A Sense for Money
Shame and fear may be strong words but they quite accurately reflect the emotions of many people when forced to deal with personal finance issues. So, let’s try to understand why these strong emotions arise. Once we understand the root causes we can move on to suggest how to master the situation and avoid any sense of shame or fear when it comes to your personal finance.
There are many causes of shame and fear. The most devastating are life’s crises and traumas such as bankruptcy, losing a job or losing a family breadwinner (whether through death, ill-health or separation). Another big cause of shame and fear is not having as much money as your friends and social acquaintances. We are often very influenced by peer pressure and the need to save face. Many of us are embarrassed to drive our ten-year-old local van away from the restaurant when the people we had dinner with are whisked away in a brand new, chauffeur-driven German limousine. And of course peer pressure also applies to spouses and children. From time to time we’ve surely all noticed – or been reminded – that our children’s party was not as lavish, or our spouse’s attire not as expensive, as those of others in the peer group.
It is noteworthy, however, that an increasing number of people are shying away from lavish displays of wealth. For this year end’s vacation, a rich acquaintance may tell you they are going for a quiet break at the beach, rather than admit they will be pampered at a seaside spa in Tahiti. Or they may well tell you they are just having a small family reunion, rather than admit to a skiing holiday in Aspen. Perhaps this is a combination of environmental concerns, or the embarrassment of being able to afford such lavish holidays, or even the fear of being kidnapped. The point is that people can be ashamed of being perceived as being too wealthy, as well as being too poor.
Many people are frightened of financial issues because they feel they do not understand them and their eyes glaze over whenever someone mentions technical words from the financial lexicon. Some may feel guilty that they have left it too late to do any real financial planning and are scared to open the box and see what is inside. Even opening the monthly credit card bill can be a shock for those who cannot properly manage a budget.
So, how do you manage these negative feelings of shame and fear and avoid all the associated stresses? A big part of the problem is often fear of the unknown. Hence, the first tip is to make sure you are as financially literate, or at least as financially aware as possible. By having an understanding the basic financial terminology and some rudimentary market awareness, you will at least remove some of this fear of the unknown. Become familiar with the language used in discussions on finance and you start to conquer the first level of fear. You don’t have to understand everything, but at least understand what is most important to your personal finances on a daily basis, such as what compound interest rates are, what does the fine print in the brochure you picked up about investment options really mean, and how your insurance plan can help you and your family. Getting yourself familiar with the terms used will help you start to understand how the wider financial world works. Being financially literate starts with taking an interest in financial language.
The second tip is to become properly disciplined with your budgeting and financial planning. For example, if you budget properly and plan carefully, i.e. set aside some money every month, don’t borrow more than you can afford to pay back, or just don’t spend what you don’t have, you need never be concerned about the risk of bankruptcy.
The third tip is to make sure you have a good personal risk management program in place. This sounds complex but it’s mainly about covering insurable risks, such as your life, your health and your valuables, so as to ensure your family’s stability in the event of misfortune. Having a basic understanding of some of the terms used in financial planning will mean that you are able to ask questions of your financial advisor to help yourself make the right decisions.
The fourth step is to get the right mindset and mental attitude. Don’t be pressurized by peers who spend more than you or earn more than you, (nor be pressurized by those who say you are extravagant). Real friends are there because of who you are rather than how much you are worth. So what if they have a bigger car, bigger house or bigger ring. Such material goods are worth nothing compared with having good health, a job you enjoy and a happy family life. This leads neatly on to the final tip: Invest in yourself.
The most important asset you have is yourself. This is especially so if you are the main breadwinner of the family. So, nurture and protect your prized asset. Make sure your professional skills are up to date through ongoing training and education so that if you lose your job, you will be well-placed to land another soon. Make sure you spend enough on quality clothes for work to look the part. Nobody respects a scruffy colleague or boss. And, of course keep yourself as healthy as possible a good diet, regular exercise and avoiding excess stress. A good holiday from time to time – properly budgeted, of course – is quite definitely a worthwhile investment in yourself.
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