Financial Planning / Money management / Saving

The truth about money

10 May 2021 | Posted by Jason Butler

Claro’s report into mental health and money shows that our confidence and capability in managing money are the essential foundations of our mental wellbeing. Over the past 30 years, I’ve carried out nearly 1,500 interviews with people about their finances. I’ve learnt that how we think, feel and talk about money – our money mindset – determines our overall financial wellbeing.

What do you believe about money?

The truth about money is that it is learned in childhood and goes on to influence our behaviour. 

For example, you might think that money is immoral or evil. That only greedy or nasty people have money. So don’t be surprised if you fail to charge or earn what you are worth or push money away when it comes to you. 

If your money beliefs hold you back, it’s time to update them with more helpful and relevant ones based on who you are now and what you know to be true.

Humans aren’t wired to be good with money

Our brains evolved to deal with the world as it was several thousand years ago when survival was all that mattered. Not the complicated world of marketing, social media, cashless payments, easy credit, materialism and potentially living to 100 years old.

The primitive part of our brain favours immediate rewards. It’s emotionally rewarding to click a button and have something shiny and new arrive in a box the next day. Sending that same money to our pension for the distant future doesn’t have the same effect. And spending can help to alleviate normal human feelings of sadness, boredom, or insecurity. 

You aren’t stupid, silly or a failure if your financial situation isn’t great. You are human. Guilt will encourage you to make changes and improve your finances. But shame is what you’ll carry around as a part of your identity, which will hold you back.

We aren’t connected with our future self

Many people make decisions based on the next week or month. We give a lot of our attention to messages, stories and cues from social media, entertainment and advertising. We are bombarded by the idea that the good life can be ours by spending money now.

But every spending decision affects our future self – whether that’s 5 or 50 years into the future. When you have little or no emotional connection with the older you, it’s much harder to make wise day to day earning, spending, saving and investing decisions.

Getting to know the future you is essential for your financial wellbeing.

You aren’t alone

It’s easy to think that you’re the only one who has money struggles, worries or challenges and that everyone else has it all figured out. Chances are, they are experiencing similar money problems. They just might be suffering in silence. 

Don’t confuse someone who has a big house, an expensive car, and regular exotic holidays as “doing well” financially. There’s every chance they are they are up to their eyeballs in debt and are living payday to payday. COVID has shown us that life has a habit of throwing financial curveballs. If you’re spending all your money on consumption, you’ll never be on the front foot for when the next life curveball arrives.  

The truth about money is that, just like the best sportspeople, no one gets good at anything on their own. They get support in the form of a mentor, coach, accountability partner or life partner. When someone else is cheering you on to do the right things and celebrate your progress, it’s easier to keep going.

Change the language of money

The words you use are really important. Here are a few alternative ways to describe some money-related terms:

Old boring termNew inspiring term
Retirement planningMaking work optional
BudgetSmart spending plan
SavingBuilding a safety net
InvestingBuying assets
Salary/incomeWealth building tool
Problem debtIncome stealer
Employer pension contributionFree money

Action list

Here’s a summary of actions that can help you improve your financial situation:

  1. Get a money cheerleader – whether that’s a mentor, coach, friend or partner.  
  2. Review your money beliefs and if they are holding you back, update them with more helpful ones. 
  3. Be clear on your values and life priorities and align your spending accordingly.
  4. Create a Smart Spending Plan and follow it.
  5. Start thinking longer term. Use an ageing app to get more connected with the older you.
  6. Change the way you speak about money to use more empowering and inspiring language.

Stop looking in the rearview mirror and living in your financial past. Every day you get a chance to start again. The truth is that you can be good with money – you just have to take small steps and accept you’ll make mistakes and that it will take time.

Remember, you’re looking for progress, not perfection.

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