CHAPTER 2

The Emotional Context of Money

In this chapter you will learn

• What money means to me and my history
• How money actually does influence happiness, but not in the way you may think
• Understand more about your own background and how it influences your current approach to money

What money means to me - my story

What does money mean to you? Does it mean safety? Security? Living? Everyone has a slightly different answer. If you have enough money, you can buy whatever you need. If you don't, there are some things you might very much want that you're going to have to go without. But money is much more than that. There are very few people for whom it does not have a significant emotional context. (When I say, "very few people," what I actually mean is: I've never met one. I don't suppose you have, either.) And that emotional context comes from our past. For most of us, it's probably rooted in our childhood. Mine certainly is.

I grew up in Melbourne, Australia. My father had an excellent and well-paid job and I and my two brothers were educated at a private school where break-time conversation might be around the new boat one of the pupil's fathers was considering buying. A nice life, you might think, and it was. Very middle-class. Very prosperous.

And then, in 1991, my father was made redundant. Up to this point, my mother had only worked part time. That had to change, and she and my father set up a bookshop. They did this under the guidance of a friend who was already in the business; nevertheless, it did not go terribly well. Money changed from being something to which no one ever gave a thought to something that was always the source of worry. Our parents probably thought they succeeded in keeping the worry from us, but they didn't. We were well aware of it, especially when the house had to be sold to fund the business and we moved into rented accommodation.

As young people growing up the issue of money and wealth becomes more and more prevalent the older we become. We simply cannot help it as society is wired this way. We see it in the media, we notice it in our friends and gradually relate it back to ourselves and our families. If you are a parent, I would encourage you to discuss money with your children. As our awareness of money and wealth increases, yet like so many things during our childhood, our understanding may not. A study by the Children and Youth Services review in 2018 concluded that "financial literacy (in young people) was associated mainly with understanding the value of savings and discussing money matters with parents."4

Back to my story, it appeared to get better for my parents, and therefore for us, when my father was offered his old job back. He accepted and my mother took over the whole running of the shop which limped on for another year before they sold it, losing pretty well everything they had from the house sale as well as the redundancy payment. Well, these things happen and they moved on.

And then, in 2008, stock markets crashed around the world and the story in the previous chapter took place. Now it was all gone. We had gone from abundance to being extremely hard-up, back to something amounting to sufficiency if not abundance, and then to being hard up once more.

I'm certainly not looking for sympathy here as over my career I have heard hundreds of similar stories. Money and wealth (and life for that matter) is rarely linear - nothing happens in a straight line. You may have a similar story where either you, or your parents, have been made redundant, or businesses failing or relationships ending that causes not just families but assets to be split up. All these situations leave their mark on us emotionally and this comes through in terms of how we view and spend our money. This is certainly nothing to be ashamed about and in fact, I believe it goes a long way to give you a healthy respect for money.

So that's my background and given my career is understanding people's financial background I know situations like this are very common.

This background has left me with the significant impression that if my parents had more financial help, heaven forbid spoke to a financial planner, they would not have made the same decisions they did. My single most prominent objective is making sure that my wife and children will always be looked after, come what may. I have also extended that into becoming a financial planner because I want to make sure other people also have every opportunity to make the right decisions by receiving the right advice.

Perhaps I am an extreme example but my reasons for raising this are two-fold. First, I want you to think about your upbringing and how your background has influenced your attitudes to money. We will do a little exercise on this shortly. Secondly, if you are a parent, I want you to consider the influence your situation and attitudes are having on your children and how you can potentially help that. My experience with my own parent's financial ups and downs taught me that children, once they reach their teens, may never do what you tell them, but they will learn from what they see you doing. As a father, I need constantly to remind myself of this fact. Setting an example of how to look after money properly is a very good idea - for yourself and your children.

What does money mean to you?

This book isn't about me. It's about you. It's about your story, your background, but most importantly, your future. To put together a financial plan that is potentially both realistic and successful we need to help you clarify the emotional context your relationship with money started.

This may sound serious but it's not that bad. It's simply trying to get you to be aware and notice those influences. A good therapist will ask us to analyse our current habits and, without beating ourselves up, will ask us to notice and say, "That's interesting, I wonder why I do that?" Maybe you grew up in a household where your parents had very different ideas about money which caused tension. Maybe you grew up in a well-off household, but had far wealthier neighbours/friends which your parents were always trying to compare themselves too. It is a commonly known psychological trait that our attitudes end up trying to right the perceived wrongs of our own upbringing. I know mine does. Everybody has a story and everybody's story influences their habits and attitudes today.

In a Forbes article, Prudy Gourguechon highlights the most important emotions when it comes to money - fear, guilt, shame and envy.5 Of those mentioned, the emotion I find most interesting is shame, because shame causes us to shy away from something or avoid it. Think about it, if you're ashamed of something, you are simply going to not do it. A few common examples she highlights are:

• I don't have enough money.
• I've avoided thinking about my finances.
• I've avoided doing what I'm supposed to do about finances (creating a safety net, planning for retirement, sensible budgeting).
• I'm really ignorant about all of this.
• I spend too much.
• I buy stuff when I'm unhappy.

You may recognise some of these emotions in your own life. Each of these are excuses we tell ourselves and potentially almost label ourselves saying "That's just me." My point is it may be you now but a) that has come from somewhere in your past and b) it doesn't have to be you in the future.

To help I have created a very simple test that hopefully will help you understand your own emotional background to money a little more.

How feelings affect spending patterns

When we feel well-off, we tend to feel more confident but that can also lead to overspending depending on our background. Try this. Answer the following questions by scoring them from 1 - 5, with 1 being the lowest and 5 the highest:

1. Growing up, how well-off did you feel your family was? (Score 1 for not at all and 5 for extremely)
2. Also at that time, how well-off did you feel your family was compared with your schoolmates, neighbours, cousins and others around you? (Score 1 for not at all and 5 for extremely)
3. Were you ever aware of tension between your parents over money? (Score 1 for very aware and 5 for not at all aware)
4. How do you handle your credit cards? (Score 1 for repay in full every month and 5 for permanently run a balance close to my limit)
5. Now apply Question 4 to your bank account (Score 1 for always in credit and 5 for permanently overdrawn at close to the limit)
6. Would you describe yourself as an untidy or disorganised person? By which I mean both at work and in your personal life? Do you keep an untidy workplace? Kitchen? Bedroom? (Score 1 for not at all untidy and 5 for shambolic)

If you scored mostly 1s and 2s, with perhaps a single 3, you've never felt overly well-off but you understand the importance of money. Your spending decisions tend to be frugal and you have...