I’ve been thinking a lot about money beliefs lately. Mostly around what I think is a “realistic” goal, what I can achieve and appreciate how far I’ve come in life compared to my family. Money management is a huge part of that, as I have achieved a level of financial stability that I used to think was impossible.
It wasn’t until I began working in wealth management that I realized there was a huge difference between what children from wealthy families were taught, and what I was taught about money. Some of that was a pure lack of awareness, but a huge part of it was the mindset. How you think about money, is often so deeply intertwined in our financial habits that it can be hard to separate the two. The first and most important step is to acknowledge that wealth can be scary and overwhelming for those of us with no exposure to it. There are a lot of big feelings wrapped up in building wealth for the first time in your family. Guilt, shame, unworthiness are all a few of the feelings I felt when I first started saving and investing.
I kept thinking:
Shouldn’t I be helping my parents more?
Should I really save for my kids’ college when there were people back home who I could help?
Was I selfish for wanting to create a new level of wealth for myself and my kids?
Not to mention the huge learning curve as virtually no one around me was focused on finances. It was all very daunting since I very rarely had financial discussions with anyone in my family, and if I did, it was usually about how someone was totally broke and asking for a loan. I had no one I trusted to turn to for help or information, which is a huge problem for first-generation wealth builders.
Secondly, it’s important that you spend some time considering your family’s saving/spending culture. Is there a strong saving culture? Was there never enough money for the things you needed or wanted? Is there a predominant money story? Something like “people like us don’t have money” or “money is for rich white people, so there’s no point in trying because that’s not us.” Becoming aware of these things can help you to realize the narratives that might have been subconsciously driving a lot of your money behaviors.
Third, take time to have an honest, factual, unemotional look at your financial situation. I know it’s difficult to do, but it’s so key that you leave the judgement behind! Your finances are reflective of your life journey. In no way are they a measure of your worth, or smarts, or capability as a person. At the end of this exercise, you should be able to answer the questions:
Where is your money? Checking accounts, savings accounts, that 401(k ) you left 3 jobs ago and haven’t checked in on. You get my point!
How much do you owe?
Who do you owe?
The last, and most fun step is to think about your short, medium and long-term goals. What do you want to achieve in one, five, or ten years? How can the resources you have available to you (existing wealth or your income) help you get there? I caution my clients to be very careful here. Don’t just use your parent’s or society’s goals as your own. Do you really want to buy a house, or is that what your dad wants you to do? Do you really like tropical beach vacations, or are you doing it for the ‘gram?
Once you’ve determined your goals, then you should prioritize them with the simple formula income- savings = expenses. Paying yourself first(i.e. saving or paying off debt) is the best way to ensure you always put your financial wealth building first, and are able to spend your money guilt free later on.
Are you shooting for first-generation wealth building? What are some of the strategies you’ve used to build wealth and change your family legacy? Please comment below!
Thanks for this! I’m going to use that, income-savings=expenses. I so often go about it the opposite way. Great topic!