The word ‘relationship’ probably (and hopefully) doesn’t bring the word money to mind. Hopefully, it brings forth warmer words such as love or family or friends but the truth is your relationship with money is probably the longest relationship you will have in your life.
It is a relationship that pre-dates your birth, with your parent’s relationship with money playing a role in so many facets of your life. It might seem unfair that statistically your life seems pre-determined before you are born but your parents are likely to determine your future financial situation, levels of education, whether or not you live a healthy lifestyle and whether you will own your own home.
It is also a relationship that survives you, with Inheritance Tax receipts steadily increasing over the past twenty years and leaving those who survive you with the financial burden of paying this liability, quite often before they have been granted access to your assets on which it is payable.
So like any relationship, how do you know the one you have with money is healthy?
In this series of blogs we will look at how you can improve your relationship with money both in terms of existing habits and building towards future goals.
In this first blog we look at probably the hardest step in developing a healthier relationship with money, which is trying to recognise the emotions that drive our financial decisions.
Step 1: Recognise your emotions around money
Talking about the ‘emotion of money’ might seem to be drifting towards the realm of psychology and not under the remit of financial advice. However, the ‘emotion of money’ is a core consideration the Financial Conduct Authority mandates we consider before giving advice, they just label it as your ‘attitude to risk’.
Everyone has an emotional response to money. Everyone.
Some will take joy in spending money, that they don’t necessarily have. Others stress over accumulating more wealth, when they have enough to achieve everything they want already. Neither is particularly healthy, and nobody is immune to the emotional stress that money causes.
There’s evidence to show that the emotions you attach to money are formed as a child. Influenced by your caregivers and upbringing you form a view of money; this creates a basic assumption of how you feel about it, which in turn impacts how you handle it in later life.
Taking some time to reflect on these core emotions and behaviours that have been with you since childhood can go along way to understanding your relationship with money. There’s various exercises such as looking at your earliest memory of money or writing down the various words or phrases that come to mind when you think of money and then tracing the origin of these. Ultimately, it boils down to taking the time to understand what emotional drivers you have in relation to money because as the saying goes ‘a little self-awareness goes a long way’.
The value of taking the time to understand these core assumptions might seem of little value to some, but it is born out of the study of Ontology (the study of ‘being’) which effectively says that before you can change or control a behaviour you first have to be aware of it. A quote by Dave Sim reads “Once a profound truth has been seen, it cannot be unseen”, this is a fantastic analogy of this concept, the root of which is that once you understand the emotions you are attaching to money, you’ll then be more aware of their influence on your financial decisions and, ultimately, you’ll be able to detach these emotions from your financial decisions.
To discuss your personal situation with one of our financial planners, get in touch.
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