How We Think About Money

August 18, 2020

Examining whether you have a healthy relationship with money is important

The COVID-19 pandemic has reshaped our lives in unprecedented ways, forcing us to live closer together with some people, rely on video conferencing to connect with those who live further away, adjust our money habits and even reevaluate our retirement hopes and dreams.

And as we enter the waning months of summer, when we would normally be preparing for kids to go back to school, we’re reminded that many schools are still closed, businesses are still shut down and many of our offices have yet to welcome employees back – bringing untold financial stress to millions of Americans. 

Our Relationship with Money

But let’s take a moment and examine how COVID has changed our relationship with money. And before we answer that question, maybe we should ask this one:

Do I have a healthy relationship with money?

It may seem like an odd question, especially if you’re one of the 18 million currently unemployed, but understanding the link between money, happiness and well-being could prove invaluable. This is especially true since our relationship with money may be healthy or unhealthy.

How we regard our finances is a function of thoughts, beliefs and emotions formed since childhood. Often, we deal with money in the same way we deal with relationships. If we are careless in our relationships and our personal behavior, our finances reflect the same lack of care.

Money Fights = Divorce

A study by Jeffrey Dew, a Utah State University professor, quantified the link between money-related tensions amongst couples and the risk of divorce. Beyond sexual relationships, money fights were the most common harbingers of a breakup. Couples who disagreed about finance once a week were over 30% more likely to get divorced than those who argued over money a few times a month.

Money and wealth are not the same. Money is physical or electronic currency that may be spent immediately for goods and services. Liquid money is a component of wealth, but wealth includes assets that are not liquid and not immediately convertible to spendable cash.

How often do we read of the rising Hollywood or athletic star destroyed by drugs and alcohol? Whether born of insecurity, narcissism or some other need, money may be fueling that fires destruction. Conversely, there are those who are loving, caring and giving, some with wealth and some with little, who are happy and well-adjusted, leading meaning-filled spiritually rewarding lives.

Why We Pursue Money

People do not pursue money for its own sake. Money represents other things. It may be power, a means of control, satisfaction of competitive urges (“the one who dies with the most toys, wins”). The most basic role of money is security. You want to know that you can meet your everyday needs and those of the people you love and care for.

A certain level of available money, along with no debt or manageable debt, allows one to sleep at night. Your first task in personal planning is building a healthy financial cushion, managing debt sensibly, with insurance safeguards in place relative to property, liability, health, disability and death.

Money Is Freedom

Having insufficient money to meet needs and satisfy obligations is a major source of tension in families, in business relationships and in one’s own head. Having ample money and liquidity offers choices and removes constraints.

Financial freedom may bode good or ill. We can make good choices, or bad choices. Chronic overspending, false friends and bad influences, immoral behavior and a life of dissipation are a slide into ruin, greased by money. If our relationship with life is one of balance, our money behavior reflects similar satisfactions.

One of the most important questions a financial advisor can ask is:

What is the money for?

Hopefully, the answer will not consist of things like: “I want to buy a car.” Frame money in terms of relationships – what it means relative to those you love and care for, your spiritual orientation, your sense of meaning and satisfaction, your obligations to others, what makes you comfortable and uncomfortable, your legacy.

Make an Honest Assessment

Try to answer these questions out loud:

  • How do you define money?
  • How much is enough?
  • What challenges do you see in the next 10 years?
  • How does money relate to the alternatives needed to meet each positive or negative challenge?
  • Is money a resource that can power alternatives, or a constraint?
  • How does money relate to what you wish to experience, the outcome desired?

Money should not define you. Your life should run your money – your money should not run your life. Again, what is the money for?

Make a healthy relationship with money your watchword.