I often observe the most common myth in the personal finance space repeated every day.
“If you want to master your money, you need to start at the most basic thing, and that is creating a budget.”
Not only is that very much off the point, but it’s also not true.
A budget is a valuable tool, without a doubt.
But it’s just that, a tool.
And like any other tool, if you don’t know how to use it or, more importantly, why, it can’t help you that much.
The FIRST step on any journey of mastering your money begins with one straightforward question;
Why is money important to me?
It is a seemingly simple question, but if you’re being true to yourself, you’ll soon discover this question is anything but easy to answer, and that alone highlights its importance.
See, every one of us needs money to survive in our modern world.
We need money for our basic everyday survival.
We need money for food, shelter, clothing, transport, and many other necessities and conveniences. This is easily understood.
What is often overlooked is what psychological needs we use money to fulfil in our lives.
You’re probably wondering, “What the hell is he talking about?”
Let me explain.
All of us have needs beyond our basic survival.
We all have different definitions of what makes us happy and feel fulfilled.
Some find happiness in pleasing others; for a different group, they may find satisfaction in power and domination.
Regardless of what emotion we’re after, our brain usually attempts to meet one of six basic human needs, also known as psychological needs.
This is a concept put forward by best-selling author and coach Tony Robbins, and I’ve found once you understand how this impacts you, it provides you with a great degree of clarity because something I’ve learned personally is the feelings that matter most to you, is what you think money is going to give you. And beneath those feelings are needs.
1. Our Need for Certainty.
It is our fundamental human nature to do our best to feel in control of the circumstances in our lives.
The more control we believe we have, the safer we feel. We usually like to think that if we know what’s coming next, we can adequately prepare ourselves and, therefore, not be taken by surprise.
The higher our need for certainty, the less risk we’ll likely be comfortable taking. This is the true definition of risk tolerance.
2. Our Need for Variety/ Uncertainty.
One of life’s many ironies is the fact that we also need uncertainty.
If we predict every move and event of life, we’d have a pretty dull existence.
No fun there! We need new and different experiences to keep us engaged and excited in life. Often, uncertainty drives creativity and allows us to appreciate spontaneity and surprises. At least the surprises we enjoy, the ones we don’t enjoy, we call problems.
3. Our Need for Significance.
Our need for significance is fueled by our desire to feel important, special and unique.
We use many different things to differentiate ourselves from others. From education to fashion and style to luxury items, even to the brands we consciously or unconsciously try to align ourselves with, see Apple and Tesla fanboys club, as we often use many things to communicate our significance to the world.
4. Our Need for Love
Deep down, it’s what we all want and need most.
People do crazy things when they love entirely; they feel alive and buzzing with energy, and they feel supported and comforted. But when they lose that, they feel isolated, alone, often erratic and sometimes violent.
5. Our Need for Growth.
Robbins often states that life is fueled by growth. If you’re not growing, you’re dying.
Stagnation, otherwise known as feeling stuck in life, is one of the most frustrating human experiences and is often a clear example of our need for Growth. Our success is often related to how much we’re willing to grow.
6. Our Need for Contribution.
Our need for contribution is often about defining our meaning in life.
The truth is, many of us want to know that our time on this earth meant something. That something was made better because we were here.
We often discover that meaning is usually gained from the things we give, not the things we get, and this has driven many great people to commit to serving others.
Each of us has varying degrees of these needs.
Where things get interesting is when we use money, often subconsciously, as a way to fulfil these needs in our lives.
The extent to which we do this determines our underlying money centres or the root of our relationship with money.
Money centres are the basis of our relationship with money.
It is often where our decisions surrounding our money stem from and usually the underlying definition of what makes money important to you as an individual.
1. Security
Security represents our strength and our ability to cope with the world.
Money as a source of security allows us to control things around us, and as a result, emotional safety is often tied to financial security.
Our feelings may be proportional to our bank account.
With money, we feel a sense of certainty, allowing us to stave off anxiety.
Without money, we feel frightened and vulnerable, unable to function with self-assurance and decisiveness.
Through a lens of security, money is meant to be saved because we never know when we’ll need it. We will often deprive ourselves of enjoying the experiences money can provide us because we would rather see more significant numbers in our accounts. The bigger the numbers, the safer we feel.
When it comes time to spend money, it is often done reluctantly, and after much shopping and consideration has been put into establishing we’re getting the best price on what we buy.
But even after that, when a purchase is made, especially larger ones, we can sometimes feel guilty about spending that money.
Bills are often seen as obligations, and not paying them would mean anger, attack and even ridicule from the outside world, so they are an absolute must; this is often why many people reject the notion of paying yourself first.
2. Love
Money can frequently symbolise love, a tool that can be used in buying and selling affection.
Often, conditioning in childhood, where some parents, for one reason or another, could not show affection openly and directly gave what they most valued- money.
This equation is usually ingrained in a young child’s mind, either directly or indirectly, through gifts or special treats.
Sometimes, we see money as a means of showering others with gifts, providing them conveniences or access to opportunities they may only gain through us. As a result, this makes us more attractive to others and, therefore, worthy of their love and affection.
The problem this creates is that “friends” tend to take advantage of that person’s hunger for affection and use their generosity and gullibility to manipulate them.
Absent an environment where someone feels loved, people seek love in many ways, including trying to buy it.
One of the tragedies of people who use money symbolically is they don’t know that the symbol is just a symbol and not the real thing.
3. Power
To many, money means power and is sometimes associated with people who are viewed as very aggressive and determined to win at all costs.
Money enables them to act and gives them the strength to accomplish anything. They see money as a tool to buy importance, domination and control and particularly useful in clearing away obstacles that stand in their way.
In the earlier days of our ancestors, face-to-face combat battles were usually won by physically overpowering your opponent. In our modern world, money may substitute physical strength to overcome one’s adversary.
In business and politics, one can hire better lawyers and advisors, buy more and better advertising and sometimes buy out your competition out rightly, doing whatever is necessary to one’s advantage.
The use of money to gain political power is as old as politics itself; think Jack Warner and Donald Trump.
The challenge a power-oriented person faces is similar to a person who craves security; they both experience feelings of helplessness and fears of abandonment and strive to use money as a substitute for both. They use money to overcome their feelings of vulnerability by becoming strong enough to force others to stay with them and do their bidding.
The caveat is that power-oriented people never get enough power and money because there’s always someone with more of both; thus, they constantly pursue more.
4. Freedom
We all have different definitions of what Freedom means to us, and most times, it’s quite a journey. But for many, money is a tool that can be used to buy Freedom.
The desires of someone motivated by Freedom are often the opposite of those driven by Security.
When security is desired, a steady job with set hours, a routine, limited responsibility, and a predictable future is the aim.
Where freedom is desired, this person generally rebels against routine, restriction on movement or initiative and anything that implies unnecessary dependency.
These individuals would instead work longer hours for less pay if it means more independence.
They desire to chart their own lives, to make their own decisions and to have the opportunity to succeed on their own merits.
People motivated by a desire for freedom see money as a tool to buy time to do what they want.
Doing their own thing is most important to them, and money is the vehicle that allows them to do it.
Money for the sake of having money isn’t the goal of a freedom-oriented person. They may spend it wisely or wilfully by other’s standards, but always in a personally satisfying way.
They may gamble recklessly or invest cautiously depending on their mood and finances. Still, they’re usually looking for something new and unique that challenges them to overcome.
As a result, they can often be easily distracted and sometimes undisciplined, which can affect their efforts toward long-term goals.
Conclusion:
Each of us is different, with a varying combination of needs, which can often result in psychological needs showing up differently in many people and having several needs overlapping in the same individual because much of our outlook is shaped by our backgrounds and experiences.
Security, love, power and freedom aren’t the only motives for acquiring or using money.
While they are among the most common, many others can be mentioned, such as comfort, revenge, knowledge and even sexuality. Consequently, everyone views and uses money differently.
This blog post aims to explore these concepts and many others concerning our relationships with money.
We’d explore more ideas and resources that can help you discover more in-depth how your relationship with money affects how you view the world and why it could be stopping you from attaining the lifestyle you truly want.