Personal Development: Money Issues
For a long time my relationship with money has been the source of a nagging fear, despite being in the financial position to fund my needs, desires, interests, and pursuits. I felt enslaved by money, and I struggled with the belief that I couldn't be the person I wanted to be, or live the life I wanted to live, without it.
Up until now, income generation has been my most significant professional and personal focus. Though important, I've had to move beyond the notion that the acquisition of more is the sole solution to my fears. I've started the process of trying to eliminate this belief system by incorporating new behaviors, ideas, and ways of thinking in order to reduce my dependence on money.
Step 1: Get out of the scarcity mindset
This was the first breakthrough for me. I had an internal conflict about money that needed to be reconciled. On one hand, I like to spend freely, give generously, and handle money as if there was an abundant supply. On the other hand some of my deepest fears have been linked to the irrational belief that there is not enough.
It is important to establish a sense of security by recognizing that we have an unlimited supply of resources (internal tools like intelligence, resourcefulness, imagination, creativity, drive, etc.) that, with proper use, ensures we won't be without.
Step 2: Understand what money is, and is not
I've held an incredibly misinformed view of what money is and it has taken a lot of research to become enlightened.
The dollar has no worth of its own. It is nothing more than a piece of paper that acts as a medium of exchange. Yet, so much of our self worth is tied to how many dollars we can accumulate. Instead, we need to realize that though nothing can be had in life without a cost — that cost is not money but the value it stands for.
I have been slowly shifting my thinking to get at the root of wealth building (vs. money making). Wealth comes by continuously creating things that are of high value to someone else and exchanging it for something that is of high value to you.
Instead of focusing on accumulating money, I now try to focus on ways I can build wealth through value-adding activities. I'm constantly thinking of ways to use my skills to create products or services I can barter or sale in order to obtain what I want or need. My livelihood, then, is not dependent on money but on the quality of my ideas.
This is not an easy mindset shift and it is only because of my entrepreneurial pursuits that I've been receptive to this change in thinking. It is, however, one of the most important insights I've garnered thus far.
Step 3: Keep recurring expenses low
If there is one area that I've mastered it's eliminating bills and I believe this is an effective first step in improving your money woes. I started this process in my mid-twenties after noticing that I dreaded going to the mailbox. I'd literally cringe every time I'd get an invoice in the mail, and just the thought of someone demanding something from me caused undue stress.
First, I automated payment of all my bills so I wouldn't be annoyed by paper statements. Then, I started identifying and aggressively eliminating things I simply did not need (car, cable, credit cards, to name a few). Fast forward to my current state and I only have rent, a handful of basic utilities, and health insurance (and most of these I pay upfront annually in full).
I can't stress the feeling of freedom this particular step will yield. Eliminating bill clutter can work wonders on your emotional relationship with money giving you the courage to tackle the more complex areas in your finances.
Even with this big win I am still in the process of learning how to live within my means. Despite being a minimalist I have self-indulgent tendencies that periodically have to be put in check so they don't undermine my progress. It's critical to be on the lookout for bad habits that can reverse the headway you are able to make in this regard.
Step 4: Go where you can live well
In the last six years I've lived in half a dozen different cities and most of them have been expensive metropolitans. Now I still live in a major city but it happens to be a poor one (Berlin), so my U.S. generated income goes very far relative to the local average.
Of course this practice isn't new and there are broader implications to be mindful of (e.g. gentrification when many people of wealth have the same bright idea), but the concept is still an interesting one to consider.
The practical reasons for making this move are clear but it also results in a happiness trick you may not be aware of. There is research that suggests we feel happier when we perceive ourselves to be better off relative to others. The "others" part is key here and it all depends on who you are comparing yourself to.
We often make unrealistic self-assessments by looking up instead of down. For example, my peer group (friends and acquaintances of similar age) are individuals of outstanding accomplishment and, as a result, great wealth. If I were to constantly compare myself to them I would always find a shortcoming. It is simply too extreme of a cohort and living in a place like New York was a constant reminder of this.
Instead, I made a decision that I wouldn't try to keep up with the Joneses. Being in a city where the majority of people are surviving off only a fraction of what I earn is not an ego booster but a more realistic view of where I stand in comparison to most people. It forces me to appreciate the progress I've made in my life and continue to prioritize what matters, instead of constantly trying to play catch up.
Step 5: Distinguish money fears from money problems
In my quest to establish dependence from money, I started to get confused about the battle I was fighting. The key to clarity was to separate out irrational fears from actual problems.
Money problems are real life threats (e.g. losing your job) that will have a detrimental impact on your financial state (e.g. not being able to pay rent) if you can't find a viable solution to it (e.g. getting a new job, etc.). Whereas, money fears are things that you continually tell yourself (e.g. I'm a failure because I don't make over X dollars) that are often untrue and only lead to a perpetual state of unnecessary worry.
I had to sort out the difference between the problems and the fears. Once I had them properly bucketed I came up with a distinct set of tactics to address them. Since money problems also add to money fears, I believe it's important to address those first. Try to put yourself in a balanced financial state by tackling the things you should be worried about (living below your means, getting rid of debt, setting up an emergency fund, etc.) and then move on to eliminating the self-deprecating thoughts that keep you from fully realizing your potential.
I appreciate some of the insights garnered from the book "How to Worry Less About Money" by John Armstrong. It was a starting point for formulating my personal approach to loosening the stronghold that money had on me. One of the most useful quotes Armstrong curates in his book was the following:
Now the last swallows are departing, and the first gales of winter shake your roof, now is the time for sorting through your bank statements and receipts. On your way home from work look in at a junk shop and buy two wooden boxes large enough to hold A4 sheets of paper. And take yourself also, as the sun is setting, to a stationery supplier and get yourself a quantity of manila folders, the colour of hope. Dine early and lay all the pieces of paper before you on the carpet. Divide them, as the Gods divide the just from the unjust, into two piles. Arrange them by date. Work slowly. And when you are done, pour a libation to Apollo, who loves clarity and order. On the second night, consecrate your mind to calculation. On the third, devote yourself to the filling of forms. In this way you spread your work evenly across the season. – Virgil
Virgil, an ancient Roman poet, is illustrating the key to establishing a healthy relationship with money: mindfulness. Virgil advises us to approach matters of money with great care and detail. It shouldn't be an afterthought but worthy of our utmost attention.
Worrying about money doesn't get your far. It is only after transferring that negative energy into a thoughtful process for understanding your financial state and mindset, that you will see progress.