Money relationships: it’s all about balance

Balance – it’s a word we hear more often than we might think. A ‘balanced diet’, a ‘balanced argument’, the ‘work-life balance’. They’re all familiar phrases, but they’re often used in the context of something being absent, or to point out what we’re doing wrong.

If we achieved that balanced diet, we wouldn’t have those extra few pounds to shift. If we could get the work-life balance right, we wouldn’t feel so tired. If the world were run on balanced arguments, well, it would be a different place entirely.

Balance matters in money too; in how we approach it, in how we feel about it, and (crucially) what our relationship with money allows us to get out of life. What’s surprising is that our approach to money, our financial personality, isn’t something that takes shape only when we start earning; it begins much earlier.

Let’s look at how our early associations with money can have repercussions for decades to come, and how we can build a more fulfilling relationship in future.

Let’s go back to the beginning

Consider a client whose earliest money-related memory conjures up a piggy bank, maybe one of those 1980s NatWest examples that are worth so much these days. In this particular memory, as she’s going to raid said piggy bank, she gets a slap on the wrist and a stern look from her Dad. Ten minutes later, she’s out playing in the garden, her mind on something else entirely and all the wealthier for it. So, no harm done?

Not quite. Our formative influences and experiences are very emotive and that incident could easily set the basis for what becomes a lifelong behaviour. As one neuron passes its chemical message to another an association is formed – in this case between withdrawing money and a negative experience. Over the years, this association could easily manifest as a tendency to feel guilty about spending – perhaps useful for building a house deposit in record time, but not so good for being happy, and certainly not a good way to live.

Now picture a second client, one who never learned to associate a dwindling bank balance with feelings of guilt, because his upbringing was at the opposite end of the spectrum. His parents gave him everything he ever wanted, without worrying about saving. For the child, that’s a positive association with spending, but it may well translate into an adult who spends without thinking, perhaps forcing his future partner to put on the brakes to offset that behaviour.

While these examples are polar opposites in the associations they create, they’re alike in that they set the scene for an unhealthy, unbalanced relationship with money. They set in motion future events that could see someone routinely saving too much without really knowing what it’s for, or spending too much and never enjoying the security they need.

Why listening matters

When either of those clients engages with us for a chat about their money and their plans, we know they’re not just bringing their thoughts about today, or even just their hopes for the future, they’re also bringing the baggage of their life so far and their experiences, good and bad. That’s why we ask about childhood memories associated with money, to try and help clients understand why they behave the way they do and hopefully, to initiate change where it’s needed.  

We’re not here to judge, we’re here to help. As financial planners, we want to help you to live the best life you can, making the very most of what you have to work with. The first thing we do is listen to what each client wants to achieve for the future, where they are now, what troubles them and what would help to take that worry away. We listen to how they feel about money and how they picture their lives in the years ahead. Every client’s story is different, but over the years we’ve identified some overarching trends.

The Goldilocks Test

First, there are those with ‘too much money’. We’re not talking about super yachts and private islands, but it’s not unusual to see clients whose outgoings are comfortably covered by their sources of income. That’s important because while they might have a good lifestyle in the here and now, they need to be able to channel their resources to achieve their ideal future in the years ahead. It’s important for these clients to understand how to really turn that favourable position into real value for the future.

Of course, we also see those with ‘not enough money’, where there’s too much leaving the accounts every month and the financial bucket, instead of filling, seems to have a leak. It may not be a very big leak, and it may even be possible to keep the bucket full enough by working harder and harder, but that’s not a good way to live. The leak needs to be stopped.

Then there are those with ‘just enough’ – people whose inflows meet their outflows allowing them to enjoy a good life. These clients are successful in achieving the kind of balance we’re talking about, what matters now is maintaining that balance into the future. As we always point out, financial planning isn’t a one-time tune up, it’s a considered, continuous process to keep you and your finances in harmony.

Finding your balance

A really good way to start finding your balance is what we call the ‘three pots’ approach. When it really comes down to it, there’s a limited palette of things you’ll want to do with your money. Even the most esoteric of financial ambitions can be grouped into one of three broad areas – saving, spending, and giving.

The likelihood is that throughout your life, you’ll want the freedom to engage in all three of these at some point. It’s a joy to save for the future you really want, but it’s also fulfilling to spend money on experiences and to give to the people, or the organisations that matter to you. By calibrating these aspects of your financial life to work in harmony, you’re creating balance – not just a balance of numbers but a balance of life.

Balance isn’t easy, but it’s worth it

If achieving the right balance was easy everyone would be doing it and there would be no call for us to get involved. But conversations about money can be hard work – they look at things like why there’s never enough money, whether you really need to spend as much as you’re spending in certain areas of your life and, of course, the really big one – how will the future look?

Achieving a balance that lets us approach the future as a friend, rather than frantically laying more track as we go is key to our own happiness, but to the happiness of the next generation too. I have two daughters aged eight and five and I’d like them to grow up to enjoy a healthy, balanced relationship with money. The examples I set now, the approaches I demonstrate of the role and place of money in our lives, will rub off on them.

As professional financial planners we’re here to help our clients understand that thinking about money doesn’t have to be about fighting fires all the time. Sometimes it may mean changing an approach or a behaviour pattern, but we're here to demonstrate and literally put on paper how key changes now could give you more satisfaction and fulfilment. That’s the balance we’re talking about; a balance between the ability to build your wealth and the ability to enjoy it.