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I have seen this so many times, I am convinced that it is almost universal. Money embarrassment. It is that feeling that we “should” have our act together more than we do. We “should” be making more money than we do. We “should” be doing a better job of growing it. We “should”…turns into embarrassment and shame that keeps us stuck where we are and not asking for help. But why “should” you be good at all those things? There are different types of money skills. Making money, keeping money, growing money, all rely on different skill sets. To grow real financial wealth, you need to have skills in all these areas. Are those skills that you were taught?
More than math
It starts with the idea that to be good with money, you need to be a “numbers” person. Money skills are boiled down to math skills. So if you didn’t do well in math, then you assume that you won’t be good with money either. People in the advice business tend to approach things from a logical and analytical manner. Accountants, bookkeepers, financial advisors sell you their logic based advice. This is all fine and good as far as it goes, but money is more than math.
The truth is that good money skills also involves our ability to manage behavior. But if you ask your accountant or bookkeeper how to do that, chances are, they haven’t studied the behavioral side and will struggle giving advice. Most people’s behavior influences their financial decisions more than they want to admit, particularly as it relates to their business. We like to think of the markets as rational and that we then make rational decisions. But emotions play a huge role.
Meeting our needs
Financial decisions are all based on meeting a need. We all have the basic needs of food and shelter. However, very few of us are truly just trying to meet those base needs when we buy food and shelter. We could buy plain beans and rice and sustain life, but most of us don’t do that. We could live in a concrete block structure but few would find that satisfying. Advertisers learned long ago that we are heavily influenced by our emotional needs. Therefore, most advertising is designed to evoke an emotion that compels you to buy. To think that we are immune to these influences would be a denial of our human nature. So why do we think that being good with math is enough?
Weighing trade-offs
Not only are we trying to meet emotional needs, but we are trying to meet competing needs. Every money decision that you make involves numerous trade-offs. Many of these trade-offs are values based decisions that don’t lend themselves to be easily crunched down to numbers. So you are constantly comparing apples and oranges and deciding which one is better. When the truth of the matter is sometimes it’s apples and other times it’s oranges that are better.
What do you want?
To make a values based decision, self-knowledge is critical. Someone else can give you advice, but it will be based on their values. This concept doesn’t just apply to your personal values, but your business itself will have different values based on why your business exists in the first place. Who are you trying to serve? What do they value? What kind of business do you want to be? How do you want to be known in the market? All of these questions help clarify who you are as a business and what values you want to have.
Why this all leads to embarrassment
When we think of money as strictly math and logic, it is easy to get ourselves confused. We aren’t where we would like to be and logically think we could have done better. Maybe we just need more will power. But to think we can execute like a robot denies our human nature. We are really embarrassed that we can’t control ourselves through will power. But relying on will power is a losing game. Will power is a fragile and quickly depleted resource. It is unrealistic to rely on it.
A better solution
Deciding how you will decide is the key. That may sound strange, but since our decisions are based on emotions and competing needs, if we don’t do this, we will constantly choose based on the emotion that is strongest at the time. Meeting an immediate need is always going to win in this situation. But how will you feel about that decision tomorrow, or next week, or 5 years from now. It isn’t possible to create good long-term decisions unless you have decided ahead of time, how you will balance your competing needs.
Having a money strategy and a plan to execute that strategy is what can make a difference. Then it is a matter of monitoring what gets in the way of executing that plan and how we can keep ourselves from getting off track.
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