Money, a simple medium of exchange, yet it stirs profound emotions within us. Why does it have such a grip on our feelings? Let's delve into the psychological underpinnings of our emotional responses to money and its implications.
How to build healthy relationships with money
Ramit Sethi, author of I Will Teach You To Be Rich, discusses the psychology behind our relationship with money.
- Our feelings are almost always unrelated to the financial decisions we make and indicative of something much deeper
- There’s no foolproof formula to making money decisions
Empathy separates great financial advice from the rest
It’s easy to tell people the right thing to do, especially when you have the expertise
- Empathy, on the other hand, is understanding that everyone – regardless of their age, gender, race, identity – has a vision of what they want their rich life to look like
- A great financial advisor will listen, understand where you are, and what you need in your current stage of life
How to get out of this cycle of negative emotion
Fixate on all the feelings around how much there’s left to do
- In terms of a loan, that looks like thinking about what you’ve mortgaged, the interest on your loan, how much money you have to set aside every month to make a payment, and the kind of job you’d have to do to get where you want to go next
- Don’t compare yourself to others or even your own life before you took on debt
You can also go even more granular and ask yourself what you’d want today to look like
This exercise is all about understanding who you are and what you want your life to look Like as precisely as possible
Your feelings are not correlated with your debt
You may think that paying off your debt will make you happy, but once you do, there’s going to be another thing to worry about
- Your mindset won’t change unless you specifically work to improve it
- The simplest way to reframe this thinking is to flip how you think about your financial decisions
- Ask yourself what you gained from it
How to build a healthier, happier relationship with money:
Know that emotions are okay
- Use them to understand your values, your fears, your needs, and your wants
- Become fluent in the language of money
- Learn about compound interest, investments, etc.
- Motivate yourself
- Be inspired by money
Empirically, we know that those with a college degree have access to better jobs and incomes. Pay attention to it.
Perhaps you gained an opportunity to study abroad or live on your own. Learn from people you still have relationships with, who taught you things, and or who you had valuable experiences with.
Invest in your “rich life”
Why do you want to be rich? What does money mean to you and what are you working towards?
- What does a better job look like? Can you visualize the role, company culture, your pay package, and what kind of projects you would want to work on?
