How To Shed Those Little Pangs of ‘Money Shame’
Do you ever feel like you’re harboring this dirty little secret that you don’t have your financial house in order (even though you’re smart, educated, making a good income, you’re successful in your work and living well)?
You assume everyone else must be organized, easily affording their lifestyle, saving more, investing and in a good place financially. After all, we all know what we’re supposed to be doing. And of course everyone else must be doing what they’re supposed to be doing. Everyone but your household.
You might be surprised to know you’re in good company. Consider the article in The Atlantic this past year called “The Secret Shame of Middle Class Americans.”
One reason we can feel like this is because people—especially women—rarely talk about money. And many people spend more than they earn to keep up with their peers, not thinking that the peers may also be spending more than they earn to keep up.
According to the late Thomas Stanley, who researched the wealthy for more than 30 years and authored the book, Stop Acting Rich…And Start Living Like a Real Millionaire, affluence is an illusion much of the time. Research shows that even for those earning six or seven figures, many are struggling with cash flow, feeling behind in saving and stressing over money. Just in varying degrees. One study showed that nearly one-quarter of households making $100,000 to $150,000 a year said they wouldn’t have $2,000 for an emergency if they needed it.
You may have one area down but not another. Maybe your important docs are organized, but you don’t have a budget so you’re just guessing at how much is going out each month. Or maybe like many people I’ve met, you’ve managed to save six or seven figures in a retirement fund, but you have so much debt that your net worth is either low or negative. (It’s your net worth that’s the true gauge of your financial health). I’ve also met folks who have their businesses and their lives organized on the outside, but they’re totally unorganized with their day-to-day finances.
But no one should ever feel shame over their money situation.
Why? It’s all part of being an imperfect, irrational human, as researchers Dan Ariely (Predictably Irrational: The Hidden Forces That Shape Our Decisions and Daniel Kahneman’s work (Thinking, Fast and Slow) suggests. Ample research shows we’re not the logical, data-driven perfect humans that we seem to expect of ourselves. We’re emotional when it comes to money, not rational. (For more, check out this article I wrote for Reuters about how irrational we are as investors).
Financial planners know this first hand. They see it all the time with clients who come to them for help, but then still struggle to follow even a simply laid-out plan. (Some are using tools and strategies from behavioral economics to help fix that).
We don’t realize that unconscious beliefs and emotions lead us to make poor decisions no matter how smart we are.
So what can you do? Here are 5 suggestions:
- Make peace with where you are right now and decide to forgive yourself (and anyone else) for all of your past money mistakes. They mean you’re human. We all have ‘mistake-stories’ to tell. But your mistakes are not you. They’re based on old unconscious habits that are stronger than our thinking, ‘rational’ mind. It would be like saying a habit is you. A habit isn’t you; it’s something you’ve acquired and can break if you choose to. How we approach money is just that—a habit. Old, patterns that we repeat unconsciously. You can break the pattern anytime.
- Know that unconscious beliefs and habits drive your decisions. So strive to become more aware and think twice before making choices. The work of Ariely and Kahneman tells us we need to interrupt our automatic habitual money choices to decide what we really want in the long-term.
- You’re at risk if you don’t have a safety cushion, if you have debt and are living beyond your means, so actively work at fixing this. Know that you can. (In fact tell yourself every day ‘I am a great money manager and wealth generator,’ and then act on it). Try to take 10 minutes every week to educate yourself on money topics, especially those you have questions about. Get financially empowered. There’s info to be found all over the web. But don’t just read and walk away: Put what you learn into practice in a way that works for your life.
- Let go of the idea of perfection. Imperfect action is better than perfect inaction. For example, if you’re afraid to invest because you don’t want to get it wrong, don’t let it stop you from just saving as much as you can.
- Start fresh for your present and future. Start a new money habit that makes you feel good about money. For example, consider taking some percentage of your paycheck starting next week and send it to a savings or investment account. Or go for a quick win: Look for one place you can save money in your monthly expenses. Take that cash and invest it or pay down debt.
When you take charge of your money, you’ll feel more confident. And even if you find you have catching up to do, you’ll feel more empowered in your work and life when you know you’ve moving forward.
Have you ever experienced pangs of money shame? Or found a good way to get over it? We’d love to hear about it in the comments below (it helps inspire others also).
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The original version of this article appeared at Forbes.com (this is an adapted version).