It has been almost six years since I completed my Master’s degree in Financial Economics, and in this short space of time, I have changed significantly as a person. One of the major changes has been the shift in my attitude towards money.
As a young adult going through University, it is easy to have grand ambitions of success where you dream of creating a successful business, or flying up the career ladder to earn ridiculous amounts of money that can allow you to buy the latest gadgets, super cars, and mansions.
Despite these ambitions, as you mature as an adult, your priorities change, and you get a different perspective on what is important in life.
Because of this shift in priorities, I wanted to share with you the five ways that my relationship with money has changed.
Don’t ‘Keep up with the Joneses’
The number one way that my relationship with money has changed is that I no longer mind how others perceive my wealth (or indirectly ‘success’).
I have been successful in my career so far, but I consider this as an achievement personal to me, and not something to compare myself to others with.
Something which I cannot understand is how some people will pursue the illusion of wealth if they don’t have it.
They will get themselves into copious amounts of debt to make sure they have the latest gadgets and branded clothes, and then put this on social media to make their lives seem better than they really are.
Someone once said to me that you can tell when someone is wealthy, because they wear understated, and ‘normal’ clothes that are immaculate, and made of the highest quality.
They are so comfortable in their lives that they don’t see the point in trying to make a show of what they can afford.
The biggest benefit of this change in attitude to money is that we try to spend as little as possible each month, with a significant chunk thrown into savings to give us protection if there is any negative event (such as the loss of job).
It will make you happier knowing that the pressure to spend, and keep up with others, was never really a big deal.
Don’t Spend to Cheer Yourself Up
Emotional spending is a common complaint made by individuals who are struggling to save.
If you have a bad day, you might just go and buy that nice outfit that you have had your eye on for a while.
The rush of dopamine should offset the bad feeling you have, and will make you feel better.
If you are upset, you might just go and buy a bag full of treats from the shop so that you can eat your way to happiness.
Even in some cases, people will spend money because they are stressed that they are in debt, making the situation far worse!
I have found other ways to cheer myself up in times where I am not feeling my best.
Maybe I will go for a long walk to get some fresh air, or I will speak to someone close to me.
These are vastly better alternatives for my mental, physical and financial health than the emotional spending ever was.
If You Can’t Afford Something, Don’t Buy It!
How many times have you been in the shop, and thought about buying something, only to get a bad feeling in your stomach about whether you can afford it or not?
How many of you still go ahead with the purchase anyway, rationalising that you will deal with the problem later?
This is an issue for many people, because it is putting short term happiness above your long-term wellbeing, and ensures that you build up the potential stress in the future.
If you have to think about whether you can afford something, then you can’t afford it – it’s as simple as that.
If you really want to buy the item, then put it on your wish list, and come back to it 30 days later.
If you still want it, then you have given yourself enough time to consider the purchase, and this takes away the impulsiveness which might be leaving you in poor financial health.
In the 30 days that you wait, you might be able to run price comparisons to find the best deal, and perhaps even knock off further amounts by finding discount codes online.
Debt on a Personal Level is Toxic
With the amount of personal debt that there is in the UK, it is now easy to feel like you are part of a crowd if you have personal debt, because the behaviour has become normalised.
You might say to yourself ‘I have £3,000 credit card debt, but some of my friends have WAY more, so I am not that bad”.
Take a step back, and just look at your own personal situation.
One of the worst things we do, is to compare ourselves constantly to others.
While some will argue that it gives us drive and ambition, it is not all positive.
You might envy the latest gadgets and branded clothes I mentioned in point 1, but it just creates a feeling that you need to spend money.
If you are in a situation where you feel pressure to conform, but cannot afford it, you might turn to debt to buy these things to make you feel as though you belong.
If you really want to empower yourself, then only compare yourself to how you were yesterday, or last month, or even a year ago.
We are all on different paths in life, and some are slow starters, but speed ahead in the later years. Some are fast starters, but then stagnate.
The Rich Dad, Poor Dad book shows how getting rid of liabilities (debt), and gathering assets will put you on a path to wealth and financial freedom.
However, the reason that I mention about debt not being positive on a personal level, is that it can be used positively in business to build wealth.
If you have a brilliant idea that might work, you might want to take a business loan to finance it if you do not have the personal funds.
It is incredibly rare for a company not to have some form of debt, because it can be used to achieve growth.
I Don’t Wish to be Rich Anymore, Just Financial Secure
The final point is one that might resonate with a lot of people working today.
When you are young, you probably are imagining yourself driving around in a Ferrari in a luxury suit, going on multiple holidays, and drinking champagne in the sun.
The foundation of this style of living is based on us not having to work another day in our life, but in reality, only a minority of us will ever have this luxurious lifestyle (because, who is going to ensure that we have the money in the bank to do this?)
In many cases, the pursuit of this way of living is usually preceded by countless late nights in the office, taking huge risks that might not pay off, and putting yourself under significant amounts of stress.
While this works for some individuals (and society in general as we benefit from innovation, and disruptive technologies), it might not work for others.
The payoff can be huge when it works out, but it can also leave you in a worse situation than when you started.
While is it a fact that hard work is going to have to get you there, you will start to wonder whether putting yourself under such intense stress is going to be worth the payoff.
Personally, given my studies into the financial market, and understanding how you can make assets work for you in the long term, I am now on a path to financial independence which should allow me to retire early.
I might not be driving around in a flash car, or permanently abroad, but by putting myself in a strong financial position, I have been able to minimise the stress of a financial shock (such as medical bill or losing my job), all without having to take significant risks.
Having respect for the power of assets means that if someone gave me £1m today, I would not be buying a flash car, but instead would be investing the full amount into dividend paying index funds, or other income providing assets which could bring my retirement age forward significantly.