Created by the Center for Spirituality & Healing and Charlson Meadows.

How Can You Improve Your Relationship with Money?

Notice your habits

To start, take some time to notice how and when you spend money. What are your patterns—what motivates you to buy things? Do you  shop impulsively? What are your triggers? You might want to start a spending diary to track your habits for a month to get a better idea. Having a better understanding of how and why you spend money is a good first step to making changes.

Rethink money

Consider that no matter how much our society values money, more of it does not necessarily make you happier.

Chilean economist Max-Neef believes that there are 10 fundamental human needs, which he describes as subsistence, protection/security, affection, understanding, participation, leisure, creation, identity/meaning, freedom, and transcendence. If you think about it you can see that meeting these needs requires very little money. We can meet our deepest needs and find wellbeing through our relationships, pursuit of purpose in life, spirituality, and connection with nature. We don’t need more money to buy more things or a bigger house.

So don’t look for fulfillment in material goods—you will be disappointed.

Revise how you spend

As we know, spending money on material goods doesn’t bring happiness. But there are ways that money can make you happier.

  • Spend money on others. Experiments show that when people spend “bonus” money on personal items or material goods, it doesn’t boost their happiness; but when they spend it on someone else or donate it to charity, they experience a significant increase in their sense of wellbeing.
  • Buy experiences, not material goods. Experiences directly increase your wellbeing and the wellbeing of others you share them with. They can enhance relationships and promote connection to purpose and community. Moreover, we are less likely to have buyer’s remorse with experiences, and they don’t lose their value over time—instead they can create happy memories.
  • Spend money to buy time. Think about ways that you can create more time in your life for fun and friends. Get a babysitter so you can enjoy an evening with your partner or friends, or just have some down time. Get your groceries delivered. Hire help for the yard or house work.  

Avoid comparing

We tend to compare our income to others and only be satisfied if it is relatively higher. If we are offered a raise, but everyone else is too, we are less satisfied.

This is not limited to money, by the way. If we win a race, we will initially be elated, then begin to compare ourselves to someone who is even better—someone who won a bigger race.

Comparing ourselves to others and focusing on income is a never-ending treadmill of dissatisfaction, and it only makes sense to make a deliberate effort to get off. Set aside time to reflect upon what you like and respect about yourself—without comparing to other people. Focus on how you have improved or grown without worrying about how you rank. Take satisfaction in how hard work and experience develop your skills or speed.

Adjust your goals

Take a good look at your budget. As we said earlier, most of what we need in life is not about money—you can have a good life and spend less. While humans have a tendency to adjust our expectations upward as our income goes up, you can consciously change that. Instead of wanting more expensive things and more of them, you can choose to save new income. Instead of buying things, you can give yourself the security of having enough money.

One way to help yourself change your spending habits is to establish incentives that will motivate you to meet your goals. These can be rewards for meeting goals or punishments when you don’t. Yale Professor Ian Ayres, author of Carrots and Sticks, has developed the StickK website that lets you specify your goals and the incentives you will give yourself, and helps you keep on track.

Nudge yourself to save

Credit cards can lead us into temptation because they separate the pain of payment from the pleasure of purchasing something new.

Saving works the other way—we have the pain of less money to spend right up front, and don’t necessarily see the pleasure of having money to live on in the future. So you need to find ways to increase the incentive to save.

One way to do this is to set up default savings that automatically come out of our paycheck or bank without us having to choose the “pain.” Tom Rath calls this “setting positive defaults.” Richard Thaler, in his best-selling book, Nudge, suggests a particularly good way to do this—Save More Tomorrow. In this plan, you tell your employer in advance to put any raises that you get in your retirement account (or savings if you prefer). That way, your take-home income never goes down, so you aren’t losing spending money, but you increase your retirement savings.

If you face unemployment, reduce your losses

Unemployment is one of the most difficult situations we face. One British study found that unemployment had a larger negative effect on wellbeing than divorce! And this is true, even if unemployment does not significantly impact income. A loss of a job brings other major losses: social connections, status, the intrinsic satisfaction of using your skills.

Recognizing this can help you enlist strategies to minimize your losses. For instance, you can search for other ways to use your skills and feel productive while you are looking for a job. Make sure you connect with your social network for support throughout.

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