Recently, a friend reached out to me because she was overwhelmed. She had just gotten a new job she loved and the fresh start at the new place caused her to reflect on where she was financially.
She thought she should have made “better” decisions with her money, should have more saved and overall should just be further along financially. She also felt like she was on a treadmill. She wasn’t really getting anywhere in her financial life. She wanted some tips that could get her out of her rut and help her stick with her goals.
I see this a lot. People feel like they’re treading water financially, and they don’t know how to break the cycle. It comes up, particularly, around the New Year, a time when many of us are looking for a fresh start.
As we head into the final quarter of 2019, I want to explore some practical things that you can do to help shift your mindset around your money and make your latest fresh start a lasting one.
Figure out what you value
I had my friend try an exercise that I give to clients to help change the lens they use when it comes to making decisions. She was a bit surprised when the exercise helped her define her values. I do this with my clients because I know that if I can help them uncover what matters most to them, what their core values are and what aspirations they have, I can help them follow through on the goals they make.
In his extremely popular TedTalk, Motivational Speaker Simon Sinek explains why some people achieve things that defy all assumptions. As a matter of biology, he says, all human behavior comes from our limbic brain, the part that’s responsible for feelings and decision-making. The great leaders of our time — Martin Luther King Jr., The Wright Brothers, and Steve Jobs — connect with that limbic system to spur action.
You can do this, too. If you tap into your inner values and motivation, you are much more likely to take action that corresponds with that emotion.
To start, think about what you value. Start with a long list — as many as 100 or 150 items you care about — and gradually narrow it down to five to seven words that represent your core truths. You can do this by yourself, or use a values exercises online. There are even value cards available to help you with the process. The key is getting to know what you truly value, without all of the voices telling you what you should do. You then use those values as the lens for future decisions.
As you complete the exercise, ask yourself a few questions. Any surprises? Do you feel like you’re aligned with your values? Why did you pick one word over another when they were similar?
Determine who is in the room with you
You may find that your values don’t quite align with how you live your life right now, usually for one of two reasons. First, you may have never taken the time to figure out what your values are. Or, alternatively, the values that you selected aren’t actually what you believe.
I’ve seen this over and over again. People pick the values that they think they’re supposed to (that should voice again) rather than the ones they want to pick. For example, you don’t want to value wealth or money because you’ve been told that love of money is the root of all evil. Or you included beauty as an attribute because you want to be seen as artistic.
Consciously or unconsciously, these beliefs influence our behaviors around and relationship to money. Professors Dr. Bradley T. Klontz and Dr. Sonya L. Britt call these beliefs money scripts. These are typically unconscious, trans-generational beliefs about money that we develop in childhood and influence our adult behavior.
I’ve seen this phenomenon also referenced as determining “who is in the room with you” when you make your decisions. Imagine yourself sitting at a table and all the people and voices of your past sitting with you.
There are four categories of money scripts:
- Money avoidance: the belief that money is bad, rich people are greedy and that they don’t deserve money.
- Money worship: the belief that money will solve all of your problems, there will never be enough money and that money brings power and happiness.
- Money status: equates self-worth and net worth and puts a premium on how people view them financially.
- Money vigilance: includes themes of frugality, the importance of saving, being discreet about how much one makes or has nervousness about making sure money is saved in case of an emergency.
Klontz and his father Dr. Ted Klontz have developed a quiz of 25 questions to help you figure out what scripts you have. Like Sinek, the Drs. Klontz focuses on the limbic brain and uses the quiz to give us insight as to what that system believes.
The point isn’t to change your scripts. According to the Klontzes, the average person has 50-200 scripts. You’re just trying to create awareness of the scripts and in turn, create some flexibility around them as you make your decisions. This will allow you to adapt when you feel stuck in certain behaviors.
Focus on what matters
One of my favorite analyses about financial decision-making is a paper titled, “If money doesn’t make you happy, then you probably aren’t spending it right,” written by Elizabeth W. Dunn, Daniel T. Gilbert, and Timothy D. Wilson. It’s a simple statement that casts doubt on the assumption that money can’t make you happy. Turns out it can.
They’ve developed eight principles to help consumers get more happiness from there money.
- Buy more experiences and fewer material goods
- Use your money to benefit others rather than yourself
- Buy many small pleasures rather than a few larger ones
- Don’t buy extended warranties and other forms of overpriced insurance
- Delay consumption
- Consider how peripheral features of your purchase may affect your day-to-day life
- Beware of comparison shopping
- Pay close attention to the happiness of others.
The article analyzes how aligning your spending with certain types of purchases brings you more happiness. The more happiness, the more fulfillment and the more likely you are to stick to your goals.
As you head into the final months of 2019 and start to make financial goals for 2020, remember to take a step back and analyze the purpose behind those goals using these three tools. Knowing that purpose will help make this the year you accomplish what you set out to do.