29 November 2022

How is your relationship with money? – Part 4

The mission statement of these blogs has been to help improve people’s relationship with money or at least start a conversation in which people re-evaluate how they perceive money.

A large number of studies in various different fields continue to look at why people handle money differently. Mental health charities such as Mind have reams of material discussing the relationship between money and mental health.

People will also tend to think a bad relationship with money, involves lots of impulse spending and debt. However, the inverse is also true with a relationship built on fear and miserly spending being equally harmful.

Spending some time evaluating this relationship is the key to building a healthier one. In our first three blogs we have looked at:

  • Looking at the emotional drivers we have attached to money.
  • Answering the question “what is important about money to you” to determine where we will derive happiness through allocating our resources.
  • Setting a meaningful goal that we regularly review and visualise to keep us on the long-term path to success.

In this final blog we look at the fourth step, which involves the role of impartial advice.

Step 4: Get impartial advice

The fact that the financial advice firm is advocating that financial advice is key to developing a healthier relationship with money is not lost on us. However, the exercises we have discussed will all be enhanced through discussion and a lot of people find it uncomfortable to talk about money with their loved ones.

Your family and friends will all have their own emotional attachment to money, which very well may differ from yours and what is important about money to one may not be important to the other. Your financial milestones and plan will, and should be, as unique as you and there is a risk that their advice and plan will mirror what they value about money, not what you value about money.

Sitting down with an impartial, independent, adviser and having an honest conversation about your stresses, needs and goals can really add value.

This philosophy of understanding that we all view money slightly different, helping you understand what it is that’s truly important about money and then helping you build a robust, long-term financial plan so you can see what you are working towards is at the heart of good financial advice, and in our DNA at Carbon.

So to conclude this four part series on improving your relationship with money, let me quickly surmise the steps to starting a healthier relationship with money:

  1. Spend time recognising that we all have an emotional attachment to money. These emotions will differ from each other and simply having an awareness of both the positive and negative emotions we attach to money will help get us started on the path to developing a better relationship with money.
  2. Work out what it is that you truly value about money. Think of your money and time in a similar fashion, avoid those things you perceive as a ‘waste of time/money’ and get far more happiness by spending your money on things that are actually important to you.
  3. Start with the end in mind. Long-term goals are hard to work towards and hard to visualise, especially against the short-term gratification the here and now can bring. Build a financial plan of all the milestones you want to achieve, making sure they are aligned with what you value about money, and then regularly review it to keep those goals in mind.
  4. Get impartial advice. Having an independent professional who can help you articulate those values, financial milestones and help highlight those emotional drivers will prove invaluable over the longer-term.

Hopefully everyone reading has found something useful in this series of blogs. For Carbon’s existing clients I am sure you will recognise lots of these points being raised in the conversations we have had and in the tools that we have used.

For anyone not yet a client who would like to discuss in greater detail, please get in touch for an initial free-of-charge conversation with one of our planners.

The value of investments and the income derived from them can fall as well as rise. You may not get back what you invest.

This communication is for general information only and is not intended to be individual advice. It represents our understanding of law and HM Revenue & Customs practice. You are recommended to seek competent professional advice before taking any action.

Tax and Estate Planning Services are not regulated by the Financial Conduct Authority.

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