Leslie-Anne Scrogie
May 8, 2023
Living with the fear of money. In more than a decade of studying money psychology and mindsets, this is possibly the most common money mistake I see.
Financial fear can be overcome. And when you decide it’s time to face those fears, literally by showing up and starting to learn how to make better financial decisions, the fear starts to subside. That’s when you start to set the course for a better financial future.
These are a handful of money decisions that are rooted in fear, and that will leave you with a costly financial hangover.
iStock-961414622
Marrying someone whose financial values are not the same as yours
Finances are one of the leading causes of separation and divorce. The person you marry has the potential to make your financial prospects infinitely better or worse. If you haven’t yet tied the knot (or moved in together), it’s time to get clear on how you each manage money, how you want your future to go, what your financial expectations are of your partner, and what each of your strengths and weaknesses are when it comes to managing money.
It’s also helpful to understand how your financial values were formed growing up (not that they need to continue, but it does give context to your individual approaches to money).
If you’ve already formed a permanent relationship and your partner is sinking your financial ship, you can seek to correct the situation through financial counselling, money coaching, or even some basic budgeting along with boundary setting. In other words, it’s all correctable, but it’s going to take work to get to a better place.
Having money conversations with your love takes courage. Remember: the goal is to get on the same financial page, and research shows that when you do, you’ll be happier and wealthier … and your sex life will also likely improve (bonus).
Waiting to invest in your retirement
There is always going to be something requiring your money and attention — stressful debt, tuition, sudden necessary travel, etc. But delaying retirement saving is going to cost you mega dollars in foregone interest and reinvested returns and financial peace of mind.
It is never too early to start investing through a pension, RRSP or TFSA. It’s only too late.
My advice is to get into a weekly or biweekly ritual of contributing money toward your retirement plans. If your budget is tight, start with one to two per cent of your take-home pay, and increase by another one per cent every six months. Once you’re at 10 per cent of your take-home pay, you should be cruising toward a healthy state of retirement readiness.
Given the increasing cost of living across Canada, this 10 per cent target is in addition to pension contributions, in many instances. Review the precise calculations with your financial adviser.
If you’re behind, it’s OK. You just need to start saving more, right now, and ensure the money is invested properly.
Not having an emergency fund
Emergencies (job loss, home repairs, medical costs, etc.) are going to happen. Three to six months’ worth of essential expenses tucked away in a high-interest savings account (HISA) is the goal. I recommend saving up in regular intervals, and when you happen to run into a lump sum of money like your tax refund, use a large chunk of it to shore up this account. It takes time to build, but once it’s there, you’ll be set and can redirect that money to another area of your life.
Earning less than you’re worth
Being underpaid impacts every aspect of your life: your daily budget, sense of worth, career satisfaction, how prepared you are for retirement, and your relationship. If you’re underpaid, it’s time to get the courage to ask for the raise and promotion you deserve, or change employers. Earning well and doing well at work is a great way to feel more satisfied in your life. This advice isn’t that you should take a horrible job just for the money. It is that you should earn what you’re worth, and still be happy.
Not teaching your kids about money
You’re probably not a pro at this money stuff and that’s not your fault. But not teaching your kids core life lessons around money is in your control. Start early with conversations about the value of a dollar, how compound interest works, give them an allowance and teach them how to save a portion and spend the rest with joy. Financial literacy is a huge gift and your children will have a leg up in adulthood because of your efforts. Avoid stressing them out with your own money issues — they have enough on their young plates.
There’s no point in keeping up with the Joneses. They are flat broke.
You are the money master of your household and no one else. You decide what’s important to you and your family. You are the budgeter. You get to call the shots. No amount of peer pressure is good (it just gets more expensive as you age). When you spend, do it for the right reasons. Nothing you buy can “buy” true friendship or respect.
Simply understanding these common money regrets can be enough to reduce any emotions and panic you feel around your finances, and give you a sense of empowerment.
