Take an honest, in-depth look at your money
Separating money and emotion is next to impossible. It’s like trying to pick the chia seeds out of your oatmeal – you’ll never get them all out. Even though money is, functionally, a means of exchanging value between people, it is so much more. Whether we like it or not, money represents all kinds of things in our minds: status, achievement, intelligence, power, self-confidence, security. How much money we have, how we manage it, and what we do with it has a direct impact on our self-image and as a result, our happiness.
No wonder we avoid talking about it. About 60% of Canadians don’t get any financial advice from a professional. One survey showed that 56% say they’d rather clean their house top to bottom than talk about money and 13% say they’d rather get a root canal. Another survey showed that about 40% of people in relationships don’t discuss money with their partners.
And if we do talk about it with a financial planner or financial advisor or our partners, most of the time it’s surface-level conversation, like our income, how much is in our RRSP, and how big our mortgage is. These are all important of course as they are part of our big financial picture, but what about the deeper stuff? The nitty gritty details? The uncomfortable realities?
If you’re doing ok financially - which might be defined as generally being on a good path for the future, and don’t spend too much time worrying about money - then you might get away with surface level discussion. With a simple savings plan in place and appropriate investments, you can carry on with your life.
For those who are experiencing challenges with their money though, a deeper dive is a crucial step in the process of getting on track. Facing the truth about your financial situation, your beliefs about money, and your actions around money can be hard. Looking beyond the surface level requires more work, more determination, and more time.
Face the numbers – all the numbers
To find a solution for your financial predicament, it’s absolutely crucial that you look at all of the facts and lay them on the table. First, gather the real numbers. I’m talking about looking at your spending in great detail and categorizing every purchase you’ve made in the last 12 month. You have to include everything you’ve bought, even those things you feel guilty or foolish about having spent money on. I’m also talking about looking at the value of the stocks you bought that went down and never recovered, the ones that will probably never recover. It’s looking at your credit card statement every month, line by line, and staring your purchases in the face without skipping over the painful ones. A doctor needs to know all of your symptoms to make a diagnosis and make you well – the same goes for finances.
Other realities to face include how you feel about money. Do you feel scared? Envious? Guilty? Intimidated? If you have a partner, do you feel resentful about how they spend? Do you feel like the financial burden is uneven? These can be uncomfortable feelings and thoughts but until we acknowledge the truth- even if just to ourselves – it can be hard to move forward and be successful with money.
Let’s talk about the hard stuff
You may need to have some uncomfortable conversations with a financial professional and with your partner. Talk about the hard things, the ones that might cause us or our partner to feel ashamed or embarrassed. It’s crucial. Survey after survey shows that money issues is the most common reason for divorce – so talk it through. Broach the uncomfortable, like irresponsible spending, a big purchase that was a bad idea, unpaid taxes, a business that isn’t making money, large differences in income levels between you and your partner, money borrowed from family members, and the very bad choice someone made on a risky investment. These are painful things to bring up, but without acknowledging them, we can’t fix the problem.
The reality of where you're at
We might also choose to shrink away from some realities of our lives that we wish weren’t true. Your income will never be as high as you thought it would be. You will not be able to pay for your child’s university education. You bought a house that cost too much. You procrastinated on the money front for decades and you have no savings. Your poor credit rating is limiting you. These are the parameters we are working with so best to be realistic and build them into the plan.
Some people have another problem: wanting to assume the worst. There are two things that commonly fall into this category. One is catastrophizing. In order to feel secure, some people want to plan for the worst-case scenario. They like to assume that they need to keep working and keep saving to build the financial cushion even more “just in case”. Even when presented with the facts, it’s hard to stop the worry. Another common view is not acknowledging the reality of an inheritance. Many people say “Yes, I expect to receive an inheritance but I don’t want to rely on it.“ Why not? If you parent has told you you’ll be getting some money, why would you exclude it from your plan? It seems that some people feel like they need to earn every dollar instead of gracefully accepting that they will receive an inheritance. Why worry about money so much if you don’t have to?
We all need to face the facts
We all – every one of us – have a relationship with money. Whether we feel good or bad about our financial situation, being completely honest and realistic is hard. However facing the facts is essential for our financial plans, our relationships, and our mindset. Isn’t it worth the time and effort to come to peace with money?
Photo credit: Geran de Klerk, Unsplash