What’s Your Money Problem?

Posted On 8 June 2024

Money seems to be the cause, and solution, to a lot of our problems in life. How can it be the money can cause so many problems, yet people generally want more money? In this post I will lay out some guidelines to help you figure out where your money problems lie.

It is a common myth that more money is the solution to our money problems. That sounds good until we look at the situation closer. I’ll start with looking at income because if there is not enough coming in, that is a problem. Some people have good income, yet they still live paycheck to paycheck. In those cases, the problem could be with their spending and priorities. While earning and spending are common, the biggest cause of our money problems is with the money scripts we have written for ourselves.

Let’s take a look at each one of these areas one by one. I need to warn you that this post can be like that scene from the movie The Matrix where Mr. Anderson is given the choice between taking the red pill and learning a potentially unsettling and life-changing truth or taking the blue pill and continuing to live his current life, unchanged. If you figuratively choose the red pill, keep reading.

I Just Need More Money

A 2010 study showed that more money does not buy more happiness after the $75,000 mark. In 2023 that number has risen to about $100,000. What that means is that if a person increases their annual income from 30,000 to $60,000 their quality of life increases substantially. At the same time, the person whose annual income increases from $100,000 to $200,000 does not see the same quality of life increase.

If there is not enough money coming in to cover the basic needs, that is where to start working on your finances.

I have heard so many times that people who think they have a money problem actually have a spending problem instead. That statement is only partly true.

Focus on Earning or Spending?

Let me give you a simple way to determine where to focus on your money problems. Take the median income and see how your income compares. If your income is lower, your primary focus should be in increasing your income. If your income is at the average or above, you have a spending problem. Most people have a combination of the two and it is beneficial to work on both.

This comparison is not meant to make you feel bad. It is only to determine where you currently are, and where your primary focus needs to be.

As a starting point, here are the figures for the whole country. For best results, look up the numbers for your state or city. In 2022 the median income for individuals was $40,480. The median household income for the same year was $74,580. Unfortunately, that is a decrease from 2021 when the median household income was $76,330.

What About Inflation?

Yes, inflation can add a degree of challenge to our financial life. We need to update our benchmarks regarding both our income and prices of goods and services. What used to be considered normal dollar amounts may need to be adjusted more often than in the past. It is possible for our income to increase, yet our purchasing power can be decreased due to inflation.

To become and remain financially durable, a smart decision may be to move our income to a source that is tied to current prices. Say, a job that pays commission. As prices increase, so does your income!

Spending Shows Your Priorities

We tend to spend money on things that we value. People who prioritize their family tend to spend a lot on their family. Others may spend (prioritize) entertainment, eating at restaurants, alcohol, or hobbies to “get away from things.” Spending becomes hazardous to our financial health when it becomes a compulsion for more, or intended to impress other people.

If we don’t pay attention to our spending, we will experience “lifestyle creep”. It doesn’t add to our wealth if our spending increases as fast (or faster) than our income increases.

Cutting back on spending does not mean cutting back on the enjoyment of life. I can’t tell you what to cut back on – that is up to you! By taking an honest look at our spending we may find that we don’t need as many subscription services. We could cook more meals at home. The goal is to get real with ourselves and get in control of our spending.

Now, if you already know about increasing your income and controlling your spending, what can be causing you to not do what you know to do? The answer is probably in the money scripts that you have.

What’s A Money Script?

Often, we run our financial lives according to scripts that we wrote for ourselves when we were children. We could have overheard our parents arguing about money. Maybe they told us things like, “Money doesn’t grow on trees!” or “Money is the root of evil.”

Would you consult with a 10-year-old about finances? Absolutely not! Yet, many of these scripts we still use were written by our 10-year-old self. Ignoring a chore may have gotten you out of doing that chore as a kid. As a 30-year-old, ignoring a responsibility will not be magically fixed by your parent or some other adult.

Money scripts can be thought of as preprogrammed responses in Alexa. We have a money question, so we ask ourselves what to do. Based on our past experiences, we get an answer.

If we follow scripts that lead us to sabotage ourselves, is it any wonder that we are having money problems? The encouraging thing is that we can replace or modify these scripts when we understand that we have them in the first place.

Our Financial Scripts

We all have money scripts, and these scripts either work for us or against us. It could be something that used to work for us. Maybe it is something written by our 10-year-old self. It could even be a result of our over-reaction to a trauma that we experienced.

The good news is that we can change our money scripts so that they work for us. Before we can change them, we must first figure out what these scripts are. For an in-depth look at these scripts, I would highly recommend reading the Book Mind Over Money by Brad Klontz & Ted Klontz.

For me, I do not want to live with financial stress. There will always be some financial stress, but I do my best to keep the stress to a minimum. I set my work schedule. When we upgraded our vehicles last fall, we bought 2016 models.

Take a Step Back

When we need to shove something heavy, we will take a step back so that we can create a bit of momentum to help us. We can use the same technique in our financial lives. If we need to shove ourselves forward, we should start by taking a step backward so we can move forward. At first it may sound strange, but it works.

How do we take a step backward? It can be cutting back on expenses. Becoming certified so you can get that job you want. Maybe, get a second job or a side gig. We sometimes must give up some current fun, money, or time in order to put ourselves in a position where we can live the life we choose.

We Can Fix It

The encouraging thing is that we can fix our finances! If we are willing to learn, get real with ourselves, and then take the appropriate action, we can change. Will it be easy? Maybe, maybe not. You could be doing most things right so a small change can make a big difference. Some people may have had years of good income with little training about money, and that can allow them to make a huge mess of things. For others, there could be some financial scripts that are killing our finances through self-sabotage.

Don’t feel like you have to become an expert overnight. We are here to improve and get better. I am still learning new things on a regular basis. Canoosa Finance is here to help you improve your finances so that you can live the life you want to live. I encourage you to join me in becoming financially unstoppable!