How To Improve Your Relationship With Money
By: Matt Reicher
Tags: Personal Finance, Money, Saving, Happiness, Finance

How To Improve Your Relationship With Money

Photo by Jp Valery on Unsplash

“Many folks think they aren’t good at earning money, when what they don’t know is how to use it.” ~ Frank A. Clark

Let’s you and I play the word association game.

When I say the word ‘money,’ what is the first word that pops into your mind? I immediately think of words like ‘bills,’ ‘spend,’ and ‘not enough’ (I know that’s actually two words — but stay with me here).

Who among us thought of the word ‘tool.’

Yes, money is a tool used to purchase the things that we want and need. Unfortunately, it is a tool that many of us need to understand better how to best use.

Before continuing, it’s essential to understand that by-and-large we each have an okay handle on our finances — especially when it comes to the big-ticket stuff. For the most part, we aren’t callously irresponsible dummies with our money. For example, very few (if any) of us are going off and tanking our financial futures by buying an RV we can’t afford and driving the country.

Those of us that take a hit more often than not do so with the smaller purchases. Our negative relationship with money is born from a thousand little cuts — not one big gash.

It’s the little stuff — one dollar at a time — that keeps knocking us down. Our financial world is filled with buying a few things we like, some stuff that we need, and using what’s left to keep bill collectors from calling. This process is rinse-and-repeat every couple of weeks. We all work hard to earn a living but have slipped into personal financial systems in which most of our money disappears from our grasp the moment it hits our bank account.

It’s hard to have a positive, healthy relationship with something that we barely know. To fix things, there need to be a change — starting with what we think about our money.

We need to reconsider the value of the money we earn to change our relationship. When money is nothing more than a means to buy stuff, we will treat it as no more. Instead of using it as the tool in our toolbelt, we needlessly waste it on mindless, unnecessary purchases made only for short-term joy. When the joy fades, we do it again. It is a never-ending walk on the hedonic treadmill.

According to Psychology Today, the hedonic treadmill is “the idea that an individual’s level of happiness, after rising or falling in response to positive or negative life events, ultimately tends to move back toward where it was prior to these experiences.” [1] Essentially, these purchases give us a mental lift, but it is short-lived.

To break out of that behavior, we need to strengthen our relationship with money by defining its worth to us. Buying stuff is fine, but we have to determine an item’s value before purchasing. We need to consider the personal ‘sweat value’ anytime we are exchanging our hard-earned money for goods or services that we don’t absolutely need.

This concept is simple but powerful and is a great way to improve our relationship with the money we earn. The cash we have is no longer only a means to buy stuff, but a partner in any purchasing decisions.

Allow me to explain —

A handful of years ago, I trained to run the Twin Cities Marathon. I’m by no means a professional runner, but I needed to get the race checked off my bucket list. To get to what I considered the proper race weight, I became semi-regimented, eating, and drinking mostly healthy stuff to get race-ready.

Whenever I wanted to deviate from that ideal, I considered the exercise that I had to do to get back to the physical point I stood before.

If I wanted to drink a 12 oz can of soda with 150 calories (give or take), then I needed to be willing to run at an 8 MPH pace for an extra 1.25 miles. There were days that the soda was worth the work, but that wasn’t always the case. In those moments of weakness that I didn’t feel like running extra, I put the can back in the fridge.

The idea is an offshoot of the real estate concept of ‘sweat equity.’ It says that the work — the actual labor — that we put into project improvements. Because we have done the job ourselves, our ‘sweat’ alone has added the extra monetary value. A person will then see a tangible financial benefit for the work that they’ve done.

‘Sweat value’ works similarly. We all work hard for a certain number of hours each week at a specific hourly rate (for the sake of argument — and upcoming examples — we’ll say $20 an hour). Whenever we make a purchase, consider how much time we’ve had to work to earn the money we need to do so — and based on that consideration — if it is literally worth our time.

For example, you’ve decided to pick up McDonald’s on the way home for your family of four. It will cost you about $40 to do so. At the above rate of $20 an hour, buying dinner this way will cost you the equivalent of 2 hours of labor (‘sweat’). Clearly understanding that fact, you then have to decide if it is worth it or not.

Does it make more sense to go home and make dinner? Maybe. We all lead busy lives, and sometimes the answer will be no — but our hard-earned money deserves consideration either way.

Let’s use a more expensive example.

You’ve decided that you need to get some more exercise. You find yourself a bit more winded than usual after walking up the stairs at home and decide to get into shape. It’s time to take up running. One beautiful Saturday afternoon, you head to the local fitness store and end up in front of a treadmill that has everything you need (at least according to the salesperson). It is on sale for $2000. Before you pull out the debit card, or heaven forbid sign up for their low-interest credit card, make sure it is worth one hundred hours of work (again, at our predetermined $20 an hour example).

Consider the opportunities that you have without spending the money. Use the same rationale to derive the sweat value. Yes, you could get the treadmill, or you could — as an example — apply that money toward the car payment and get out of that and its interest four or five months earlier.

Which offers more value?

Maybe it’s the treadmill — there is nothing wrong with that as long as you’ve come to that conclusion honestly. Or, perhaps you decide that running outside for the summer to make sure you enjoy it makes more sense and hold onto that money for something else.

This idea works for experiences too. Is that one-week trip to California worth $5000? That is 250 hours of your ‘sweat.’ Perhaps it makes more sense to go somewhere less expensive? Maybe not, though. You have to decide. Is the value of the trip worth more than six weeks that you’ve worked? Only you can answer that.

Partnering with your money will change your relationship with it — or create a new relationship if one was previously lacking. Thinking about the value of your purchases in terms of the actual time commitment needed (your ‘sweat’) will take away the impulsivity that leads too many of us to buy stuff that we didn’t want or need.

When you honestly consider the value of the things you buy before you buy them — they’ll mean more to you. Now the things you have will get used more often, and you will better remember the experiences you enjoy.

After all, it did take X number of hours at work for you to buy them.