After a 22-year career in financial services, I kept returning to an unsettling thought that something was very wrong with our perceptions of money, both individually and as a society. As I delved deeper into understanding the issues at hand, I could see how we've been sold a series of lies about money -- and many of us bought them hook, line and sinker!
The most deceptive of all begins with the belief that money equals happiness and if you want to be happier you just have to figure out how to get more money.
Yes, analysis completed in 2011 by Angus Deaton, Ph.D. and Daniel Kahneman, Ph.D. using data from a Gallup-Healthways Well-Being Index (GHWBI) shows that money can make you happier by having a household income of up to $75,000. The problem is that cultural norms do not teach us to be satisfied with a specific income and so even if data tells us we do not get happier beyond $75,000, that doesn't keep us from striving for more.
Our mental training about money starts very early in life according to research by Cambridge University and is heavily influenced by a system that says more is better.
Another challenge affecting our relationship with money stems from a system that teaches us how to think convergently where there is only one answer to any given problem. This type of training often saps our creativity and feeds into how we make decisions and interact with others. In the case of wanting to find greater levels of happiness in life, we've been taught it will come from money and you need to either acquire more or go without and be unhappy.
Yet, when we think the only way we can solve our problems is by having more money, we become a slave to the 'machine.' We must continue to work hard, pay our dues, sacrifice our personal goals all in order to make more money and continue to support the system. No matter how hard we may try, ultimately we are playing this game called 'life' by other people's rules, which may be one reason why there are so few winners and many losers when it comes to money.
However, when we learn how to change our money mindset so we think creatively and divergently, whereby allowing our problems, even those with money, to be addressed with an endless range of solutions, we take control of our own lives and leave the machine behind.
There are five key steps to thinking more creatively when it comes to money:
Step 1 -- Learn who you really are (outside of the past stories you've been 'sold.')
Step 2 -- Know what is most important to you and what you want (and need) to be able to flourish.
Step 3 -- Create a personalized action plan according to your three Ps -- principles, passion, and purpose so you have a map of where you want to go.
Step 4 -- Know you have the power to bring your dreams into reality.
Step 5 -- Ensure you have the necessary support and resources.
When you learn how to change your mind and identify the endless array of possibilities available to you when it comes to money, you will see there is absolutely nothing holding you back from achieving the financial and personal freedom you seek.
Diversify Your Investments “Don’t put all your eggs in one basket” can be applied to investing. Spread your money to minimize your risks if a company doesn’t perform as well as expected. This way, you’re also exposed to different assets and will get more gains for your future. Watch.
Make Small Changes To See Big Results One of the biggest money hurdles is getting in control of your money. Instead of making drastic changes -- and falling off the wagon -- track your spending and incorporate new habits slowly. Do you go to the movies once a week? Try going every two weeks. Grab a coffee at Starbucks each morning? Brew your own twice a week. The small savings will add up. Watch.
Know How Much To Save And How Much To Invest If you’re ready to get your feet wet into the stock market, start slow and keep building. You want to be able to put your money into an account and not have to withdraw it. Forget rock-bottom savings account rates for all your money -- put 20 percent into a savings account and the other 80 percent into the stock market. As you get closer to retirement age -- and less willing to take risks with your retirement money -- the percentages will become 50/50. Watch.
Take Advantage Of Compounding Interest Too often, women forget about the power of compounding interest. The earlier you start saving, the less you’ll have to save in your 40s and 50s for retirement. It’s not magic, just math. Watch.
Negotiate A Higher Salary It’s critical to negotiate your salary -- no one else is going to do it for you. Research what people in similar industries and job roles are making, and present it to your supervisor. If your company can’t provide you with more money, you can still negotiate: can they provide you with more vacation days or allow you to work from home once a week? These extra perks might offset a lower paycheck. Watch.
Forget About Cashing In Your 401k If you think of the money sitting in your 401k as an emergency fund or savings account, think again. Withdrawing money early will result in paying taxes just like you would your normal paycheck. Additionally, you will pay both a 10-percent federal tax penalty and a state tax penalty. Watch.
Save Money On Your Online Shopping Make saving money when shopping online a breeze with Bodge’s favorite app, Invisible Hands. This handy program does the price-checking research for you, and will alert you when a different site has a better price -- or let you know that you’ve found the best deal. Watch.
Avoid Financial Rip-Offs When choosing what to invest your money in, if it looks too good to be true, it probably is. Remember that you’re investing and saving for the long term, not to get rich overnight. Watch.
Decide Whether To Rent Or Buy Buying a home is not only an investment, but a permanent tie to a location. More importantly, it can limit job opportunities by making you location dependent. If you’re uncertain about whether you’ll be in the same city in 5-8 years, it’s best to rent. Watch.
Cut Back On What You Want, Not What You Need Identifying what you need versus what you want is an easy way to cut back on spending. You need food -- but ordering out instead of eating the leftovers in your fridge is a want. By being honest with yourself about what you actually need to spend money on, you can start to save. Watch.
Don’t Pay Down Debt With More Debt If you’re trying to pay down debt, avoid taking on more debt -- forget taking out a loan or getting a new credit card to pay another off. Instead, keep paying off debt as your priority, and with each paycheck, add a few extra dollars to your payments. There are no shortcuts, but making on-time payments above the minimum will help you pay your balances as soon as possible. Watch.
Save At The Grocery Store When you’re shopping for groceries, look at the unit price, not just the price per item. While that box of cereal might be $1 cheaper than the other brand, it might also contain less. Use this strategy for boxed items, meats and cheeses -- you’ll save more than by just looking at size differences or brand. Watch.
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