Personal Finance

A Healthy Relationship with Money: What it is and How to Achieve it

You don't have to be an expert in finances. You have to dig into yourself and change your habits a little.

What is the essence of a healthy relationship with money?

Financial health is a conscious, goal-oriented attitude towards money that is fulfilling and not overly stressful,” says what It Means to Have a Healthy Relationship with Money financial psychologist Brad Klontz. It includes the understanding that funds will be needed not just now, but also in the years to come. And also the ability to distinguish between what you really need and what you want.

Your relationship with money is healthy if you:

  • Spend money based on your inner values.
  • Have no or almost no debt.
  • Save up to achieve your goals.
  • Have a financial cushion or contingency insurance.

Accordingly, if you spend a lot on nonsense, constantly owe someone, do not save for important goals, and your relationship with money cannot be called healthy for a rainy day.

What prevents a healthy attitude to finance

The attitude to money arises in childhood. It is then that we develop "financial scenarios." These are beliefs about the means that further guide our economic decisions.

Read also: What to do When You Have Financial Problems.

They are shaped by personal experience, family stories, and parental attitudes. And more often than not, we don't even notice them.

According to Klotz, some scenarios become money Beliefs and Financial Behaviors: Development of the Klontz Money Script Inventory cause of low income throughout life. “In particular, the avoidance scenarios (“ Money corrupts,” “ Love for money is the root of all evil,” “ Honest people don’t think about money ”), deification ("Everything is decided by money,” “Money is the key to my happiness,” “ There is never too much money ") And status ("How much money you make will define how successful you are," "You should only buy the best," "Not everyone deserves to be rich "), he says. "They are all associated with severe financial repercussions."

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For example, people with avoidance scenarios refuse potentially lucrative offers, unconsciously try to get rid of money (by spending or donating it), just so as not to control it. These study participants earned less.

People with a scenario of the deification of money are prone to unjustified financial risks, the desire to earn as much as possible (for example, through gambling or a permanent job). They want to buy a lot and often accumulate debt. Those who regard money as an indicator of status are constantly comparing themselves to others. They try to keep up with successful people and spend a lot on expensive things.

Public opinion also influences the perception of money.

Sometimes, it creates the feeling that it is impossible to achieve financial well-being in a certain activity field.

If you are used to hearing that everyone in your profession is paid very little, you develop a scarcity mindset.

Its speakers constantly notice what they do not have and envy others. They get used to thinking that it is simply impossible to achieve anything better in their position. The scarcity mindset influences all the decisions we make. People stop believing in the possibility of change and stop dreaming. Not looking for new opportunities or giving them up.

What to do to make a difference

Identify your financial scenarios.

We usually follow them unconsciously. To change these scenarios, you need to bring them into the light deliberately. Otherwise, they will continue to influence your actions without your knowledge. Here's what to do.

  • Ask your relatives. Every family has its own story about money, and scripts are often "inherited." Chances are, after talking with loved ones, you will notice general trends. Pay attention to repeating phrases in stories (for example, “Money should be saved, not spent,” “You can't buy happiness,” “Money is freedom”). Think about which ones you yourself would repeat.
  • Analyze your experience. What is your happiest money memory? What's the most painful? Earliest? What financial lessons did you learn as a child? The answers to these questions will clarify a lot: you will see how your scenario developed and how it influenced your decisions. Let's say you saw from childhood that money is nothing but trouble: because of it, people quarrel, commit crimes. In this case, an avoidance scenario could develop.

Understand yourself

Dissatisfaction, envy, jealousy, sadness often force you to spend too much: purchases temporarily drown these feelings. But it is important to understand that acquisitions will not help get rid of them. But they can easily lead to debt and even greater dissatisfaction with life.

Think about what you are missing, what you are trying to make up for with purchases.

For example, you cannot go to a mall without purchasing a ton of unnecessary items. Perhaps the reason is that you are lonely, you are jealous of others, or trying to drown out self-doubt with things. Identify the root and look for healthier ways to combat it.

Think of money as a tool

We often repeat the phrases “I wish I had more money” or “I really need to start saving,” implying that more funds will solve all our problems. We turn finance into an end in itself, although it is just a tool to achieve what we want.

Think primarily about the outcome of your actions, not the short-term emotions caused by shopping. This will help you protect yourself from impulsive spending.

Consider what is most important to you, what you need money for (pay for your studies, travel). Based on this, identify priority spending. For example, you enjoy trying new food in different establishments, and you also dream of going to Iceland. Keeping this goal in mind and seeing money as a tool to achieve it, you can save on cafes and other small entertainments.

Don't reward yourself with shopping.

Financial decisions often depend on mood. If we feel bad, we buy something to comfort ourselves. If we have achieved something, then we reward ourselves with a pleasant acquisition. Because of this, there is always an excuse to invest in anything new.

Also read: Family Budgeting Mistakes and How to Avoid Them

Learn to notice these triggers and not reward purchases. Stop yourself when you feel the momentary desire to acquire something. Remind yourself that your mood is simply influencing you. Move away from the thing, get distracted by something else, and most likely, you will see that you don't really need it.

Never Spend More Than You Earn

Otherwise, you will always be a slave to money: you will have to live from paycheck to paycheck or even borrow. Introduce the rule on the day of pay, first of all, to save some of the funds and pay bills. And only then decide how you'll spend the rest. Try to do this every month. Gradually, you will have an airbag and savings for important purposes.

Adapted and translated by The Cop Cart Staff

Sources: Life hacker