4 Tips for creating a great relationship with your money
Money. A word that creates so much emotion. Sometimes stress, anxiety or helplessness... How can I get more? How can I make it work for me? Other times money creates absolute joy and pleasure. Earning it, giving it away or investing in experiences that you love.
We think money is what gives you freedom and choices so here are our tips to fostering a great relationship with your cash.
1. Know your Values
Money is simply just a tool so you determine how you use it and ultimately how you feel about it. An uneasy relationship with money can eventuate if you don’t feel in control so the first step to fostering your relationship is to earn and spend money in accordance with your values. Asking yourself “What is important to me and why?” is the best place to start. Find a quiet spot, make a good cup of tea and explore your “whys”. Dig deep and ask yourself “Why?” several more times. This process will assist you to understand your motivations which will inform your decision making going forward. Once you know what is significant to you make sure your actions align to that.
Here is an example: You identify that you value health and wellness and yoga is your go-to exercise and mindfulness activity but you think you can’t afford a yoga studio membership so you don’t go as often as you would like. When you take a step back and think about health as a value you appreciate that it is important to you because it gives you quality of life and you know you have better relationships and the ability to work more effectively when you fuel your body with good food, exercise regularly and make time for restorative activities. So, knowing this you reflect on your finances and you realise that you work long hours so often buy take away at the end of a busy day. By assessing your options, you commit to making easy, mid-week meals at home and dedicate those take away funds to a membership at your favourite yoga studio. Financially you are spending the same amount (or perhaps less) but you are now spending in a way that aligns to your goals – you want to be fit, healthy, work well and have a great life. Easy (but expensive) convenience meals weren’t supporting that value but your new exercise membership will.
Determining your values is everything. It means you will stop spending your hard-earned dollars on everything and anything (read: buyers regret, money guilt, items in your wardrobe that have never been worn and running out of money well before payday). Going forward you will invest in the things that mean something to you and are supporting you to your goals.
2. Know your big picture
What are you striving for? And why? It’s important to know this high-level aspiration because it will inform every decision and action you make. When you have a goal in your sights it is much easier to understand why you are making sacrifices or changing your behavior. Evolving money mindsets and spending patterns takes time and commitment, and financial goal setting is an essential element to support the evolution of your relationship with money.
Reducing your spending on coffee to be in a better financial position could be a goal but focusing on something that really inspires you may give you a better result. Reducing your coffee budget to $10 a week because you are saving for an overseas trip at the end of the year, well that is more specific so could be more motivating. You then focus on what you are gaining, rather than what you are giving up. Latte or walking through the streets of New York, a Magnolia cupcake in hand and window shopping? Imagining what you really want will help you walk on by past your favourite cafe any day of the week. Essentially, know where you are going, know how much you need to save and put an achievable time frame on it - this is a great framework for success in setting and achieving goals. Once you start utilising your money to do the things that fulfil your life you will feel in control and financially confident.
3. Make it effortless
The easier, the better so keep it simple. Establish a straightforward weekly budget to understand your earnings as well as your expenses – savings, bills and essentials and discretionary spending. See how you go, tailor it until it works for you and your goals. Ensure your banking structure aligns to how you manage your money. It can help to have separate accounts for every day, bills and savings. Or the hands-on envelope system – whatever works for you to make it clear what you have available to spend after all the planned expenses are covered. There are fee free bank accounts available so it pays to look around.
Most importantly, set up automated savings - a portion of your income that goes directly to another account on pay day via an automated transfer. Only tap into these funds for the actual intended purpose. Set your goals and stick to them.
Setting up direct debits for regular bills or setting up payment plans for bigger bills (like utilities) can also make the most of “on time” payment benefits which can be a great way to streamline your finances.
4. Share the journey
Like any personal development it can be fun to share your experience. Recruit a likeminded friend or family member to share your goals, challenges and successes with. It’s like having a plan to meet a friend at the gym for an early workout – if you know someone is there waiting to workout with you then you will show up and get it done. Having someone to share achievements or troubleshoot the endless opportunities to spend money can support your motivation and momentum. Being accountable to someone who knows your big picture can be very powerful.
If you share finances with your partner it makes sense to set joint goals and share the journey. If you are both working towards the same aspirations, you can encourage each other and have a greater chance of being on the same page and sharing success.
While these tips will give you a huge sense of control unfortunately life can be unexpected and things come up. Knowing your values and goals, reducing your debt position, building your savings, having awareness and a financial plan will put you in a great position to face anything that arises.
A positive mindset is everything. Focus on what you can control, know what works for you in achieving your goals and surround yourself with people who are passionate and excited about what you are working towards. With all of this in place you can achieve anything. Here’s to building your relationship with money and everything that beautiful alliance can offer.