Susan has a very good job with a multinational and earns a salary that most people will give their right arm for. She dresses well, lives in a nice neighbourhood and from first impressions especially given her income you would think that she would not have any problem investing or saving. However quite the contrary. Her expenses particularly impulsive luxuries are high and jeopardize her ability to put anything aside. Her spending habits have also resulted in high levels of debt. About a year ago she came to see us to help her structure a spending plan so that she could release more money into investments.
Now this was of course practically not rocket science to figure out. It was simply a matter of cutting down the expenditure and using the excess funds to pay down her debt. We worked out a budget and a debt repayment plan. This would then release more of her income to be channeled towards proper investments. Three months later she came to see us for a review of her progress and nothing had changed. She was still spending money impulsively on unnecessary items. Its one thing to plan for a holiday, but it’s an entirely different thing to wake up and decide that you are taking the whole family to South Africa next week on borrowed money. This is when I realised that the issue she had was not surface deep, there was an underlying problem that we needed to resolve before we could make any progress whatsoever. After a couple more conversations with Susan, it turns out that despite her great job, the working hours were unbearable and made her spend a lot of time away from her family. So how did Susan compensate for this? She spent money on them. She bought gifts; she took them on ad hoc holidays. In summary Susan was racked with guilt and no matter how much planning we did, she was going spend money to make up for the time she was away from her family.
Susan had two choices. The first one was to stop feeling guilty and suck it up. Secondly change jobs or agree on a work schedule that does not infringe on family time to the level it was doing. Definitely spending time with her family was important to Susan. It was core to her value system so there was no way option one was going to work. One year down the road Susan has a new job that allows her a lot more flexibility and she is now well on her way to working through her debt.
We all want to create wealth at some level. Most of the time we blame lack of resources, usually time and money as key obstacle to us being able to do it. However, I am now fast starting to learn that we carry a lot of baggage that we need to deal with before we can do anything about creating wealth. There is no way Susan was going progress with the guilt. So what is your “Junk in the Trunk”? I am no psychologist and this article is written purely from experience and observation. There is some common Junk that over the years we have come to identify as stumbling blocks to the creation of wealth.
1) Guilt:
Susan’s guilt was related to not spending time with her family but there could be other reasons for this guilt. We have worked with other people who feel guilty for having the money in the first place. They will often deny that the car they are driving is theirs, or that they did a certain type of investment. It often stems from messages received in childhood such as money is bad, people who have money are evil etc so subconsciously they will try and hide that fact that they do have money.
2) Avoidance/Fear:
Do you throw away your ATM slip when you withdraw money? Do you tear up your bank statement before opening? Do you never look at your credit card bill? Humans tend to operate with a strong desire to experience pleasure and reduce pain. Looking at your financial information can induce pain because it serves as a reminder that you may not be where you want to be. A lot of people have told me that when they look at numbers they feel incompetent so they will do anything to hide this. It could step from negative experience with numbers e.g. flunking math or being told you will never be good at numbers. We associate activities saving and investing our money with pain because we are denying ourselves the instant gratification of what makes us feel good. We need to recondition ourselves so that the picture of pleasure can also be related to the activities we are doing now for future consumption. Denying some immediate material pleasures such as a new car, and instead investing in the stock market will ultimately cause us pleasure as we take our kids to good schools, retire comfortably, buy a house etc. We might associate the steps of wealth creation such as using good debt to create a more secure financial future with pain because of our fear of potential failure. This fear of failure (pain) stops us even trying and makes things harder for us in the long run.
3) Hoarding
People who have grown up without money or in their early years experienced a period without money, which caused them pain, may always feel the need to have money they can see. Their greatest fear is being in that same situation that caused them so much pain. They need the security of having cash. This is in itself not a problem but the problem tends to arise when they never want to spend it at all or invest it. They are comfortable simply with money in the bank. The problem here is that rarely will savings in bank with minimal returns ever get you to where you want to be so in essence this fear is jeopardizing the future.
4) Rebellion
A good number of people tend to behave exactly as they observed from their parents or totally opposite. If your childhood was marred with feelings that money was being kept away from you or you could not get what you want, you may have subconsciously resolved to completely spoil yourself when you got your own money. People in this frame of mind are rebelling from the constant feeling of denial they experienced. People who rebel tend to be spenders and it is usually very hard to convince them to save. They have a “live for now” mentality.
Whatever your conditioning or junk is, it is important to recognize it so that you can address the root problem. It is usually not changed overnight but through consistent change in habits or behavior patterns over time. Alternatively like Susan change in environment that is causing the junk. It may start by looking and understanding your bank statement, having a standing order to a savings account to avoid spending, putting 30% of your cash in something else. Consistency in these habits will create the discipline to remove the Junk in the Trunk.
Waceke Nduati-Omanga
www.centsiblewoman.com