is an enabler for even greater upliftment in the future, rather than for creating the impression of status immediately. He encourages them to allocate a portion of what they have towards education and emergency savings so that the money they spend really is improving their status and future security – and to begin to experience what it means to build true wealth.
He says that one of the most common problems he sees in this area is so-called “lifestyle creep”, where people improve their lives as they earn more, instead of boosting their savings. He encourages clients to budget by considering the actions of people who earn less than they do, and who have less debt, rather than those who have more.
Money vigilancePeople who are overly vigilant about their money can act in a way that negatively impacts their financial growth – including hoarding money rather than investing it. This type also tends to be overly worried about pending trouble or danger, which leads them to make ill-considered decisions about growing their wealth.
Stuart says that it’s important to carefully guide people with these beliefs towards a state of trust in others and the financial system. Their fears need to be addressed and they need to be shown the benefits that can be gained by making sensible (not fear-driven) financial decisions. He believes that the best approach is to encourage baby steps towards new products and relationships, helping them gain incremental levels of trust in the system.
The bottom lineIt can be extremely useful to examine your beliefs about money and how these are influencing the decisions you make. For many, having a long, hard think about priorities and behaviours will be enough to set them on the path to a bountiful financial future. However, if you are still struggling to overcome your beliefs and get your financial planning on track, visit your bank or an independent financial advisor to talk about your options, and if you still can’t break the cycle of overspending and debt, consider seeing a therapist to help you to confront your money problems.