Thursday 26 April 2018

Katie Byrne: Changing your attitude towards money requires asking yourself tough questions

 

Katie Byrne
Katie Byrne
Katie Byrne

Katie Byrne

How much do you earn? It should be a straightforward enough question when we reveal our relationship status on Facebook and our dinner plans on Twitter.

Yet even in the age of transparency and self-disclosure, the size of one's salary remains one of the last taboos.

In a culture that derives its self-worth from its net worth, money is a touchy subject. Couples don't discuss their salaries (a recent UK survey revealed that half of married couples in the UK don't know how much their spouse earns); parents don't discuss family finances in front of children; friends don't discuss their savings (unless it's in cryptocurrency, in which case they never shut up about it...)

Vicki Robin put it best in Your Money or Your Life: "It is easier to tell our therapist about our sex life than it is to tell our accountant about our finances," she quipped.

Money is an emotional issue: it stirs up status anxiety, fear and shame. It leads us towards avoidance and denial. Enlightened types like to point out that money is "just a tool", but for the vast majority of people, it's much, much more than that...

We may believe that financial freedom is just one Warren Buffett book away, but before we can start thinking about passive incomes and index funds, we have to examine our relationship with money. We have to look at our core beliefs and patterns. We have to accept that we can't have frank and forthright conversations about money with other people because it's a conversation that we don't want to have with ourselves.

The road to real financial freedom starts with some tough questions. Here are just a few of them.

ARE YOUR FINANCIAL GOALS REALISTIC?

David Bach, author of The Automatic Millionaire, has noticed that people "plunge into all sorts of detail about what they want to accomplish, what investment they should buy, and where they want to be, without first making sure they know where they stand now".

He's right. Many of us set unrealistic saving targets without looking at our monthly budget. And we set these goals without giving any thought to why they have so far been unattainable.

Instead of resolving to save 10pc of your salary, start with €100. Rather than aiming to 'clear all debt', take the first step of calling the credit card company to negotiate a reduced APR. As with everything else, financial goals are more likely to be achieved when they are small and specific.

WHY ARE YOU SPENDING YOUR FINANCIAL SECURITY?

Over-spenders are dab-hands at rationalising their more frivolous purchases. They usually have a superhuman capacity for denial (of course I can live on €100 until the end of the month!) and a friend - a fellow big spender - who encourages them to head towards the till.

Over-spenders often regret their purchases, asking themselves why they were compelled to buy that pair of shoes. The question they really need to ask themselves, however, is why they choose to buy financial anxiety month after month. Or, to put it more bluntly: why are they trading their peace of mind for a handbag?

DO YOU HAVE A MINDSET OF LACK?

Do you agonise over every purchase and pay your bills begrudgingly? Are you envious of people who 'got it all handed to them'? Have you noticed that, in spite of pay rises and windfalls, your money mindset has remained much the same? "Sometimes lack is a state of mind, or as the late Wayne Dyer put it: "Abundance is not something we acquire. It is something we tune into."

You may believe that all your problems will be fixed when you have more money, but it's worth remembering that all the money in the world won't change a mindset of lack.

DO YOU KNOW THE VALUE OF YOUR GOOD FORTUNE?

They say you can't put a value on good health, but the 'Using Surveys of Life Satisfaction to Value Social Relationships' study (Journal of Socio-Economics, 2008), gave it a go. According to the researchers, a move from having very poor health to having excellent health is worth an extra £300,000 a year, while a happy marriage is worth £70,000 a year.

Granted, happiness and wellbeing are impossible to truly quantify, but this study certainly presents a novel way of measuring wealth. Instead of wondering when you're going to win the lottery, try focussing on the life lotteries that you've already won.

HOW MUCH IS ENOUGH?

If you're finally making a lot of money, it's worth asking yourself how much it's costing you. What have you sacrificed: family time, quality of life, hobbies and passions... ? More to the point, when is enough enough?

"Somewhere along the way we've gotten the message that the more we struggle and the more we suffer, the more valuable we will become and the more successful we'll eventually be," writes Kate Northrup in Money, A Love Story.

"And so we overwork ourselves, overschedule ourselves, and become 'busier than thou' because we think there's some sort of prize on the other side of the pain we cause ourselves. And you know what? There's no prize. All you get from suffering is more suffering."

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