As many of you know, I started this community from a desire to help myself, and others, learn how to build wealth from the ground up. I spent months researching how to ‘not mess up’ my finances, and I reached out to colleagues in every network to learn about their personal finance struggles. During this process, one of the most popular questions (phrased in many ways) was: How do I balance enjoying life and good financial habits?
Individually, I could make recommendations on where you should 'be nit-picky' and 'enjoy life'. But as I zoom out to more general advice for Common Wealth Coaching’s weekly readers, I realized that the root of this question is caught in the fear of ‘messing up’. This often causes us to go toward one of two extremes-- excessive frugality or excessive spending-- because both of those routes seem easier than finding balance.
Stress related to money - otherwise known as money anxiety disorder - is real and can even impact physical health. Most of this stress stems from avoiding ‘money-talk’ throughout our lives, as very few families, friend circles, or even close relationships discuss money unless there is a crisis. As we grow up avoiding ‘money-talk’, we can start to either overly demonize or glorify money, neither of which are healthy.
Deconstructing Money Fears
Despite our initial fears, money isn't actually scary-- it is simply a vessel, or tool, for other things like sustenance (read: food, shelter, etc.) and exploration (read: travel, education, etc.). Anxiety comes in when we not only fear money, but we also feel that we have no control over our flow of money. Other sources of stress include debt, compulsive spending, and general financial illiteracy.
If you find yourself feeling anxious when you think about money, try deconstruct and isolate the source. Then, set up small goals to address each challenge individually, and reach out to a trusted financial resource if you need guidance.
Reducing General Money Anxiety
While you are isolating the source of your money anxiety, there are some general guidelines for building confidence and minimizing stress.
1. Seek educational resources to learn more about money and financial strategies.
Congrats! You’re already accomplishing this one by subscribing to a personal finance newsletter. There are so many other resources out there -- like NerdWallet (essentially the ‘Yelp’ of finances), Penny Hoarder (essentially the ‘Buzzfeed’ of finances), and 360 Financial Literacy (essentially the ‘Wikipedia’ of finances). If you need help finding specific resources via apps, Podcasts, etc., let me know so I can share those that are even more personalized to you.
2. Stop comparing yourself to others.
You never know other people’s financial situation unless they explicitly walk you through it. This includes friends, cousins, Instagram icons, that friend on Facebook going to work for Goldman Sachs, and anyone else you think has it all figured out. The amount of money anyone has is NOTHING compared to how they approach it.
Take countless examples of athletes and music artists making millions of dollars, but declaring bankruptcy within years. You may think that all doctors, lawyers, insert-high-paying-job-here-ers are swimming in cash, but the reality is that money management trumps the size of your check every time. Building wealth is personal-- it’s based on personal goals for your personal circumstances-- so focus on your strategies instead of others' external appearances.
3. Set up an emergency fund.
Talk about having peace of mind-- an emergency fund is a savings goal that means you have backup in any worse case scenario. It’s the seatbelt in your car that prevents any crisis from too much damage. And while you could still technically operate the car without wearing a seatbelt, it doesn't mean that you should.
A healthy emergency fund typically has about 2 - 3 months worth of living expenses that can support any sudden career changes, medical needs, or personal crises. If you can set aside money for emergencies, you will start to reduce stress around upcoming uncertainties and your ability to adapt when situations change.
So, how do you find that balance between enjoying life and good financial habits? The first step is deconstructing fear around money, and the second step is acknowledging that your financial decisions don’t have to be extremes. On the spectrum from extremely frugal to excessively careless, there are countless ways to balance your habits, and strategy, to be nit-picky in some areas and enjoy life in others.
I’ll give you a personal example. You all will roll your eyes, but if you didn’t know already, I love Soul Cycle. Yes-- it is a completely over-priced ($34/class), now-mainstream, EDM loving, cult-like community, and I’m over apologizing for having this guilty pleasure. Despite it’s bad rep, I love the energy of the instructors, the seamless playlists, the motivational wall art, and the lack of technology in the studio that allows me to give 110% for 45 minutes.
It’s absolutely therapeutic-- I come out feeling strong, proud of myself, and ready to conquer anything-- until I factor in the $34 price tag. But for me, I know that taking this class once a month will be a source of happiness and rejuvenation. So I’m choosing to “enjoy life” on this one. This means:
1. Not guilting myself for enjoying this costly activity
2. Setting some boundaries for enjoying this pleasure -- like going once a month instead of once a week
3. Shifting other parts of my budget -- this $34 will come from my decision to leave my car at home, which currently costs me $50/mo for gas
If you’re struggling to identify your own priorities, want an example of a budget, or want help developing a budget and strategy of your own, let me know! I am still accepting a handful of clients for free one-on-one coaching until May 12th._ In the meantime, take a deep breath, do a little soul-searching, and don’t beat yourself up for seeking a balance between frugality and enjoying yourself. In fact, seeking that balance is one of the best things you can do for your mental, emotional, and financial health in the long-run.
When it comes to managing your money, how do you avoid the noise, and bad advice, to actually get peace of mind?
This month, tune into our podcast for the exclusive Future of Finance series. We ask leaders from digital investment apps and social impact companies to simplify what you should, and shouldn’t, be doing with your money!