Examining your money history

In order to identify, accept, and overcome the money-related obstacles that are currently preventing you from making the most of what you have and reaching a place in life where you’re satisfied with your position — financially and personally — start getting a handle on what I call your “money history,” particularly the influence of your parents, your childhood, and young-adult environments.

Taking a historical inventory isn’t easy, but if you put in the time and want to challenge yourself and your beliefs, the process can be productive.

Set aside time — about an hour should do — for some personal reflection, ideally in a place and at a time that frees you from distractions. Consider going to the library, the beach, or some other place that’s away from your home. Reflect upon the following questions:

• What personal experiences (good and bad) relating to money do you recall from your childhood? Did you work as a kid and teenager? What lessons did you take away from these experiences? If you didn’t work, think about why you didn’t and what your parents said to you (or implied) about working and making money.
• What memories of your parents (or other guardians) do you have that relate to finances? Were your parents spenders or savers? What financial crises occurred, and how did your parents handle them? Did money cause tension and problems at home? If you don’t have many explicit recollections about money with your caregivers, what implicit messages did you take away from the way they led their lives and the role that money played in it?
• What efforts did your mom and dad make to teach you about money? How much freedom and latitude did they give you with money? What lessons did you take away from this? If you had to summarize their philosophy and approach to money in a sentence or two, what would it be?
• How important were financial considerations in what you chose to study and what jobs and career you sought? Did you pursue work based upon what interested you or what you believed you could make more money doing? Were you pushed into your career by someone else for the supposed financial security you could achieve?
• Thinking back to your childhood and young-adult years, what significant events happened to you and your family that impacted how you felt about money? These events may include, for example, a major illness, a parent being laid off, volunteer work you did, and so on. You need not have a long list of events — the two or three most important and formative occurrences will do.

Exploring your attitudes toward money

Having taken the time to ponder your background and how it colors the way you relate to money (see the preceding section), take the next step and spend some time reflecting on your current feelings and attitudes toward money. There are no right or wrong answers to many of these questions:

• What stresses you about money?
• Are you frequently juggling bills and trying to figure out whom to pay next?
• Do you watch your investments daily, or do you avoid looking at your investment statements out of fear? Why?
• Are you looking for a hot investment tip that could multiply your money quickly?
• What financial secrets are you keeping from your spouse (and others)? What would cause you feelings of humiliation and embarrassment?

In working with clients, I’ve found that simply taking the time to think about and reflect upon one’s history with money provides valuable insights that can enable people to cultivate better financial habits. Quite often, people who go through this process say things like, “I never took the time to consider why I do what I do with money or even what I’m doing.”

Don’t beat yourself up if you can’t handle developing thoughtful responses all in one sitting. Some people find these questions bring up strong memories and emotions, so you may need two or three sessions to complete this task.

Understanding your friends and money

Our peers may have a major influence over how we spend money and even deal with money overall. When I used to teach a personal-finance course at the University of California, I talked about consumer spending and our choice of cars. Over the years, some students confided to me that they had been embarrassed by the shabbiness of their cars. One person told me that his co-workers would get on him about his car “trashing up” the parking lot. Sales professionals who called on clients and took clients out in their car were especially self-conscious about their vehicles.

Here are some examples where money comes into play with others. Consider each and what lessons you can take away about how your friends and peers affect the way you think about, spend, and use your money:

• Going out to eat or for entertainment: Do you go out to restaurants, bars, or entertainment venues? Do you go on trips or vacations with others? How do you choose the place? Do the folks you tend to hang out with discuss and care about the cost, or is it not discussed? How are things handled when it comes time to pay the bill?
• Lending money: Are you comfortable lending money to friends or family? Have you ever done so with bad results (for example, not being repaid)? If the loan extends over a lengthy time period (years, not months), have you collected a reasonable level of interest?
• Gift buying/exchanges: In a typical year, how much do you spend on gifts for others? Do you feel obligated to buy many people gifts? Do you find yourself spending more than you can comfortably afford or giving more than you receive?

Using the listed topics as a guide, spend some time reflecting on your interactions with friends and other acquaintances relating to money. What are you happy about? What would you like to change, and why?

Making sense of your environment and money

Another profound influence on how you deal with and relate to money is your environment. For example, how did you choose where you live? Wanting to live in an area that’s safe and convenient is fine, but if you select a location populated by the rich and famous, how will you be able to save money, especially with conspicuous consumption surrounding and tempting you?

In addition to where you live, consider the other circles in which you travel — your work environment, areas where you spend a lot of your free time, and so on.

Write down your thoughts about your environment and how it may impact and reflect your views on money. In what ways is your current environment a positive or negative influence on how you manage your money? What would you like to change about your current environment and why?

Diagnosing procrastination

Answer the following questions to identify areas of your financial life where you’re procrastinating:

• Are you financially disorganized and prone to clutter? Because avoiders dislike dealing with money and related issues, they don’t spend their free time keeping documents organized and easy to find.
• Are you late paying your bills and tax payments? Money avoiders often incur late fees and interest charges on various household bills. Those who are self-employed, and thus responsible for quarterly income tax filings, are at additional risk for falling behind with tax payments, the negative financial consequences of which can be huge.
• Do you have unopened financial account statements or emails? We all get busy with life, but I was amazed at how many money avoiders I worked with who would have piles of unopened account statements (and now emails of the same), even during periods when their types of investments were doing fine, thus eliminating any reason for avoiding opening potentially bad news.
• Do you have a sense of unease, and even shame and embarrassment, with having cash sitting around in low-interest accounts? Money avoiders who are able to save money may have a tendency to allow it to accumulate, for example, in bank accounts that pay little if any interest. While they may know that they could and should do better with investing the money, they can’t overcome the inertia.
• Do you experience feelings of enormous stress and anxiety over money issues and decisions? One of the main reasons that avoiders relate to money in the way they do is that for whatever historical reason(s), making financial decisions makes them feel uncomfortable and stressed. (In some cases, for example, growing up in a home where money was an ongoing source of unhappiness, conflicts, and problems can lead to avoidance behavior as an adult.) Other people believe that they lack the skills and knowledge necessary to take control of their finances. Finally, some folks believe, right or wrong, that their current financial picture isn’t so bright, so they simply decide to avoid the bad news, even though ignoring the situation will only make things worse in the end.
• Do you have a low level of interest regarding money issues and decisions? While some avoiders shun financial decisions and responsibilities due to anxiety, others are imitating behavior learned from their parents or are rebelling against a parent who was financially or emotionally overbearing.
• Do you have an absence of long-term financial planning and thinking? Many of the money avoiders I dealt with clearly hadn’t thought much about what their personal and financial goals were for the years and decades ahead.
• Do you have marriage problems relating to money? Money avoiders typically have conflicts over money with their spouses, and their avoidance may stem from or be exacerbated by that.

Coming to terms with why you may procrastinate with money issues

Understanding some of the common feelings and issues surrounding money-avoidance behavior can help in coming to acknowledge and productively change poor habits. Here are some common reasons folks put off dealing with certain issues:

• Feelings of incompetence: Some people have negative memories and associations from prior attempts, with parents or spouses, at dealing with money and making financial decisions. Many money avoiders have similar feelings of incompetence with math and mathematical analysis, which are certainly key abilities to possess for effective personal financial management. Lack of experience making financial decisions certainly plays into feelings of incompetence as well.
• Disorganization: Money avoiders have a tendency to be generally disorganized people who avoid dealing with other facets of their lives as well. With only so many hours in the day, people who are poorly organized struggle just to deal with work and family responsibilities. Making financial decisions, especially involving longer-term issues (such as retirement planning and insurance) is easily postponed or never considered.
• Marital friction: Money is among the leading causes of marital discord. So, some spouses cope by avoiding the topic altogether in the hopes of keeping more harmony in their marriage. In the short term, this avoidance strategy may reduce some stress and arguments. In the long term, however, it doesn’t work, as dissatisfaction gone underground doesn’t go away (or get better).
• Fear of future problems: People who were abused growing up or lived with a loved one who was a substance abuser often worry about bad things occurring. Ditto for folks suffering from depression or generalized anxiety disorders. Money troubles are often intertwined with these types of issues and lead to plenty of negative associations with money and simply not wanting to deal with the topic.
• Perfectionism: While this is a less-common reason for people shunning money matters, some perfectionists continue putting off making decisions and taking action because they can always find flaws in or potential obstacles to their intended course of action. Or, they may feel that they can make a better decision with just a little more thinking and analysis. Of course, no one can predict the future, and everyone is limited in terms of time, money, and analysis.
• Ability to get away with it: Some people simply don’t want to deal with money issues and decisions and are able to get along sufficiently through good fortune and being surrounded by those who enable the avoiding behavior (perhaps through care giving and taking responsibility). Unfortunately, life changes and unforeseen problems can expose gaps in poor financial management.
• Avoidance of difficult issues: Some people procrastinate doing financial planning for retirement and buying life insurance for the same reason they haven’t prepared a will — they’d rather not think about aging, dying, and other difficult and unpleasant topics.

Overcoming money avoidance

If you are a money avoider, my goal isn’t to turn you into someone who loves dealing with money. That’s probably not going to happen. However, I can show you how to ensure that you can accomplish common financial goals and won’t suffer the ill effects that money avoiders so often do by neglecting their finances.

Overcoming money avoidance takes time and patience. That statement isn’t meant to provide you with a reason to forgo making changes in your financial life. Instead, I’m relaying a fact and reminding you that change takes time and some steps forward are interrupted by steps back.

The first and most important part of the process is to recognize the tendency to procrastinate when it comes to money management and then understand the reasons behind the procrastination. Many people find it helpful to write down their feelings relating to money avoidance or to speak about their feelings and history with money with someone who is an empathic listener.

In my work as a financial counselor, I found that many avoiders typically felt greatly overwhelmed with a laundry list of financial to-dos. That’s why you should prioritize and only work on the top one or two items at a time. I’d tell clients that even though they might have a total of eight or ten things on their longer task lists, they shouldn’t expect to complete those next week or even next month. It might take six months to a year to work through the longer list.

The following sections offer simple ways to get control of your money.