Money can be a very taboo topic of discussion and can cause a lot of anxiety. Our decisions around finances come down to our relationship with money and their interconnected relationships with other aspects of our lifestyle. Are we cautious with money? Are we bold with money? Are we distant with money, that potentially leads to reckless expenditure? Does money make us feel taller? Do we use money to impress others? Do we use money as a tool to help others grow?
It is very important that we build on our relationship with money so that we can spend it wisely on health and create resilience for ourselves, our loved ones and the well-being of others. If we build an open and kind relationship with money, we will remove much of the anxiety that financial matters cause many of us on a regular basis.
What is behind the desire to spend?
Of course, it is very challenging for sections of a population to save money if there is an admixture of rising inflation, job insecurity, family dynamics and more. What about the individuals who are in a stronger financial position to save money? What prevents them from doing so? According to financial experts Stephenson & Surana:
In the United Kingdom in 2019, of more than 27 million households, nearly 13 million had no savings at all, according to the Money Charity. So, approximately half of all Britons have no money of their own to fall back on or to use either short or long term. In the United States, average personal saving rates (the amount of disposable income that people put by) were around 7.6 percent in 2019, and even below 5 percent in the decade prior, which is significantly less than required to retire comfortably, according to financial commentators.
We are primed to react to short term immediate dangers and acute stress. This can cause us to react to threats such as fleeing from an animal attack or panicking when a letter of debt comes through our door. This does not mean that we will innately make a wise decision, but the panic will kick in nevertheless. When things are good and there is no immediate danger, we can often focus our attention on other domains and matters within our lives. We may aspire for more, we may find the drive for a bigger house or we may want to attract a life partner and show them our potential. Hedonic forms of pleasure can become a natural drug and cause many of us to chase pleasure, money and short-term highs. Professor Sonja Lyubomirsky discusses her thoughts on why chasing money has its limitations:
Why does hedonic adaptation occur in the context of wealth? The two biggest culprits are rising aspirations and social comparison. While people are briefly satisfied with the bigger house, the fancier car, or whatever, eventually they experience a sort of 'creeping normalcy' and begin to want an even bigger or better one, especially if that’s what their neighbors have... As a result, even as people amass more of what they want with every year, their overall happiness tends to stay the same. To paraphrase the Red Queen in Through the Looking Glass, “We’re running faster and faster, but we seem to end up in exactly the same place.”
How can we begin to form a healthier relationship with money?
- Focus on our values – If you woke up one morning and all of your worries had disappeared, what would you do on this day? Who would you help? What would you like to learn? Start to build each day and your life around your values in life and begin to take small steps to live the life that aligns with your heart. From here, make sensible financial decisions that compliment these values.
- Create positive money habits – Talk to your partner regularly about your finances. What are sensible savings to make? What dreams can you plan for together that match your aligned values? Are you buying the big house because you truly think it will bring you happiness? Are you buying the big house because it will bring love and a healthy place to raise a family?
- Focus on the bigger picture of health – Blue Zones studies have shown why people live happier and longer lives in particular environments across the world. This is not to say that you need to move location to live a happier and longer life; you can simply prioritise health and happiness for yourself and your family. This goes much deeper than chasing hedonic pleasure and chasing bigger and better items. By focusing your financial plan and spending on creating health and happiness, you will organically create an eco-system that enables you to thrive and has strong pillars of resilience and support for life’s challenges. This is a completely different vision than spending money on physical items and chasing the ‘bigger and better.’
If we ask ourselves questions about our expenses and the motive behind our actions, then we can start to take our first step toward building a healthy relationship with money. From here we can take the time to really explore our values and what true happiness is for us instead of what advertisements and magazines propose happiness to be. If we focus our spending on creating a healthy eco-system that allows us and our families to thrive at every turn and enable a buffer of resilience for hard times, then we can spend our money in the best possible way for ourselves.
Next time you make an important financial transaction, ask yourself deeply why you are making this decision?