By Cleona Lira, 11th June 2015
Why financial integrity?
Conversations about money or related topics are one of the most natural things to me, perhaps due to my professional work as an IFA. In this piece, I want to explore Financial Integrity, which to me, is about having a healthy, conscious relationship with money.
My vision is for more and more people to have a conscious relationship with money; to be clear on our underlying needs when we make buying or investing decisions. Money often becomes a limiting factor for people not living their dreams or exploring what their life could really mean. But Aha! You can work on it...
Money, a 'loaded' topic
At a social dinner, a few weeks ago, my best friend, let’s call her Miss A was asked by another friend Miss B prefaced politely of course with ‘if you don’t mind me asking’ - "what was your bonus this year?". Miss A clamped up, her jaw tightened and she replied after a few moments of considered silence "much less than I expected or deserved". Turns out Miss B is so removed from the corporate world and was just curious to know what others earn…Turns out Miss A got defensive and clamped up as she is seen as the ‘lender of first resort’ in her family, often dragged on shopping trips to fund shoes for her sister or dental bills for an aunt and therefore struggles with being open in this area.
Beliefs around money
This led me to think about how deeply held some of our beliefs are around money and wondering how conscious we are with these beliefs. I have always been interested in the psychology of how people think and behave. Also, I work with money and I get to see how limiting or expansive money beliefs can be; I guess another way of seeing it is having scarcity or abundance beliefs.
Stephen Covey, in his book, The 7 Habits of Highly Effective People wrote:
Most people are deeply scripted in what I call the Scarcity Mentality. They see life as having only so much, as though there were only one pie out there. And if someone were to get a big piece of the pie, it would mean less for everybody else.
The Scarcity Mentality is the zero-sum paradigm of life. People with a Scarcity Mentality have a very difficult time sharing recognition and credit, power or profit – even with those who help in the production. The also have a a very hard time being genuinely happy for the success of other people.
Money is really a means to an end. It is a strategy to meet human needs. Needs like safety, comfort, love, belonging and acceptance. It is clear that money does not necessarily make us happy.
There are numerous examples of lottery winners who go broke within 1-2 years of winning all their millions. There are also examples of really wealthy people that seem to lead fairly miserable lives – a great example of this is Ida Wood, a recluse from New York City.
I am no research scientist or Brene Brown (whose TED talks I love) but I have seen a fair share of sabotage with money. In my professional work, examples of this would be making a bad financial decision early in life and then reacting to financial decisions by being forever scarred by this or losing money in the stock market once due to poor asset allocation or reactive investment decision making and then choosing to be risk averse forever-more (lizard brain overriding logical brain).
What is Financial Integrity then?
I read a book recently that inspired me and really challenged the way I thought about money and time…both very important strategies that we use to meet our needs.
So, you will need to actually buy the book as it is explained in very clear terms. I highly recommend you buy it…ok, back to the book…so the book says that:
You need to keep accurate records of money. Oh…I already hear all the objections…but in order to get conscious about this topic, you do need to keep records. I find the old fashioned pen and notebook really helpful. I note it down as soon as I spend it if I can and I carry the notebook with me in my handbag…watch out for your money gremlins that will attempt to sabotage this important stage.
Work out how much time it takes you to do your work…include travel, study time and other ‘leaked’ time.
Work out what you spend on work related tasks. This would include buying that latte at work, lunches, books or periodicals related to work, etc. Also the costs of going to work such as your work wardrobe expenses, cost of travelling etc. Are you with me so far?
Work out how much you earn per hour. But add your travelling hours, study time and other work related time to the hours you work so you know how much time you really spend with work. Then also deduct the costs you uncovered in step 2.
If you are saying to yourself, what is the point of all this? Hang on…its coming. Once you know what your real hourly rate is, for which you may need an excel spreadsheet or a calculator, you can work out what your time is worth in terms of your life energy.
So, when you buy something you really want, you can work it out in terms of your life energy. You can ask yourself if it is really worth it? This then makes you more conscious about how you spend your money or your life energy. For example, a potted plant you really want may only be 10 minutes of your life energy and bring you great joy; a week's holiday may cost you 100 hours of your life energy and you may even question it.
This is different of course than the conventional method of working out what your hourly wage is by just dividing annual income by hours worked per year as that isn't a true reflection of your real hourly wage.
Life energy and joy
Get it? Good…This may mean you spend more on things you really love and cut back on expenditures which give you less joy.
This is similar to Marie Kondo’s philosophy of de-cluttering and keeping items that bring you joy. Declutter your spending…and spend consciously on that which brings you joy or value.
When I did this exercise, I was amazed at how much I shopped at Amazon. It is so convenient; credit card spending can be so unconscious. The main culprit for me is books…and books bring me great joy so I choose to continue to spend on them.
However, I have some strategies to get better in this area:
I buy second-hand where possible. Once books are read, I tend to sell them back if I do not wish to collect them.
I also read quite a lot of books at the British Library which I adore spending time in…and I have a 3 year reader pass. I need to get organised to read there but it is worth it; I speed read, so I can order about 4-5 books a session and only concentrate on the books where I feel I am getting the most from. I tend to ignore all the preamble and build up bits - I let my logical brain take over & skip generously paragraphs or pages where I find little value.
I also add things to my Amazon wish list and see if I can delay buying and see if I still really want it. If yes, buy. If no, delete. Easy.
I book swap with friends and keep a note of the book lent and borrowed -otherwise I lose track of my books.
I try also to eliminate spending where I feel this is merely out of habit or obligation. So, I tip generously when I receive good service but I often reflect about how I am habituated to do it. Why do we do things merely out of obligation or guilt, I ask myself? I want to choose to live differently and with greater freedom in my choices. We don’t somehow feel obligated to send money to Nepal (If you have, I am sorry...this is a general and fairly pessimistic observation) when there is a horrific earthquake yet we feel obliged to do many things that aren't as important. Just wanting to point out - when we spend, even on 'minor' things, do we do this consciously or because we are programmed to?
Language of obligation or possibility
I am inspired when I read stories about people who enjoy travelling and find a way to meet this passion creatively if they do not have the budget to do so by house sitting/house swapping or renting their spare room on Airbnb. People who aren't limited by their beliefs about how it 'should' or 'must' be (language of obligation) and find creative possibilities to create what they want (desire/vision/possibility).
I also am aware that many clients I meet do not have a disciplined investing plan. I think it is important to pay yourself first. Set aside a percentage of money to invest - work out what is right for you. The more unnecessary expenses you can get rid of, the more you can afford to save or invest. It is easier to cut back on waste than to earn more money. I love, love, love this example on compounding by Richard Russell, author of the Dow Theory Letters which in my experience serves to inspires people to do it sooner, rather than later.
Your money and your brain
We have different parts of our brain that drive decision making – sometimes we want love and connection, other times it is our lizard brain that dictates choices and is driven by fear…and sometimes it is our logical brain. Successful traders know how their brains can sabotage and train themselves to use their logical brain, to make decisions in the moment rather than based on static beliefs, they mentally rehearse how they will react if faced with a challenging situation so that their fears do not hijack them. It is an art to learn to be wrong in the trading world and make manageable, small losses.
Get conscious, get deeper!
I met a client who was deeply in debt but yet noticed himself buying rounds of drinks all night- which he realised may have been another form of money sabotage. Ask what is behind that need? Are you doing it for approval or to be liked? Or just for the pure joy of giving.
Dig deeper. Money is neither good nor bad. It is just a strategy to meet your needs and it is really up to you to uncover what is important to you and how you wish to allocate money consciously in line with your values.
Some resources on Financial Integrity:
A great book I read on this subject of money sabotage is by Guy Hendricks and is called ‘The Big Leap: Conquer Your Hidden Fear and Take Life to the Next Level’. I really recommend it to anyone wishing to go deeper into understanding their relationship with this topic.
I would also explore FinancialIntegrity.org which has a lot of free resources to explore.
I would also buy the book 'Your money or your Life' by Joe Dominguez
Read more about the lizard brain in a blog by Seth Godin (love him!).
I am excited for you continuing your journey with financial integrity!
Hope that helped!