Using money to make an impression

It's pretty normal to consider how other people will respond to our choices. We are social creatures and making a good impression is useful in many situations. There are times when it's very valuable to stand out in a crowd or fit in with a group. It can influence others to pay attention to us or support us when they might not otherwise do so. Money, especially our spending choices, can be a part of that.

Sometimes using money in this way can become overly important to us. This can even happen to people who wouldn’t normally think of themselves as “people pleasers”. When the good opinion of others is the main driver for our decisions, especially those involving money, we can end up living inauthentically or using money in ways that doesn't support our long term goals.

The most obvious example of this is when a person goes into debt buying expensive designer or luxury items to signal to others a wealth they don't actually possess. Overspending on gifts in order to appear generous or on socialising at trendy bars and clubs in order to seem like part of a fashionable in-crowd are other variations of this.

There are also more subtle ways this tendency can show up. For example, it can appear in reverse. Imagine someone whose social circle disapproves of, or is suspicious of, people with wealth and power. A member of this group might feel compelled to deny themselves anything that might be seen as a status symbol, even if they would enjoy it or it would make their life better or easier. Or they might not to make any overt moves to improve their career and earn more or manage their finances effectively, leaving them worse off and possibly stuck in unfulfilling work.

The interesting thing about this tendency is that it can occur even when there’s no active pressure from the people we’re trying to impress. The compulsion towards certain choices can come entirely from within. We form beliefs about what others want from us and anticipate getting a negative reaction if we don’t meet their expectations. The trouble is that all of this is a story we’re telling ourselves. It may or may not be true. Sometimes the people we are trying to please couldn’t care less what we do or may want something different from us than we’ve imagined. It’s worth looking for evidence of people’s true expectations and opinions. Sometimes it’s simplest just to ask!

And if a person or group really does expect you to make financial choices that don’t align with your values or goals, it’s worth considering whether it’s really worth going along with their wishes. Are you really getting what you want from this person or group’s approval?

Getting a balance between using money in ways that support your relationships and also your individual life goals is key to financial wellbeing.

If you are facing a dilemma around money in relationships, coaching can help.

The cure for being "bad with money"

In spite everything I’ve said in previous blogs, do you still think “I am bad with money”? Does the thought of ever getting on top of your finances seem impossible? Is there some part of your identity, deep within, that rejects the idea that you could ever be good with money? Does even trying make you feel tense and sweaty? Is your stomach doing an awkward, twitchy, little dance just reading this?

It’s ok.

I’ve got you.

Imagine a life in which the end of the month doesn’t feel too different from the beginning. Imagine planning to treat someone you love and being able to go to town without going into debt. Imagine knowing if one of life’s crises crops up, you have the money to cope. Imagine musing on the future you want once your ready to stop working, confident that you’ll be in a position to enjoy it.

What if you could be ok with money? What if you could be fine with money? What if you could be good enough with money?

The good with money/bad with money false binary that I’ve ranted against leaves no room for a more casually comfortable relationship with money. In reality, this is what a lot of people would prefer. Many people would like to be confident they’re doing alright with their finances, but aren’t primarily driven by money.

Does the idea of being good enough with money sounds great, but also a long way from your current situation? That’s ok. You can get there. The key is to start really, really small.

Imagine the types of actions you would take as a person who is good enough with money. Some suggestions:

• shop around for deals and cancel unwanted subscriptions, so you don’t waste money on shopping;

• learn the meaning of financial jargon and basic economics, so you feel confident in your choices;

• save and invest automatically on pay day, so you don’t rely on willpower to make good intentions happen;

• pay off borrowed money as soon as possible without incurring extra charges, so you pay as little interest as possible;

• negotiate for more pay and lower costs, so you get a great deal;

• keep financial paperwork orderly, so you can get your hands on the information you need when you need it;

• learn what different financial professionals do and how to choose the right one for your needs, so you can tap into the expertise we all need from time to time.

Choose one of these groups of actions. Now choose a single, small, simple action that fits within this group.

Smaller than that. Nope. Still too big. Think smaller. Think tiny.

Some suggestions for tiny actions:

• Search for reviews for one product you are considering buying and bookmark the review to read later, if you can’t read it now;

• Find out where you can see the list of subscriptions in your Apple, Google or other mobile payments account;

• Learn the meaning of one piece of financial jargon - this is a good list - start with words you’ve seen before;

• Find out how to set up a regular automated payment into savings;

• Find out if you can overpay any money you’ve borrowed without being charged extra;

• Make a list of your achievements at work;

• Open one envelope - you don’t have to read what’s inside.

We become confident, not because we’re confident people or by telling ourselves to “be confident”, but by doing what we want to become confident we can do.

There is no such thing as being “bad with money”, but if there were, and if you were, the “cure” would be these tiny actions, one after another, day by day, gradually adding up to better more money in the bank. Do a few tiny actions every week and you’ll be well on your way to being good enough with money.

P.S.

I used to be a financial adviser. It was my job to have a deep understanding of financial products currently on the market and how these could meet people’s needs. I would listen to people’s individual stories and ask questions about those needs, then recommend the products I thought would suit them the best.

As a money coach, I help people understand and improve their psychological relationship with money, so they can be happier that their financial choices are supporting them to build the life they want. There! You’ve completed an action from the last group already! In fact you’ve done it twice. Well done. Go have a cuppa and listen to a song you like.

Do another tiny action tomorrow.

You’ve got this.

"Bad with money" is a fixed mindset

After writing my post about why I don’t think there’s any such thing as being “bad with money” I was curious what other people thought.

I didn’t want to have to explain my whole blog post on social media, so I thought I’d just do a quick LinkedIn poll and see what came back.

Image shows a screenshot of a LinkedIn post and poll by Martha Lawton.

The post says:

“I'm getting increasingly annoyed with the phrase "bad with money". So many people say about themselves "I'm bad with money" and just shrug, as if that's all there is to it.

I don't blame individuals, because this is a common idea, but I think it's super unhelpful.

We can all grow and the label "bad with money" cuts people off from that growth.

What do you think?”

The poll question is “Are some people just “bad with money”?”

The answers are:

“Some people are bad with money” 23% of the votes

“Everyone can improve” 72% of the votes

“Other (please comment)” 5% of the votes

In my previous post I talked about how saying someone is “bad with money” or “good with money” is simplistic and disguises all the many different skills needed to manage money well.

This poll highlights another damaging part of the “bad with money” label. As with almost all labels, it promotes a fixed mindset. For those of you who aren’t familiar with fixed/growth mindsets, I’ll give a quick explanation.

A person with a fixed mindset believes that our skills and abilities have inherent limits beyond which no amount of practice, study and effort can take us. A person with a growth mindset believes we have infinite capacity to develop our skills and abilities as long as we practice, study and work.

A fixed mindset says that talent is everything, you’ve either got it or you haven’t. A growth mindset says that we all start from different places, but where we end up is a combination of our own efforts and the resources available to support us.

It’s worth noting that a growth mindset doesn’t say anything about the rate of progress, only that progress is always possible. Slow improvement still counts. It also makes it very clear that resourcing is important, this isn’t a viewpoint that says the world is a pure meritocracy and there are no structural advantages or disadvantages.

If you say that some people are just “good with money” and others are just “bad with money” and that’s all there is to it, you’re expressing a fixed mindset position about money. The trouble is that it’s a self-fulfilling prophesy. If someone is just “bad with money” why should they try to manage it? They are doomed to failure and might as well give up. Similarly there’s no point is trying to teach or coach anyone to get better with money if it’s just in their nature to be “bad with money”.

One of the people who commented on my post said something similar.

Image shows comment from Penny Delve

“The danger with labelling yourself is that you become that label. Our language is very powerful and our subconscious is always listening 👂.

We all create our own experience so there is a choice. So I voted ‘everyone can improve’ because we always have that choice to change Martha Lawton 🙌”

Not only that, but even people whose fixed mindset puts them in the “good with money” category, can end up very anxious about their money skills. This is because if your ability with money is fixed and you make a mistake or have a financial setback then a fixed mindset says that’s because you’ve reached the limits of your money ability. There’s no way to correct for the mistake in future. A fixed mindset may even tell you that you’re not as ”good with money” as you thought, perhaps even “bad with money” after all.

Worse yet, because in a fixed mindset every skill or behaviour is a fundamental unchanging characteristic of who you are, any time things go wrong that’s a sign you’re a lesser person than you thought. This means that a person with a fixed mindset who gets into debt will either see themselves as a helpless victim and expect someone else to fix the problem for them, or will be too ashamed to ask for help because it feels like exposing their fatal flaw.

It’s an insecure position to be in.

On the other hand, a person with a growth mindset around their financial skills will be actively seeking to improve and will perceive a setback or loss as a chance to learn. They can think clearly about whether they made a mistake or whether they just had bad luck. Neither answer is a threat to their sense of their own value as a person. If something goes wrong with their finances, even a serious debt issue, they will be ok asking for help and will hope that their adviser can help them understand how to fix things now and avoid similar problems in the future. People with a growth mindset tend to be open about their shortcomings because they see themselves as a perpetual work in progress. Today’s failing is tomorrow’s strength.

As you might guess from all of this, people who have a growth mindset about an activity, whether it’s money management, acrobatics or playing the bassoon, tend to achieve more in the long run, because they will usually be more persistent and creative in their approach to developing their skills.

The good news is a fixed mindset can grow into a growth mindset, it’s just a matter of talking about yourself and others slightly differently. Instead of saying “I’m bad with money” or “I’m good with money” (fixed permanent personal traits) you can say “I’m making a habit of tracking my spending, but I don’t do it every day yet” or “I’ve made a plan for my financial future and I’m happy with how well I’m sticking to the plan” (actions and outcomes).

You’ll find you feel more in control with a growth mindset and it will help you to a more secure financial and emotional future.

You can learn more about fixed and growth mindsets and Dr Carol Dweck who did the research around them in this episode of my podcast, Squanderlust.

No one is "bad with money"

One of the ideas I see in people who struggle to deal effectively with their finances is that they are “bad with money”. I hate this phrase. It leads to so much hurt, shame and frustration, and worst of all it’s tosh! There’s no such thing.

The idea that you can be “bad with money” or “good with money” comes from a simple assumption: that managing money is a single skill and you are either good at it or bad at it.

All-or-nothing.

Binary.

Simple.

Nonsense.

Financial success involves using a wide range of skills together, along with a measure of luck. If you tell yourself there is just one money skill and you don’t have it, you deny yourself the credit for all your existing strengths. This attitude will prevent you from realising what’s really going wrong in your money management and how to fix it. The vague undefined nature of being “bad with money” causes a sense of general helplessness that will always undermine your efforts to improve.

OK, so, what are some money skills?

• Self-knowledge - so you understand what you really want, what you really don’t want and what you are and are not prepared to do to get to your goals.

• Realistic goal setting - so you know where you want to go and whether that’s possible.

• Collecting and analysing data - e.g. what do my bank statements say about my current spending patterns? Where might those have come from?

• Planning - what, specifically, do you have to do to achieve your goals?

• Research and selecting reliable sources of information.

• Prioritising - making effective comparisons.

• Negotiating - whether that’s a raise at work, settling a complaint or a getting a better tariff for your bills.

• Assessing risk and being comfortable with uncertainty.

• Monitoring progress and adapting plans to changing circumstances.

• Reading comprehension, ability to identify key information in a lengthy document.

• Numeracy skills e.g. to compare value for money from different deals.

• Assertiveness - willingness to ask professionals awkward questions; willingness to say “no” to friends or family members when their plans don’t work with yours.

• Proactive problem-solving - spotting issues and resolving them quickly.

• Organisation to keep on top of your paperwork and avoid missing deadlines.

• Communication skills and empathy to navigate conflict around money with people close to you.

• Tenacity - for when things are unpleasant or challenging.

• Moderation and self-care - so you neither overspend your way into debt nor burn out trying to be over-frugal or hustling too hard.

This is not at all a comprehensive list, but hopefully it gives you a hint of the ways that managing money involves a range of skills in balance with each other and how you will use different skills at different times.

Once you see managing money this way, the idea of being '“bad with money” makes no sense at all. You might be missing some key skills, or not applying them to your finances, because you didn’t realise how they applied. I’m sure you have at least some of them though and once you start thinking of money management as the combination of the right skills at the right time, you can work out how you need to improve.

It all just becomes much more manageable. You can do this. One step and one skill at a time.

For more on all-or-nothing thinking and how it can mess with your finances check out this episode of my podcast Squanderlust.

How to be more optimistic about money

It’s Mental Health Awareness Month and one feature of poor mental health is a skewed sense of optimism, so this post is about that.

Optimism is a funny thing.

Too much and you don’t prepare for the worst. I’ve been vocal about how often people don’t buy insurance or save for emergencies because they assume bad things happen to other people.

On the other hand, if you’re too pessimistic, you won’t take the action you need to improve your situation, because, well… what’s the point?

So we want to build a Goldilocks mindset around money and get amount of optimism just right.

Thankfully, there’s some great evidence about what can help us to think more positively without losing sight of reality. Positive Psychology is the study of happy, mentally healthy people with the aim of learning how everyone else can be more like them.

The founder of positive psychology, Martin Seligman, identified three key attitudes towards life’s challenges that lead to either a more optimistic or a more pessimistic viewpoint, with the optimistic view generally leading to better outcomes overall. These are called the “three Ps” of pessimism.

People who are pessimistic tend to see setbacks through the lens of Personalisation, Permanence and Pervasiveness. What do these mean and how do they play out in terms of our finances?

Personalisation

“It’s all my fault!”

Personalisation means assuming that bad events happen to you because of something about yourself. It means assuming all the blame, whether that’s realistic or not.

Financial examples:

At the less harmful end of the scale, this might look like a homeowner who engages a builder and finds the final bill is higher than expected. The builder may have been unclear about their costings or have inflated a price somewhere, but if the homeowner tends to personalise they will feel angry at themselves for not having checked the costs more thoroughly sooner.

At its most harmful, this could look like a person who feels cursed with bad luck on some level so that they blame themselves when things happen that are completely outside of their control. For example, their chosen retirement date may happen to coincide with a small fall in the stock market (leaving them with a smaller pension pot than they had expected) and they feel in some secret part of their heart that the stock market fall happened because they were due to retire that day.

The optimistic view

A person with an optimistic viewpoint understands that the must take responsibility for their actions, but only in proportion to their potential effects. They do not automatically assume that they are at fault if things go wrong and they certainly don’t blame themselves when the outcome is largely or entirely due to chance.

Advice

If you tend to assume that setbacks are always your fault, try to challenge this by thinking about who else influenced events and what role chance played in the outcome.

Permanence

“It’s never going to get any better.”

Permanence assumes that any change for the worse is going to last forever. It says that once something goes wrong, this is just how things are now.

Financial examples:

A person asks for a pay rise and is refused. They assume that their employer will never agree to pay them more or promote them in future. They become discouraged and underperform or look for a new job.

Another example, a person accidentally misses a bill payment and it shows up on their credit record causing their credit score to fall. They assume that this means they could never get a good deal on a personal loan, let alone a mortgage.

The optimistic view

Things change all the time and there are often solutions to issues, even if you don’t know what they are when the problem first arises. Just because things are difficult now doesn’t mean they can’t improve.

Advice

Think of a time when you faced difficulties in the past that no longer affect you. Things may have seemed bad then but now you' barely remember it happened. Whether through resourcefulness, hard work, luck, or just letting time pass so that an issue became less relevant, you have overcome and moved on. Times always change, and nothing is permanent, including your troubles.

Pervasiveness

“One thing went wrong - everything is terrible!”

In this mindset, a small difficulty or embarrassment is a sign of a much larger problem. Specific issues that could be fixed with specific actions are generalised into fundamental flaws or failings to big and all-consuming to solve.

Financial examples:

A person whose card is declined declares themselves “hopeless with money”, even though with a bit of practice at planning and avoiding overspending they could avoid this happening in future.

A person makes a failed insurance claim and says “all insurance is a scam”, even though the problem is just with this single claim and they have many steps they could take next including: checking their policy terms to make sure they claimed under the correct part of the cover; submitting more evidence to the insurer; or making a complaint.

The optimistic view

The optimistic person gives life a second chance and waits for a clear pattern to emerge before generalising. The take each issue as it comes and try to find solutions to each one.

Advice

Listen to how you speak and identify when you’re using words like “everything”, “nothing”, “always” and “never”. These are often a sign of Pervasiveness in your thinking. Other signs are using generalising/labelling phrases like “I’m so…” or “Banks are…”.

When you catch yourself using this language try to replace it with the specifics of this incident. That will give you a more realistic viewpoint and potentially help you identify solutions to the issue at hand.

Learning to drop the three Ps will help you keep negatives in perspective so you will feel more in control of your money.

Did you find this useful? Comment below if there’s a mental habit you’re going to change.

To learn more about money mindsets listen to my podcast Squanderlust.

Understanding the poppadom effect

Who loves poppadoms? I know I do. Crunchy savoury appetisers are my favourites.

You know who else loves poppadums? (Or olives or prawn crackers or bread baskets or whatever…)

Restaurants. You know why?

Because they cost almost nothing compared to the sale price and almost everyone orders them, even customers who intended not to.

In fact, we quite often order little extras we hadn’t meant to buy. Going to the till with a new sweater we see some earrings that would go with it and think we might as well have them. We get a screen protector to go with our new phone. We buy the upgrade, the insurance, the add-on.

Why?

The poppadum effect.

Once you’re already paying for a whole meal, the cost of poppadoms seems trivial in comparison, so why not? The poppadum effect is a type of mental accounting; a way our brains trick us into making unwise decisions by using a cognitive shortcut that doesn’t take us where we really need it to go.

Once you’re committed to purchasing a new tablet (say), adding the cost of a case seems negligible. Shops know this and they play on it. Salespeople are trained to offer the extras after you’ve decided to buy and there are always tempting small items at the till.

The truth is these little extras are often the poorest value for money in the store and if we were thinking clearly, we wouldn’t have bought them at all, but in the moment of purchase we’ve already overcome the resistance to spending and the part of us that always wants more can take its chance and add to basket.

Being aware that this is a common phenomenon can help you make better decisions. I, for example, will always want poppadums, but only one, thank you.

Take a minute when a shop offers you an extra or an add-on and remember you almost certainly don’t need to make a decision about it straight away. Say you’ll think it over, because nine times out of ten you can come back for it. You might even get a discount.

I did a podcast episode on our weird irrational responses to prices. You can listen here.