In this series of blogs we are considering steps to help improve people’s relationship with money. We are trying to reflect on the fact that your relationship with money is one of the longest and most profound relationships you will have.
In the first blog, we encouraged you to spend some time to recognise the emotional drivers you have attached to money. Various studies show that you form an emotional attachment to money in your early years and this then informs how you treat it throughout your life. The good news is there is an equal amount of literature demonstrating that just having an awareness of these emotions will let you assert a degree of control over them.
In the second blog, we encouraged further introspection to determine what it is that you truly value about money. An exercise as simple as just answering the question of “What’s important about money to you”.
Once you can answer this question, it will allow you to do two things: 1. Allocate/spend your money in a way that will bring you happiness; 2. Set meaningful goals.
In this blog we are going to expand on the latter, because any part of setting meaningful goals involves part introspection and part looking to the future.
Step 3: Start with the end in mind
In the second of these blogs we made a comparison between money and time, stating that we’re adept at wishing for more of both and wasting what we do have of them. We also discussed that we tend to be better at allocating our time to the things we value the most, as opposed to allocating money to things that we truly value.
To continue this analogy part of the reason we are better at allocating our time than we are our money is that the gratification of allocating our time is instant. If I want to play golf, then I find some time to play and, other than the terrible shots, lost balls, and muttered expletives, I am instantly rewarded with the experience of playing golf.
With money the gratification can be far longer. If I want to retire early, then making a pension contribution is not likely to offer the same reward for years, if not decades.
Sticking to these long-term financial goals can be difficult, therefore employing the psychological principle of visualisation can really make a difference between the success and failure of achieving these goals.
The single best resource to help you with this is the process of building a financial plan, because creating a clear picture of what achieving the important things about money would look like to you will help you stay on the path to success.
Using sophisticated cashflow modelling software to help articulate what those financial milestones are to you, to stress-test these under various scenarios and, most importantly, revisiting it regularly to keep the end goal in mind is absolutely key.
If any of this resonates with you, please get in touch to discuss your personal situation with one of our financial planners.
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