2 Steps to Take Now to Reframe Unproductive Money Behaviors

According to a survey by Wells Fargo, nearly half (44%) of those surveyed said that money conversations were the toughest to have, more difficult even than religion, politics or death. If you find that you are one of those who find it difficult to initiate or be in important conversations, you will want to read further. Money holds a lot of judgmental emotions and tension as inappropriate behaviors can usurp the initial intention of the money topic.

Let’s examine the following situations: You are at a dinner with friends and the bill comes. What happens next? Do you grab the bill? Do you wait for someone else to make a move? Do you talk about splitting it in half or per everyone’s individual order?

And how about this situation: You are invited to join an “By Invitation Only” group on a long weekend retreat. The group really wants you to join them but you know you do not have the extra money put aside for this. What do you tell them? Do you make up another “reason” for not being able to join them? Do you tell them you will think about it as a way to avoid talking about it? Do you put it on a credit card knowing it will take you eighteen months to pay it off as well as the other items on your credit card accruing interest each month?

It is so easy in these situations, and many others, to keep your thoughts to yourself; those thoughts like: “Let’s split the bill per each individual’s order.” “I can’t come this year, but let me know the cost for next year, so I can save up for it.” You do not want to appear different, inadequate, or bothersome. You want to do what everyone else is so seemingly agreeable to doing.

Unresolved money conversations create tension because you add a perspective of shame, guilt or judgment about you and money. But when you start talking about money openly and without the shame, guilt, or judgment built into the conversation, you can develop respect and understand around money and your role with it. But how do you do this?

There are two steps you can take immediately to begin to reframe your behaviors with money. The first is to understand what money was like growing up for you. I call this understanding your money stories. Begin by asking yourself: “How was money talked about when I was little?” “What did I do with allowances or financial gifts that I received when I was growing up? How did I talk with my friends about money when I was a teenager?” These and many other questions will give you insight into your own early views on money. You will probably recognize patterns you use today due to your early associations with money.

The second step you can take is to determine how you are going to handle money situations when others are involved, before the event happens. If you are going out for dinner with others, you can send a quick text to share your idea of splitting the bill. Prepare a response when you are asked to join events you cannot afford. Letting people know you have not allocated an amount for a particular “retreat” or other event to your budget presents a sense of responsibility with your money.

I know this just scratches the surface of changing money behaviors and habits but I thought it was important to talk about this.

Let me know how you handle money so money is an ally to you and your goals in life. I would be delighted to hear from you.

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Key Strategies to Keep Money Intact Across Generations

When the subject of passing money to the next generation is broached, a question that is often asked is: “What are you going to do with the money?” Although this is a great question, I think there is a farther-reaching question to ask as well: “How is the recipient being prepared to receive their inheritance?” What make this question so compelling? Because it redirects the subject from being about the money to being about preparing the inheritors. And this is so important yet often omitted.

There is a common phenomenon taking place around the world. This phenomenon even has a phrase associated with it. It has to do with the common consequence to inherited money: inherited wealth does not tend to survive beyond 3 or 4 generations. Independent studies have found that 70% of families lose their wealth by the end of the second generation while 90% of families lose their wealth by the end of the third generation. The common phrase that accompanies this horrible unintended consequence is: in the U.S., shirtsleeves to shirtsleeves in three generations; in China, rice paddies to rice paddies in 3 generations; in Italy, barn stall to stars to barn stalls in 3 generations. Although this may be a common consequence to wealth, thankfully, today, this common phenomenon is being addressed head on. Families are looking to change the statistical probability to their accumulated wealth.

Let’s look at two strategies families are using to keep their wealth intact as it moves across the generations.

The first strategy is the passing down of the story, the one that describes how challenges ere overcome, how successes were dealt with, and what it meant for the creators of the wealth to build that which they can pass on. This is important for a family to have because each generation is farther removed from the wealth and having the story reminds them of their roots and of the principles it took to accumulate the wealth future generations have become accustomed to having. When succeeding generations understand what it took to build the wealth in an experiential rather than in a didactic fashion, there is a much greater chance for financial stewardship across generations.

The second strategy is to pierce the veil of sheltered silence, that silence protecting the status quo and instead, talk about the purpose of the money and supporting money stewardship in the family. Teaching money skills, like the 5 S.I.D.E.S. (Save, Invest, Donate, Earn and Spend)© of Money, help family members feel more confident with money conversations. Developing family philanthropic initiatives give families a formal method to talk about how their money impacts their community. Holding Money Nights, where one topic about money is discussed without judgment or interruption, develops deeper trust and more engaging conversations around money.

Find tools to use with your family so that the money you accumulate can stay intact across generations.

How do you view money as a family? Let me know your thoughts.

How Could My Parents Blow It?

As the multi trillion-dollar asset based makes its way from one generation to the next, in what has been called the biggest asset transfer in history, I hear a repeating question that has plagued families for hundreds of years: “How could my parents blow it when my grandparents had so much money?”

According to the Williams Group, a wealth consultant group, 70% of wealth families lose their money by the end of the second generation and 90% of these families find their wealth has been squandered, spent, or squabbled over by the end of the third generation. And they are not the only ones to have uncovered troubling findings. U.S. Trust found, in their survey of high net worth individuals, that 78% of the wealth holders feel that the next generation is “not financially responsible enough to handle inheritance.” 64% of those surveyed have disclosed little to their children about their financial wealth.

I have heard many stories due to the work I do with families, keeping them connected across generations, when money matters. One family’s senior generation, turned over all financial decisions, after receiving a large payoff for the sale of a product, to their financial advisor. The financial advisor has become the arbiter of family and friend loans. The financial advisor decides how and when the money is to be used. The family has not established its own purpose to the money. There are no family conversations about money. Although the sale of the product was completed two years ago, there are already disagreements about whether or not to let the next generation know about their wealth, where to send their children to college, and whether or not to help an older generation with their mounting health care bills. The financial advisor is not equipped to help the family build a framework of purpose to the money so family conversations about money can be neutral rather than tense.

Another family, whose story I know, doesn’t want their children to know about the money they received from the sale of a business. They decided, after receiving their initial check that nothing would change at home. But within a few months, one parent had quit work, wanted to move their parents to live near them, and was adamant that they did not want their older teenage children to know anything about “the money” as it may ruin them. The other parent has found that they cannot engage in a meaningful conversation with their spouse about their money. It has created a gap between them.

Money, in families, needs to become just another topic conversation or more families run the risk of finding that their money becomes a “home wrecker.” When money is not talked about and understood for its role in the family’s life, data supports the fear that the next generation will “blow it.”

“How did my parents blow it when my grandparents had so much money?” is a question I am often asked. “They didn’t know any better. Nobody taught them about what money meant to them nor helped them construct a framework of purpose that the family shared, developed and sustained across generations.

What can you do to affect a framework of purpose and financial smarts in your family? Let me know I would like to hear your comments.

Reduce Money Conflict by Instituting These 2 Key Elements

Conflicts can arise in families with family businesses in many areas, but one that seems to be prevalent and I see in many of these families is: conflict around money.

When there are family members both in and out of the family business, the topic of money can become heated when differing objectives are striving to be served. As the business grows, the business “side” may very well need and want to re-invest profits in the business, pay down debt, or expand while those not in the business may want their distributions or dividends to grow. This is a natural tension that can disrupt any family enterprise and family heart.

Families who want to sustain the family across generations while continuing the family business have had to create successful models to keep the harmony of the family objectives in partnership with those of the business. A successful model is one that codifies the purpose of the family money with the purpose of the business so both can be understood and appropriately developed.

Because individual expectations can disrupt what is being built or developed, it is critical that purpose be defined and codified by all appropriate family members. It is also important to conduct annual reporting meetings so each “side” is aware of the sustaining objectives of each other and stay in high communication with known expectations. This will reduce conflicts between the two entities. Without purpose, cohesion gives way to individual agendas and behaviors which in turn, ignite conflicts.

Change the Narrative of Money Conversations for Better Outcomes- Part 2 of 2

It is important for couples who are arguing over money to take a moment to change the narrative. Instead of rehashing the perceived problem, engage in a different conversation about money. Start your next conversation with a question.

 

The type of question you ask is critical. For starters, ask open ended questions as they elicit a more expressive response. Listen to the responses you receive, not merely for information but for feelings and intentions behind the words that the responder provides. Seek to understand them so you can create bridges to a conversation that brings you both to a satisfying outcome. Ask questions like:

  • “How did you observe about money when you grew up?”
  • “What did your Mother teach you about money overtly and covertly?”
  • “What did your Dad teach you about money overtly and covertly?”
  • “What did you like to do with your money as a child and how did that make you feel?”
  • What is an example of a challenge you have had with money and how did you successfully face that challenge?”
  • “What is something you are proud to have done that increased your savings?”
  • “What would you like to change with your current money management?
  • “What are three things that are important to you about money?”

 

There are many more questions that can be asked but I wanted to get you started. You may think of ones on your own as well. The key point is to remember to make your questions open ended and inquisitive rather than confrontational. A question like: “Why don’t you save money?” is more confrontational than “What is important about saving money to you?” which is more inquisitive and invites understanding. People want to be understood and it is important that questions be framed to do that.

 

Changing the framework of money conversation is beneficial for two big reasons:

  • It gives context to someone’s current views and behaviors around money.
  • It can transform the existing anxieties about money to understanding where the other person’s views on money derived.

 

Have your conversations be ones built on respect and understanding as you develop strategies to your productive conversations about money.

 

One final thought: share your responses to these questions as well…after the person you are engaged in the conversation with is done with their response to the question you asked. Trust is built when people feel listened to and understood. Here is an opportunity to listen, share, seek and offer a bridge to understanding.

 

Would you like more guidance as move your money conversations from mess to success? I would love to help you! Send me an email at bhaj@focusasndsustain.com and let me know an issue you are facing with your money. Let’s get you on track to having money conversations that work for you.

Change the Narrative to Connect in Money Conversations Part 1

Money conversations are not always easy. Surveys by the Certified Divorce Financial Analysts show that money is one of the top causes of divorce while Think Health Magazine finds it to be one of the top two causes of divorce.

 

Dr. Brad Klontz a financial psychologist and associate professor at Kansas State University has found that money anxieties are fostered because people are not generally used to talking about money in a substantive manner. Too often it can “seem like a mind field that can easily go wrong, Brad says.

 

Couples can find that there disparate upbringing, experiences and expectations around their money spill into their expectations and judgments of their partner’s habits and behaviors. Of course, their partner had their own set of money experiences growing up that they bring into the relationship. Because “much of their beliefs around money are held in their unconscious,” Brad continues, “they really don’t come out to play until you are in a relationship.” These money stories and scripts can play havoc on primary relationships when the current money habits and behaviors play out.

 

Allianz’s LoveFamilyMoney Study, conducted in 2014 with over four thousand adults, found that financial issues causing the most stress in spouses were: planning for future needs at 76%, covering current financial expenses at 62%, and getting out of debt at 56%. Allianz’s study further revealed that 28% felt they spent too much on unnecessary things, 29% said their financial baggage was difficult to overcome and 23% were not saving enough money.

 

Resentments can build when the right conversations are not held. It is important for couples who are arguing over money to take a moment to change the narrative. Instead of rehashing the perceived problem expressed by “the other person,” engage in a different conversation about money. Asking the right questions, which we will delve into in the next blog, make a big difference to feeling like you have a strong financial partnership.

 

How are money conversations in your home? Let me know. If they are precarious, our next blog will introduce conversation tips to transform your home money anxieties to understanding and resolutions.

It’s Time to Alter the Traditional Financial Security Model

People are living longer lives. More years are being spent post work. And the current model of financial security funded by 401ks and social security is cracking.  Three out of five boomers, according to a recent report from Transamerica Center for Retirement Studies, are forced to retire due to “layoffs, organizational changes, health concerns and family responsibilities.” Only one in six can retire early, with a secure financial net to carry them through their golden years.  The 2008 “Great Recession” hit the boomers hard as many found their retirement savings severely reduced, were laid off, or could not find increasing salaries above inflation adjustments to fund their lifestyles.

 

Boomers are not alone.  The Generation Xers, born between the mid-1960s and the early 1980s, are concerned about their financial security. According to the Transamerica 17th annual Retirement Survey, only 12% of Xers are confident they will be able to retire comfortably, 30% have taken a loan or an early withdrawal from their retirement accounts an 86% are concerned that social security will not be there for them when they retire. Their median retirement savings is: $69,000.

 

It is time for a change to the financial model we have in place.

 

I think it is odd that people can work and then find themselves without enough money in their sunset years, after they provided great benefit to companies they worked for. I find it egregious that companies skating on the thin line of ethical standards, can jeopardize the financial security of their employees, while the founders or CEOs raid the company to line their own pockets. I think it is not right that so many retirees do not have a secure financial base at a time of life when they are more prone to disease, increasing costs, and shrinking opportunities. Dementia and Cancer are potentially major financial requirements that can reduce a couple’s assets to almost nothing. I think it is terrible that very capable workers are unable to find jobs due to efficiencies of businesses and now find themselves falling further and further behind financially. These stresses do not help people live productive lives.  

 

It is time for a change.

 

Some countries are looking at alternatives. Canada and Finland and Switzerland, for instance, are looking at a base universal income. Switzerland is talking about a guaranteed income of 30,000 Swiss francs for its citizens. Here in the U.S., Alaska has been paying its residents a dividend since the 1980s. This dividend is based on the oil revenue it produces.

 

What are you experiencing in your community as it examines its own economic security? Let me know. I would love to hear what you experience.

Buried Emotions around Money were Revealed When…

Because I often host money workshops, I do not have the experience that my workshop attendees (mostly intergenerational members of families) have. It was a delight to be able to participate in a workshop hosted by a therapist.

 

In this money workshop, we all pretended to be a family. Although none of us were related, it did not take long for emotional dynamics to come into play between us.  

 

The first direction was to take the bills out of our wallets and give these bills to the host. Immediately questions of trust were unearthed. Would the money be returned? Should I hold back any bills? Who cares, it’s just money, right? were just some of the dynamics that came up.

 

Next, the host asked for a volunteer to count the money the host was holding. That brought comments like: “How can we trust the counter?” “Are they going to keep the money?” “Can I count the money too to be sure they counted it correctly?”

 

Next, the host asked for a volunteer to divide the pile of money into seven uneven piles (matching the number of participants.) The host then picked up a pile, gave it to the first person, picked up the next, gave it to the second person and continued to distribute the piles like this until all the piles were distributed.  As you can imagine, this created quite a stream of comments as some felt short changed while others felt like they got a good deal from the initial amount they had given the host. One person felt like a weight had been taken off his shoulders as the pile he got was more than what he had borrowed from another player to give to the host (he did not have any bills in his wallet.) One person left the game frustrated that this was “going nowhere. You’re just moving money here and some of it was my money that I no longer have.”

 

The host then told us to put any money that we had above the smallest amount a player had in their hand, in a pile on the floor. Each participant now had the same amount of money in their possession. Tension turned to relief and awkward laughter.

 

The host asked everyone to talk about their favorite charities which we did, one at a time. The host then had us talk about what should be done with the money in the pile on the floor. Should it be returned to the participants or should it be given to one of the charities mentioned by us? We had seven minutes to reach consensus. We did not reach consensus. The host then had everyone pick a number from a hat. He called out a number and the person holding that number was identified. The host then told us we had another five minutes to reach a consensus about what to do with that money or it would go to the person holding the number he called. Still no consensus so the host gave the money in the middle of the floor to the person whose number he had announced.

 

Two people were okay with the outcome; two people were outraged that their money had been “taken from them”; one person asked what the person who was awarded the money was going to do with their new money? The person with the money said they would either give it to the charity they had defended or they would return it to each participant so they could be made whole. But the group had to come to a consensus on which choice to make. The decision was to give it to the organization that the person holding the money had talked about.

 

We then debriefed on the exercise, paying close attention to the emotions we exhibited and the feelings we had during the various sections of the money exercise. I found myself noting reactive behaviors triggered by feelings I had as a child around money.

 

Money exercises are a wonderful way to experience beliefs and emotions around money. You can identify patterns of behaviors that are unproductive and introduce new patterns of behaviors that encourage productive habits and behaviors around your money. Often, we hide and bury these feelings but they can come up in the oddest places.  

 

If you would like to explore a money exercise with your family or group, let me know. I would be delighted to develop a money workshop for you.

Sometimes, Money is Hard to Talk About. But…

When money can be talked about without the added emotions of hidden blame or unrelenting shame, money conversations can become like other productive conversations: meaningful and connective.  When money conversations become supportive rather than decisive, money conversations can be engaging and powerful. Instead of blaming others for their behaviors or shaming ourselves for behaviors and habits we are exhibiting, we become supportive of another’s and our own objectives with money. We become engaged in conversations as we understand others and our own motives and intentions with their and our own money. We can then put in play powerful actions to attain our common objectives. What makes this transformation from feeling divided to feeling unified around money?

When we understand each other’s views and stories about money, we become more engaged with their struggles and triumphs with money. When we take money “out of the closet” of isolation, blame, or shame, and bring it into our shared lives, as partners and as a family, money becomes a productive tool.

What restrains you from talking about money? Is it lack of confidence on your ability to make consistently good decisions about money? Is it an inability to engage your partner in conversations you think are important with your money?   Is it an inability to know how to approach planning your financial goals? Is it an inability find time to spend on financial matters and if you had the time, not knowing how to frame a conversation on financial matters? Is it a fear that conversations about money will lead to tension or disinterest from your partner? These can be dealt with productively and effectively.

The first question you can ask someone you share finances with is:  What is important about money to you? And let them response without interruption from you. You can learn a lot by asking this one question.

When you find out what is important about money to yourself and to those with whom you share financial interests, money will transform from being hard to talk about to being a welcomed subject of conversation in your house.

Let me know what keeps you isolated with your money or, how you have created a bridge from isolation around your money to it being a productive tool in your and your family’s life.

 

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Consumer Debt Gnaws at the Fabric of Freedom and Self-Worth

Debt is back, big time. The tightening that occurred after the crash of 2008 has been replaced by debt approaching $1 trillion dollars. And it shows no signs of abating.

 

Student loans and credit cards may be good for the issuers who capture more revenue through high interest loans and late fees but they are creating a pool of consumers sinking deeper and deeper into debt.

 

Credit card debt has already surpassed the pre-2008 crash levels, per WalletHub. Thirty-four billion dollars was added to credit cards in the last quarter of 2016 alone WalletHub found. To add to that increase, in the same period there was a record low payback of debt.

 

In my conversations with Millennials, I hear a range of concern about their debt. Some do all they can to avoid debt by delaying college until they can afford to pay for it or work for companies that will pay for their college education. I know one Millennial who has $300,000 in student loans. She told me that it is the price she has had to pay to attain her law degree. Although the debt does add stress to her life, she does not want it to confine her life to just working. She figures she will have this debt all her life and hopes that the government will one day forgive it.  

 

What have we done, where we have created a society saddled with debt as a way of life? Is this a sustainable model? I do not think so. It may seem to work for a generation but it is not a sustainable model for financial strength. Ongoing and mounting debt gnaws at the edges of the fabric of freedom, independence and self-worth. Debt is a burden. It may not direct all our actions but it directs our thoughts on how we think of ourselves.

 

Tell me your thoughts and how you deal with debt in your own life. I would love to hear your thoughts on this mighty subject.

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