Money Part 3

Klaudia Mitura: Hello, happiness seekers. My name is Klaudia. Welcome to the third and final part of the happiness challenge for this month of reflecting on the relationship between money and happiness. This month's happiness challenge has been inspired by Peter Komolafe, the author of Money Basics and a financial coach and speaker who in episode 114, shared his practical tips for creating more financial wellbeing.

And in episode 115, I have summarized the key psychological research to answer that ever intriguing question of does money make us happier. And inspired by Peter's advice and the key research findings for the last three weeks, I have been reflecting on what is my financial goal and I'm analysing my expenses and identifying habits that can help me to support it and contribute to my happiness. So, this is what I have learned through this [00:01:00] process.

My first insight was that it took much longer than expected. I really thought I could just sit down and in a couple of hours have all my answers, but actually it took me a few goes to collect the right numbers and to make decisions and really reflect on the questions like, what is my financial situation now? What I would like it to be. What are the key financial goals for the next 12 months?

And I have done a similar exercise in the past. So, I have my old good spreadsheets set up with all the numbers and key information, but still took me a little bit more time than expected. So, I guess my tip number one is that set aside more time than you think you need.

And actually, you know, spend that time to truly reflecting. And when I was reflecting on those questions and about my financial decisions, I came across very interesting research about beliefs about [00:02:00] money. So even though we may think that our financial decisions are fully rational, hey, we are speaking here about numbers.

The truth is that our subconscious beliefs had a very strong impact on our behaviours in relation to money. So, researchers call these beliefs, money scripts, and we develop these in childhood on the basis of our observations of adults around us dealing with money. And researchers have distinguished four money scripts.

First one, money avoidance. So, if you have the script, you believe that the root of all evil is money, and you associate it with greed and corruption. You tend to feel undeserving of money and guilty for desiring it. And this behaviour can result in unhealthy financial decisions, such as living in denial of financial situation or not budgeting and engaging with money.

A second script, money worship. So that happens when you believe that [00:03:00] money means a better life and money's here to bring salvation. But this can also lead to negative consequences like debt, overworking, overspending, and taking risky financial decisions.

A third script, money status, happens when you believe that your self-worth is tied of how much money you have. Which tends to lead to competition, constant comparison of wealth and very much can lead to anxiety about money.

And the final script money diligence is that when you are diligent about money, you tend to resonate with some of the statements, such as if you can't pay cash, don't buy it.

Always save your money, always keep your earnings to yourself. And of course, generally being diligent about money is quite good for our financial health. But if you are too diligent, you can again, be quite stressed and [00:04:00] anxious and worry about money. And also, the script has been shown to prevent from enjoying the money and spending it on the things we want to do in life.

What struck me about these money scripts is that they are not positive and it's not that we should be aiming for one script avoiding the other. So, I guess the idea is to understand which manuscript you have and try to recognize it, how it drives and influences your financial decisions.

So, my idea for action here is to write down your recent financial decisions, and ask yourself, which money script is maybe driving these. And to be honest, when I looked at this, I'm definitely money avoider. I always think there is never enough money. And only by very much conscious effort, I started to budget and improve my financial skills.

So here we go. What script do you have?

[00:05:00] My second insight on this reflective exercise was that I love using spreadsheets and I generally run my finances and life on the spreadsheet. But the good news is that there is lots of apps that can make this process of financial reflection quicker. So, we have apps that can analyse your bank statements and provide key categories of spend.

There are apps which can help you to budget and keep track of your saving goals and they are apps that can monitor your spending on the go and do not allow you to overspend, which is, I think is brilliant. So, my second tip here is that take advantage of technology when it comes to finances, because it can really make the process more fun, but also much more achievable and realistic in day-to-day life.

Klaudia Mitura: My third insight and my final one is that me and my [00:06:00] husband have a good habit of reviewing our finances monthly, and we are also good at that long term planning, asking questions such as if we want to retire at this age, how much money would we need to save and what that means in terms of the current savings and investments when it comes to retirement. But through this reflective exercise and Peter's advice, I have realized that we don't do much of a financial planning for a shorter term, such as a year. So, what do we want to happen financially this year? What spend do we expect? How much our goals and fun experiences we want to do will cost us.

So, my tip three is very much when you're looking at your financial planning, divide it into monthly, yearly, and that very long term. And again, here is quite interesting research of why we might procrastinate when it comes to saving, [00:07:00] budgeting, thinking about retirement and that long term financial planning.

And the answer is we are not very good at imagining our future self. I mean, it's really vague and abstract for our brain to think, well, I'm currently 37, but at some point, I will be 80 and how that will look like. So, in one study, for example, participants were asked to interact with their future selves via virtual reality programs, and those who did that were more likely to put aside money for their hypothetical retirement fund.

So, if you are procrastinating with making financial decisions that are long term, what can help you is to regularly imagine yourself quite vividly and realistically at the later stage of your life. Five. 10, 20 years in the future. What helps me is kind of [00:08:00] writing it down, really trying to play with that. Okay. When I'm 80, what I'm wearing, where I'm living, what could happen, and only by doing that, your mind can start shifting towards focusing to consider the consequences of immediate actions that we currently having on our future self. And therefore, we can start acting differently.

Can money buy us happiness? Well, fascinating topic. Wealth cannot really substitute and cannot be a substitute for other important aspects of our life. However, as my guest, Peter Komolafe was stressing, having money allows us to make life choices out of freedom rather than necessity.

So, what we need to be thinking about is how does money can help you to create the world, the life, the freedom, the happiness you want.

Thank you [00:09:00] so much for listening. I do hope that this month's happiness challenge has inspired you to create more financial freedom and most importantly, sit down and reflect about money.

Let me know your insights. You can find me on LinkedIn under Klaudia Mitura. And remember to subscribe to my newsletter to get some extra content. I'll see you at the next episode. Bye.