Managing your personal finances (connecting heart to money) whilst … starting a coaching business/service as your first career (post-graduation) by Kim Stephenson (Part 2 of 5)
In Part 1 I introduced Sarah, a recent graduate with both a Masters and a Bachelors, who was exploring for the first time what is personal finance, how this relates to her situation and her dreams for the future. Now that Sarah has some awareness of this and the differences between national economics and personal finance, in Part 2, I’ll look at how we unpacked the details of her rather vague dreams and gave them more structure. Then we’ll move to how this relates to her current life situation. This is the ‘heart’ of my approach, and in the remaining parts of my 5 part series, I’ll focus on the ‘head’ and the ‘hands’ of making personal finance for Sarah (and others like her) fit into their current realities.
Bringing into focus a sweet spot for dreams and finance.
Sarah’s clearly got dreams and at least a vague vision of how she’d like her life to be.
But she is caught between apparently incompatible goals (spending now and saving for the future).
She's confused by the stories she’s heard about money (all the “you should”).
She has her own doubts about her competence to deal with money and uncertainty about where to start.
We started our work together by working on making the vision less vague. It helps to begin with meaning (in the sense of Seligman’s PERMA model). There’s lots of terms for it:
what gives you energy,
what brings flow,
what deeply moves you.
There are many ways to look for it, the one that clicked with her was the “future interview”. Trying to look at legacy, or writing your own obituary and similar exercises work for some people. But contemplating death (“imagine you’re dead, what would you want your eulogy to be”) unsettles many. Sarah wasn’t considering being a grandparent or leaving a legacy with wise words on her death bed. Getting her thinking about what she’d want to say to a TV interviewer in, say, 20 years, worked. When she had achieved what, and become whom, she wanted, she would feel great. It gave her permission to fill out her dreams in more detail for a timescale that had meaning for her.
What had the most meaning and potential fulfilment was being good as a coach, being recognized as professional and genuinely helpful to people. That’s probably tied up with a self-image that Sarah is a “people person”, she’s an F not a T in MBTI terms, and the energy comes from the feeling side, not the rational exploration of what’s important.
That doesn’t mean she doesn’t want financial success, to be well-rewarded, to own her own house, have material benefits etc. Obviously, if she can get both lots of money and a fulfilling life, she’d take both! But if it’s a choice between a higher level of professional and social success and the wellbeing benefits that would bring with lower money rewards on the one hand, and having greater material wealth but less fulfilment on the other, she’d opt to focus on the professional and meaningful life.
It doesn’t mean that she has no other dreams either. She imagined being popular and having a great social life, being in a good relationship and maybe with her own family, well-respected in the community; as well as at least comfortably off financially with sufficient for day-to-day costs and a secure financial future, no debt and a good “nest egg” in case of emergencies and to handle old age without becoming dependent. But it’s useful to be aware of which drives and goals are fundamental to who she is, and which would be nice to have, even if the dividing line between them is quite thin.
Attitude to money, and why it matters?
During the unfolding and forming of Sarah’s vision, it gave me more insights of how she felt about money. Through Sarah’s priorities, she offered clues of her attitude to money.
Fulfilment and happiness were important, rather than financial success.
Similarly, she thought of success in terms of professional recognition, rather than being wealthy.
She would compete with peers in terms of professional competence rather than material success.
Money, to her, was something of a necessary evil. Holding that belief made it easier for her to be happy with money, and not get into a “hedonic treadmill”. It’s easy to think that if something is good, then more is always better. But the evidence with money is not just that more isn’t always better, but frequently it’s worse. Kasser for example, suggests that materialistic attitudes, always wanting more, actually reduce overall wellbeing. As Francis Bacon said, “money is a good servant, but a poor master”.
The issue with the inflexibly opposite view, that money is inherently a bad thing is that it can make it more difficult to handle it because it’s “tainted”. And it can deny people the benefits that money can bring if it’s used as a tool, or as Bacon says, a servant. Uses like charitable giving, helping friends, trading money for time to do meaningful things, have all been shown to improve wellbeing (Srivastava et al. 2001).
There are more sophisticated research instruments to categorise attitude to money, but they do tend to produce an academically precise, practically clunky result. In real world terms, there’s no good or bad attitude – the essential is to know how you think about money, whether you see it as inherently useful, a neutral tool, reward for effort or the wages of sin. You can then allow for that in the way you approach things.
One of those allowances, for Sarah, was that her ethical approach and her slight suspicion of money meant there was a need to build a strong ethical component into anything she wanted to plan for her money. Another allowance was that part of her suspicion was from a history of being a “people” person, not a mathematical one. There’s a common assumption that finance requires mathematical skills. That if you can’t do mental arithmetic, instantly calculate percentages, and make a good estimate of the effects of compound interest, you’re lost. The reality is that even in corporate finance (which is more complex) I’ve known accountants who, without a calculator or computer would have to take their shoes and socks off to count beyond 10. For personal finance, you don’t need more skill than that. A spreadsheet or a calculator allows all the figure work you need – it’s not a timed test, you can work through things carefully and get help if you need.
Getting comfortable with ‘maths’ in personal finance
Despite that, Sarah thought she wasn’t “good enough”. The idea that I’m too (substitute your own hang up) stupid/slow/old/young/fat etc. is a standard therapy/coaching situation. It was aided by the cultural idea that women “don’t do maths” or “don’t do money”, which is ludicrously wrong. My usual response, which I used with Sarah, was a client from my personal finance days.
My former client told me that for certain he needed me to handle the money, because he failed maths O-level, had never been any good at it and couldn’t do tax returns, accounts, or anything to do with money. We got on fine and went for a drink (this was finance, in London, in the 1980’s, that’s what you did!) We played darts. I (with double subject maths A-level, quantitative methods in my insurance exams and working in finance) would be trying to add up the score of three darts, including doubles and trebles. Before I’d multiplied 17 by three to get the total of one dart, he’d totalled all three, taken it away from my total, and told me my finish, ending on a double. I challenged him that he’d said he couldn’t do maths – in fact he was way better than I was. He said, “that’s not maths, it’s darts”!
I commonly find people don’t know how good they are at things, particularly maths and finance. It’s because they see it as some weird thing they don’t understand and don’t give themselves credit for abilities in other contexts. With Sarah, she’d learned and used some psychometrics. She understood concepts like Sten scores, and percentiles. They’re relatively complex, compared to finance. But she didn’t think of herself as able to deal with the money, because she wasn’t a mathematician and had struggled to understand the psychometric training.
Very few people have any real trouble with the maths of personal finance – it’s an untimed, open book exam. It’s just that, like any profession, the people in finance try to make it sound complex as it makes them feel important and knowledgeable. They fill it with jargon, and pretend that it’s too complex for “ordinary” people. So many, like Sarah, are hung up on how complicated it is and how limited they are, and are scared. And they end up “deifying” the money and thinking that it’s the important thing, when in fact it’s just a simple tool for them to focus on their own life. They have all the mathematical and logical skills they need, they simply need some accurate information and to take a bit of time at first to work out a method that works for them.
What next?
We got to a point where Sarah appreciated that, while probably never going to excel at, or love, maths and finance for the fun of it, she had more than enough skills to handle her finances. Furthermore, exploring her relationship with money helped her to see the money as a bit more than a necessary evil, as something that she could use to help her achieve her goals. And she could use it in a way that fitted with her values – like helping others – rather than being forced to sup with the Devil.
A lot of people who get this far don’t think any further, they start on looking into investments, talking to financial advisors or institutions. It’s on a bit further from the questions I mentioned in part 1, where people ask, “what is a good investment”, or “where should I put my money”. There is some idea what sort of life the money is supposed to help build.
But I think there’s a bit more groundwork to do yet.
References:
Falecki, D., Leach, C., & Green, S. (2018). PERMA-powered coaching: Building foundations for a flourish life. In S. Green & S. Palmer (Eds.), Positive psychology coaching in practice. Routledge.
Kasser, T (2002) The high price of materialism, MIT press.
Seligman, M. E. (2012). Flourish: A visionary new understanding of happiness and well-being. Atria Paperback.
Srivastava A, Locke EA, Bartol KM. Money and subjective well-being: it's not the money, it's the motives. J Pers Soc Psychol. 2001 Jun;80(6):959-71. PMID: 11414377
Kim is a former financial advisor and an Associate of the Chartered Insurance Institute (hence the interest in costs, ROI etc.) and now a Chartered Psychologist, coach and tutor/assessor in neuroscience. He’s written two books on the psychology of personal finance and can be contacted on kim@stephenson-consulting.co.uk or via the website, www.tamingthepound.com.
* I’m qualified in finance and worked as a financial advisor for 14 years, have taught personal finance and am a qualified and experienced psychologist and coach. I do know a bit about both people and money. From that (unique) viewpoint, those ideas are wrong. They assume people are simple, while money is complex and money is more important than people. Neither assumption is even partially true.
