If you were privy to the financial habits of your friends, family and acquaintances, I’m sure you’d find that some of them are savers, some are investors, some just make it from month to month, and others are perpetually in debt. Interestingly, their individual circumstances might not bear much relationship to their income, so that the highest earners might be those with the debt, while the less well-off might be the savers and investors.
Why the differences in money management styles? Well, it might be that the savers and investors had parents who were savers and investors, or had themselves been exposed to an influential, positive role model. And perhaps the financially reckless acquired their bad habits from their parents, and are simply living what they learnt.
Psychologists tell us that, as children, we construct maps of reality that are based on our experiences of daily life. To a very large extent, these maps are influenced by what we hear from our parents, and by the way they live their lives. It is these maps of reality that, as children, allow us to survive, but it is important to realise that they are not real. ’The map is not the territory,’ as the saying goes.
What is more, if we continue in adulthood to cling to these maps, as we tend to, then we are in serious trouble if our maps describe a warped and unhealthy reality. This tendency to live by outdated and inappropriate maps is called ’transference’ by psychologists, and is the source of much mental anguish. And, as our maps are constructed when we are very young, much of their influence as we get older is unconscious and goes unnoticed.
It is because of these mental maps that we all have a unique and sometimes troubled relationship with money. And if we reflect on our own financial behavior and that of our friends, we will realise that our financial habits have changed little, if at all, over the years. The unconscious influence of our maps persists, whether we have a healthy relationship with money or a decidedly dysfunctional one.
The big question, then, is what if anything can be done about this problem? As I discovered, the answer is to be found in a personal finance guide that was an international bestseller in the 1990s, and that has just been rediscovered by the millennials (the generation born after 1980). Similar to the 12-step programme that addicts follow to recover from their addictions, ’Your Money or Your Life’ sets out a holistic 9-step approach that not only redefines money, but changes the way in which you view life itself.
The idea is that, in getting your financial affairs in order, you will get your life in order as well. The benefits can be amazing: debt elimination, early retirement, a value-driven minimalist lifestyle with less stuff and more peace and contentment, while helping at the same time to save the planet! It sounds like the plot-line from a utopian novel, but the testimonies of thousands of satisfied converts attest to the transformational power of the programme.
Both authors of the book, Vicki Robin and Joe Dominguez, came at various stages of their lives to the realisation that more money and more stuff do not translate into greater happiness. On the contrary, we often find ourselves doing unfulfilling work for people we don’t like, just to pay for the things that the advertising industry insists are going to bring us joy. And all the while this nagging little voice inside us asks: ’Is this all there is to life?’
The authors quote psychotherapist Douglas LaBier, author of Modern Madness, in this regard: "The steady stream of successful professionals who showed up in his office with exhausted bodies and empty souls, alerted him to the physical and mental health hazards of our regard for materialism. LaBier found that focusing on money/position/success at the expense of personal fulfillment and meaning, had led 60 percent of his sample of several hundred to suffer from depression, anxiety, and other job-related disorders, including the ubiquitous ’stress’".
If levels of personal debt are an indication that we are living beyond our means, then the writing is on the wall. In America in 2017, levels of personal debt were more than twice that of 2001. On average, every American man, woman and child owed more than $11,000, resulting in a total of over $3,7 trillion (or $3700 billion, if that makes it easier to grasp!). ’I owe, I owe, it’s off to work I go,’ is no longer an amusing little rhyme, it’s the reality for most Americans and no doubt many South Africans as well.
I think many of us sigh inwardly when we are reminded about the damage being done to the planet, but even the most sceptical of us must be getting a tad concerned by now. Take ’Earth Overshoot Day’, for example. This is the date each year when the human race has collectively used up the resources that the earth can renew in a single year. In 1971, earth overshoot day fell on the 21st of December, but by 2017 the day fell on the 2nd of August. Global leaders are now warning us that we are using more ecological resources and services than nature can regenerate, through overfishing, overharvesting of forests, and pumping more carbon dioxide into the atmosphere than our forests can process. Certain scarce resources may soon no longer be scarce, but non-existent.
By now you may agree with me that a global change in consciousness is way overdue. We need to re-evaluate our lifestyles to get our global house in order, and in doing so we will sort out our financial issues as well. It’s not so much that we mismanage money, we mismanage our lives - and in doing so, everything else suffers.
Though I won’t set out the entire 9-step programme devised by Vicki Robin and Joe Dominguez, here are a couple of important points. The first is the way in which Dominguez defines money: not as a medium of exchange or a store of value, or any of the other terms taught by economics, but as something that you exchange the hours of your life for. One of the nine steps requires you to calculate your current hourly earnings, and then to re-evaluate the things you spend money on, in terms of the life-hours you’ve sacrificed.
It is a sobering experience as you gaze upon unread books and magazines, piles of CDs, unworn clothing, and so much more, and see them in terms of the precious, never-to-be-recovered life hours that they represent. I can guarantee you that you will never spend money quite as thoughtlessly in future.
One of the big reasons that the 9-step programme works (or can work, if you buy into it) is that simple steps have big emotional pay-offs, way in excess of what might be expected. Take the need to have a clear-out of your clutter, all of those things you have bought, seldom used, and will likely never use again. I recently carried out this exercise, and it is amazing how psychologically free one feels afterwards. Also, if you decide to give stuff to charity or homeless shelters rather than sell it, the payback is even greater.
If you can identify with any of the issues mentioned above, ’Your Money or Your Life’ may help you to deal with them. What’s more, it may also give you your life back. In her poem ’The Summer Day’, Mary Oliver asks: "Tell me, what is it you plan to do with your one wild and precious life?" It is a question we can no longer ignore, because too many years of living on autopilot are not only threatening our happiness and financial wellbeing, they’re threatening our very existence. And if that’s not a reason to change, what is?
Your Money or Your Life, by Vicki Robin and Joe Dominguez (Fully updated for 2018). Published by Penguin Books.
AJ is an academic and a freelance financial journalist who has written for Sharenet for some 15 years. He spent 25 years as an accountant and financial manager in various South African companies before moving into academia. He has a broad range of interests, including all aspects of business and stock market investing. Apart from a bachelor’s degree in Accounting, AJ holds a Master’s degree in Financial Management. He is also a Fellow of the Chartered Institute of Management Accountants.