Most of us in some ways have distorted, complex, quite frankly weird and a completely broken relationship with money. Almost everyone is tricked into believing the biggest propaganda that the financial services industry tells us.
What may you ask is this deliberate lie, deceiving millions of people, yourself included?
It is the assumption that all your financial problems are all your own fault and they are as a result of you being stupid, greedy, silly, uneducated or just plain lazy. Like most people struggling with money, you don't make fully rational and logical financial decisions. You make normal decisions based on your own experiences, background, unconscious money beliefs and cognitive and emotional biases.
As a survival mechanism inherited from our caveman times, the modern man relies on following the rule of thumb (or rule of thumb heuristics) to make fast decisions. Although modern life is much more complex than our ancestors, our brains haven't changed much since earlier times. Unfortunately although relying on the rule of thumb is mostly correct in about 80 or 90 percent of cases, in the remaining 10 to 20 percent, it is wrong. This is where we make incorrect assumptions and our financial decision making process is unduly influenced subconsciously by our beliefs, previous experience and cognitive and emotional biases.
The money beliefs that believe come from our environment, largely from our parents and others around us when we are growing up as young children trying to make sense of the financial world that we live in, a process known as financial socialization.
These beliefs can be inherited from prior generations and be passed down either fully intact or altered in some way. Although they might have fitted with your family's particular circumstances a few generations ago, following those rules in your head may not be appropriate for today's business world.
For example, imagine that your family lost the family farm due to the high interest rates on the 1980's. The farm had been in your family since your ancestors had arrived in NZ in the 1880's as early settlors. This financial flashpoint that your family suffered has been passed onto younger generations. Now you as a member of the younger generation have been told by your family never to trust banks and only buy a house with cash. Although you have been saving for a long time to buy a house for yourself, the house prices have been rising too fast for you to keep up. You missed out on buying a house earlier as you had been told never to trust banks. This is despite you being a successful qualified professional person and you can afford to service a mortgage.
The Financial Services industry want us to believe that we are responsible for all our own financial mistakes and all we need to do is read more self-help books and become more financially literate. But financial literacy doesn't actually solve the problem. We all know (or most of us do), that we should be saving more money than we spend and save for our retirement. After all, personal financial management isn't rocket science. It is actually relatively simple. Whether your favourite personal finance author is David Bach, Anthony Robbins, Robert Kiyosaki or Suze Osman, if you don't exam your money beliefs and behaviours, challenge yourself about how you think about money and take active steps to change your behaviour, your personal financial situation isn't going to change.
Like someone suffering from poor physical health due to eating an unhealthy diet and lack of exercise, we don't take action to change our personal financial habits or seek professional help to question our money beliefs, where they come from or how we can start to develop a healthier relationship with money.
If you are concerned about your financial health, contact me now to book your money health check.
References
Klonz, B & Klonz, T (2009) Mind over Money - Overcoming the financial disorders that threaten our financial health