money therapy

Money Therapy: How to Heal Your Relationship with Money In 6 Steps

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You just opened this article which means you are on the financial health worry meter, going from a little worried, to full on save me from myself. The debts are piling up and the only phone calls you get are from collection agencies. Perhaps you know someone who is struggling and this article is part of your research to help them out. Whichever reason you have, welcome, this article will give you a step by step guide on how you can recover your financial health.

Money is a topic many parents fail to discuss with their children so you have to teach yourself how to make it work for you instead of against you. In the process of learning, you probably made mistakes that put you into debt or close to it. Your goal is to recognize where your problems lie, what your triggers are and how to fix them fast

Identify your problem areas        

Money therapy

The first step you have to take is self-analysis. You cannot fix what you do not know and identifying the cause of your financial instability is the best way to determine the best solution for it.

Some of the well-known causes of financial trouble are

  • Bad spending habits
  • Income changes
  • Lack of budgeting and money management skills
  • Bad investment decisions
  • Unexpected expenses

If you are finding it difficult to fully locate the problem area here are questions to help.

  • How much are you earning?
  • How much are you spending in your household and on yourself?
  • Do you have enough money to pay your bills on time?
  • What kind of debt do you have and how much do you owe?
  • How frequently and for what reasons do you take out loans?
  • Do you make regular payments towards clearing your debts?
  • Do you have credit cards and if so have your credit cards been maxed out or cancelled?
  • Do you borrow money from family and friends and how frequently do you do so?
  • Do you have a savings account and how much do you have in it?
  • Do you spend money on things you don’t need and aren’t budgeted for? If so how frequently?

Once you find out what is causing you hardship you can work on implementing your action plan.

Following bad money advice

Image by Vlada Karpovich

There is a lot of good and bad financial advice on the internet. Statements like you are what you buy make you think you have to spend a lot to attract success. Fake it till you make it which makes you spend every dime on designer items to keep up with the trends waiting to be the next big name in your industry of interest.

 If you jump on whatever financial trend comes out or follow bad financial advice it is difficult to remain stable which is why you need to form a healthy long-lasting money habit. Overcompensating with money you don’t have will drag you to the depths of debt.

Your history with money

Image by Annushka Ahuja

Let’s take a journey back to the Genesis of your beliefs and habits, your childhood. As a child, you learn from your environment and you see what happens in your circle as normal. This is the same with finances where your parents imprinted money messages in your mind that you carry within you as an adult.

What are your earliest experiences with money? Was it one where money was a constant cause of worry and fights? Was it one of constant lacking where you couldn’t get what you wanted? Was it one where your parents got you a piggy bank and a savings account? Was it one where money was regarded as a matter of secrecy?

Gems like ‘money is meant to be spent not kept’ and ‘money is the root of all evil’ are part of it. These lessons that you picked up as you got older have an impact on how you relate with money. If you were taught how to save you will find it easier to do it as an adult. If you were taught money is used to impress others then you are more likely to overspend to maintain a certain status.

If the beliefs you were taught don’t work for you then as an adult you have to work to transform them. Your view of money being a status symbol can be changed to money being a source of security. Getting therapy will go a long way to helping develop a healthier outlook.

Finances and emotions

Image by Darina Belonogova

Are you an emotional spender? What do you do when you feel sad or happy?

You hear people talk about or participate in retail therapy. It seems like a tiny issue but it has the potential to grow. Emotions are not to be taken lightly as they can influence your spending. If you are sad you decide to buy chocolate and a cute dress but its fleeting joy so you decide to buy more to feel better and end up broke. Rewarding yourself once in a while when you can afford it is okay but doing it every time then is a problem. If you think it can crossed over to addiction then please visit a mental health expert.

Your life philosophy

What is your vision and attitude on the purpose of your life? If you have the philosophy of live for today, tomorrow will sort itself out; I have some bad news for you. Your attitude towards life determines how you treat yourself and in extension your finances. Living life today and having fun is a great thing but make sure you keep tomorrow in mind because you never know what circumstances you will be in. You might lose your job in two months and having spent all your money you have nothing to fall back on. That attitude in every aspect of your life has the potential to be very self-destructive.

Face your money spending habits- income vs spending

Image by Tara Winstead

Do you know how much you spend on a monthly basis? If you don’t, please go scavenging through the receipt box if you have one. Knowing how you are spending your money and what you are spending it on is very important when taking charge of your finances. It makes it easier to locate where the problem is and fix it fast.

Three Steps to Fix the Income Vs Spending Dilemma
  • Gather all financial information

In this step you have to gather all your financial information for the year or as long as possible. This includes income records, expense records and bank statements. If you are self-employed then your business records should be on the table. The goal is to know your earnings and expenses.

  • Categorize your expenses

When looking at your finances you will realize there are three types of expenses. First are the fixed expenses that stay the same throughout the year such as rent and mortgage. Second you have the variable expenses which vary from month to month such as groceries and utilities. Lastly you have the periodic or irregular expenses which can be fixed or variable but are paid periodically such as tuition, car maintenance and holiday spending.

  • Find the hole in your cup

Observing your finances you will find that small thing that nibbles on your gold bar. It could be buying coffee daily or thrifting but it all adds up to thousands at the end of the year. By spending money daily you lose track of how much you are spending which makes it easy for the nibbles to increase. So close the hole before you hemorrhage and end up with nothing.

There’s a scene in the American TV sitcom two and a half men that covers this. In season one episode fourteen Charlie Harper goes to his accountant because his cards have been declined and his bills haven’t been paid for four months. The accountant proceeds to tell Charlie that he’s run out of money and explains how it happened by picking a paper cup and a bottle of water. In this scene the accountant demonstrates how healthy financial habits are by poking one hole and pouring water into the cup, it show that they spend a little while leaving a reserve.

 In the case of Charlie harper, the accountant pokes multiple holes at the bottom of the cup and pours water in. It drains faster showing how Charlie spends his money stating, ‘you don’t drip, you hemorrhage’. This is a clear example of how the multiple small daily expenses put multiple holes in your financial cup leaving you with nothing when your cash flow slows down or stops.

Moment of truth

Image by Mikhail Nilov

You’ve done the work of gathering all the information you need. Now all that’s left is to sit down with the information and be honest with yourself. Add up the amount spent for each expense separately to give you a clearer picture. Combine the amount and subtract it from your annual income.

If your results are in the negative, it’s clear you spend more than you make. You’ve been financing your lifestyle through debts such as payday loans and credit cards. What makes the situation more dire is that there might me bills that aren’t paid which create a bigger financial deficit. It is clear you have a problem with money when this is your result. Financial education is something you need to look into for the betterment of your future. All hope is not lost, time and dedication is what you need to come out stable.

A positive result is good but it depends by how much. If you barely pass then you need to get a better handle on your finances. Look at what your expenditure and create a budget that works best for you and your account. Don’t wait for an unexpected situation to knock you into the negative. Plan ahead and cover your bases.

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