I bet you didn’t know you were an author did you. Whether you recognise it or not we all tell ourselves stories to justify and rationalise our spending. Some of those stories are short blogs, and others are full length novels!
What do I mean by justifying and rationalising our spending? I looked up the Merriam-Webster dictionary to see what they had to say about it and this is the definition of justify, “To provide good reason for the actions of [someone].”
Interesting. What about rationalise? “To think about or describe something (such as bad behaviour) in a way that explains it and makes it seem proper, more attractive etc.”
I probably don’t need to add much more as those two definitions really sum it up. But I am going to.
We were at a dinner party recently, and the usual question of “what do you do” came up. Generally one of two things happens when I say I am a money mentor. The person suddenly has to go and talk to someone else (the same thing happened when I used to say I was an accountant). Or I get chapter and verse about how good (or bad) they are with money. Continue reading →
It’s called the framing effect.We view money differently depending on the source, and what is even more interesting is we generally aren’t even aware that we are doing it.
Imagine you are walking down the street, minding your own business, when you happen to look down, and there right in front of you is a $10 note. You look around to see if you can see anyone who might have dropped it. No one is there so you pick it up and pop it in your pocket. You are probably thinking “this is my lucky day; I’ll go and buy that magazine I was looking at”. This is the framing effect in action found money you can spend on anything you want.
I can still clearly recall receiving my first week’s wages when I started working as an 18 year old. I was so excited; I had never had that much money at one time. I went out and shopped and spent most of it. My prize purchase was a beautiful white sheepskin rug.
I touched briefly on what money means in my blog “Money. Love it or hate it you have to live with it”. Let’s delve now a little deeper into our own money meanings. It’s important to define what it means to you, as it impacts on your view of the world, how you view others and your decisions. If you want different results you need to dig deeper than just your behaviours.
Money mistakes; yes we all make them, but do you ever wonder why? It’s all about what is going on in our head. But you knew I was going to say that didn’t you.
This is what happens. The more we attach emotion and meaning to money, the more we lose sight of what it really means. The maths bit goes out the window. It is when 1+1 equals more than 2 that mistakes kick in.
Here are five tips to help you avoid money mistakes
1. If you are feeling emotional, don’t make important financial decisions. Sounds really obvious doesn’t it; but when you are emotional your perspective narrows and you can lose sight of the big picture. A warning here, have you tried to help someone see logic when they are in a highly emotional state? It can backfire and they dig their toes in even more, empathy and understanding is needed more than reasons and logic until they have calmed down.
2. Being stressed or tired are also not good times to make financial decisions. We just don’t think straight. Wait until the tension has eased. I remember my Mum saying, never go to bed angry as you may say things you regret later, the same applies to money decisions when you are tired you may regret what you buy. Continue reading →
Quite a dilemma isn’t it. We work hard to earn the money to give us the good things in life but then we don’t have the time to enjoy them because we are working too hard. Bit of a chicken and egg scenario.
When we think about what we are trading (or compromising) for money, time tends to be the first thing that pops into our head. The 40hr working week that our forebears fought so hard to get seems to be a distant memory.
I received an email from a client at 11pm she was still in the office (she arrived at 7am) and would be back at 7am the following morning. She has two children who she feels spend more time with the babysitter than they do with her. But she is building her career in a profession that expects that kind of commitment. Whilst she loves her work, she is really concerned about missing time with her children as well. So why does she do it? She feels she has no choice, she needs to provide for her family, and the hope of a large salary and less hours at some point in the future keeps her going.
This is a common story, not only from people on salaries, but business owners as well. We seem to be prepared and feel we need to work long hours for some financial goal in the future. Continue reading →
Strange as it sounds we all have a relationship with money. When you think about it, it does make sense. Money is everywhere, we really can’t ‘opt out’ and say we want nothing to do with it. Unless you want to be a hermit in the deepest darkest Amazon jungle where there are no other people and you can be self sufficient, not my idea of fun.
I hadn’t really thought about it either, money was just there (or not) depending on what day of the week it was and how close to payday it was. OK, that was many years ago when I was young, single and carefree, or I liked to think I was, but looking back now, even then money permeated my thoughts and actions.
Whether you like it or not, you have a relationship with money. Love it or hate it, money is everywhere and like any relationship there are good relationships and bad.
A little tongue in cheek, but think about it this way, if you were dating money what would it say about you? Continue reading →
Earlier this week I wrote a blog on Instant Gratification. Just like the movie Sliding Doors, the story can have a different ending…..
Twelve months ago, I had a Freddy Mercury moment. “I want it and I want it now”. What was the object of my desire? A red leather lounge suite.
It would look perfect in our house, not that there was anything wrong with the lounge suite that we had, but the red leather was divine. It wouldn’t just enhance the room, it would transform it.
We weren’t even looking to buy new furniture, it was one of those moments when you walk past a shop and something grabs your attention, next minute you’re in the shop chatting to the salesman like he is a long-lost friend.
I did all the things that I tell my clients to do when impulse kicks in. Walk away, give yourself time to assess whether this is a Need or Want. What is the opportunity cost of the purchase? Is the purchase worth it in terms of our longer term goals? We looked at the price tag and decided we weren’t prepared to pay that price. So we didn’t buy it. Continue reading →