What is your relationship with money? How much do you love your money? In the African tradition, it is almost taboo to show too much love and fondness for money.
Love and fondness for money are oftentimes mistaken for glutton, obsession and glorification for material things.
But money is what makes the world go round. And the relationship you have with your money determines which end of the wealth or financial ruin spectrum you end up at.
The back story
To a large extent, your relationship with money as an adult is usually formed during early years. This means that you subconsciously handle your money based on how your role models, guardians or even parents handled their money.
“Every family has a money story from which our original outlook on money stems from. It could be beliefs such as money is unimportant, rich people are greedy, more money is good for self-esteem, or a streak of poor money decisions,” says Brad Klontz, a financial psychologist and the author of Mind Over Money.
According to Klontz, an individual’s money script starts to develop at age 3 to 4 years. It then develops continuously up until adulthood.
“Children tend to absorb ideas, perceptions, and attitudes towards money from watching, observing and listening to those around them. For example, if there was tension around pay day or when your father was due for a mega bonus at work when you were a child, the same anxieties are bound to be reflected in your adulthood, especially on how salaries and bonuses were spent,” he says.
In addition, your spending habits are partially influenced by the type of emotions you attach to money.
“These emotions could be fear, guilt or shame. These emotions can easily override rational financial thinking and decision-making, and end up driving your financial decisions,” says Prudy Gourguechon, the author of Starting Older Your spending.
Abundance vs scarcity
The psychology behind your perception and attitude towards money is more critical to your success than your hard work.
According to psychologist Dr. Carol Dweck, a professor of psychology at Stanford University who conducted a 30-year quantitative study on the relationship between money and psychology, your mindset accounts for 80 per cent of your success while your skills only account for 20 per cent.
In the study that formed her book, Mindset: The New psychology of Success, Dr. Dweck singled out the shift from a scarcity mindset to an abundance mindset as the first step to managing your finances better.
However, even an abundance mindset can also leave you broke. “If you grew up surrounded by abundance, it is highly likely that instead of inheriting this abundance, you may have inherited financial instability and poverty,” says personal finance coach Beatrice Kibonei.
Abundance and scarcity are like the proverbial double edged sword. On one hand, you may have grown up knowing that you can consume everything in one go because the same will be available tomorrow.
In adulthood, even though you may have a good career and a high salary, Beatrice says that you may find yourself living large and spending all of your earnings because you have the safety of a monthly pay.
On the other hand, if you grew up around scarcity, you might find yourself living so large as if there is no tomorrow. “With the scarcity mentality, you will easily find yourself spending too much unnecessarily, living the YOLO philosophy, and living from paycheck to paycheck,” says Beatrice.
“One of the ripple effects of these two extreme mentalities is that you may have no savings, investments, passive income streams or side hustles to survive on should you lose your primary income.”
This is the subtle admission that was recently made by singer Sanaipei Tande on NTV. Ms. Tande may have taken too much comfort in the monthly salary she got from her radio job. She lived well in a rented apartment house that cost her Sh. 55,000 per month.
Then in August 2015, she suddenly lost her job and found herself working as a karaoke singer at a club along Moi Avenue. She earned Sh. 10,000 for singing from 8 to 11pm.
“I’d have to go to the balcony first to check if it was safe to leave the club, cross the street and get to my car. Sometimes I’d not get paid at all and other times I would get half the pay,” she said.
In 2016, without a home, Ms. Tande rented a lodging where she could sleep after her karaoke gigs. “As I drove home, which was the lodging, I used to park my car and just break down, and ask myself ‘How did I get here? How did I get to sleeping in a lodging earning Sh. 10,000 after so much abuse?’” she said. Eventually, she moved back to her parents’ home.
Half empty, half full
According to Mindy Crary, a personal finance coach and the author of Personal Finance that Doesn’t Suck, you will never be able to have a beneficial relationship with your money unless you are willing to create a healthy relationship with it.
“This requires you to make a choice and invest yourself in your money, and consistently show honour in the manner you handle and relate with your cash,” she says.
This is echoed by Tonny Robbins, an entrepreneur, financial coach and the author of Money: Master The Game, the first step you need to take is to start associating with people who see the glass as half full instead of half empty.
Robbins says that the scarcity mentality has the tendency to rub off on people. This means that the more ties you sustain with persons who have a scarcity mentality, the less likely you will be to overcome it.
“The quality of a person’s financial life is most often a direct reflection of the expectations of those in his social groups,” he says.
According to Klontz, there are four basic money scripts that describe the relationship people have with money in adulthood. Which one describes you the most?
- The money worshipper: This is the person who glorifies money, and believes that if they had more money than they have now, all their problems would be over. This is also the person who’d be willing to do anything for money.
- The money status chaser: This is the person who believes that their money is a reflection of their self-worth, esteem, social standing, and net worth.
- The money vigilante: This type of person is very cautious about money. He or she doesn’t spend on impulse, doesn’t spend if there is no plan or budget, and is very strict about acquisition and repayment of debt.
- The money avoidant: This is the person who likes to distance themselves from money. By practicing avoidance, this person ends up undermining their own financial well-being.