Money Energy Law #12:
A spending plan can improve your life’s trajectory. Efficient use of savings helps to reduce stress.
The famous author, Ralph Waldo Emerson once said, “The only person you are destined to become is the person you decide to be.” While I fully embrace this statement, it requires an addendum. To become that person, you first need to know yourself, your identity, and the behaviors that are the essence of you and how you deal with money.
Having spent many years exploring financial well-being from every angle to help others, the most valuable insight I can share is that it is contingent upon one’s relationship with money—regardless of how well you know yourself. It’s part of the journey to self-awareness.
It’s more than saving for a “rainy day.”
Most of us have heard the saying and the need for a “rainy day fund.” It’s a way to maintain financial stability by using those reserves to help supplement those times when your regular income is not sufficient to cover irregular expenses. While this is a compelling objective and a healthy consideration when establishing an emergency fund (and financial planning), we need to address how your relationship with money impacts your financial future and associated stress.
Is stress really that big of a factor? In recent years, T. Rowe Price conducted a survey that reaffirms how financial stress is a strong indicator of your financial well-being.1 A great deal of pressure is derived from the accumulation of debt and those who continue to increase their financial liabilities end up saving less for retirement than those who are not stressed.
According to the Federal Reserve Bank of New York’s Household Debt and Credit Report (as of May 22, 2023),2 the average American has $59,580 worth of debt across mortgages, home equity lines of credit, auto loans, credit card debt, student loans, and other personal loans. Keep in mind that’s an average. Some of you may have closer to 10 times that alone as mortgage debt.
By the way, the average total debt increased by approximately 20% since 2018. I can always make the case for financial planning, but the best way to reduce these tensions is formulating a well-structured spending plan too.
Easier Said Than Done
It makes sense—having a spending plan is a tool that puts you in control of your life through greater clarity and less fear. And if we are honest with ourselves, we can acknowledge whether we are inherently spenders or savers to some degree. But even with that awareness, how many of us fully comprehend how money shapes the course of our life?
Every person has Money Energy; many don’t know it, and fewer understand it, but it’s real. It presents itself in a variety of ways:
A racing heart when you realize the repercussions of overspending
Receiving an unexpected bill and not having enough money to cover it
Being diagnosed with an illness and discovering the out-of-pocket expenses you will bear
When a family or friend is in financial trouble, but you are in no position to help
You have successfully accumulated wealth but seem incapable of holding on to it
The energy of money and our emotions are in every decision we make—and the best part, it can be revealed and measured. Most financial planning tools are missing this key ingredient that can help you develop more effective spending, saving, and investment plans.
Harnessing the Power
Money Energy is the power and capacity to generate wealth which becomes a stored force releasable to your life at any time. It feeds your very life being. It enables you to potentially achieve more and reduce barriers to achieving financial wellness. But first, you need to be able to recognize it for yourself. Foundational to your level of Money Energy is your ability to increase your Financial Behavior Capability. Managing your spending and improved saving habits lead to more opportunities, which combined to form your Money Relationship Integration which may open the door to quantum leaps in generating wealth.
To illustrate, I’d like to familiarize you with Kim Grant, a 39-year-old creative director in an advertising agency. She and her husband Geoff have been in previous marriages, which has evolved their relationship with money. When they married, Kim and Geoff agreed to hold some shared investments, like their home, but keep all personal investments separate.
More recently, Kim met with her new financial advisor and explained that she was seeking to improve her spending and investment plan. Her advisor recommended going through the DNA Natural Behavior Discovery Process, the foundation of a behaviorally driven goals-based planning process.
A quick review of Kim’s scores showed her to have an “Adapter” DNA Style based on her:
Risk behavior
Financial relationship management
Financial planning management
Wealth building motivation
Financial emotional intelligence
Based on her scores, Kim can adapt to the needs of her existing lifestyle and leverage or work on avoiding behaviors that can either help or hurt her success. One of the facets of the process is revealing her Financial Behavior Capability and Money Energy. Her unique discovery also shines light on various contributing factors such as her savings and budgeting, ability to create wealth, her risk-taking behavior, and other contributing factors such as her Financial EQ (which is her ability to maintain wealth by understanding how it works).
The behavioral elements revealed are what the person has said about themself through the objectivity of the DNA Natural Behavior Discovery Process. The advisor can now speak to specific areas of Kim’s relationship with money that will inform the spending, saving, and budgeting plan she wants. However, a word of caution: The scores may indicate a natural predisposition for wealth generation, but it does not necessarily reflect whether someone is financially wealthy.
The ultimate ability to create wealth will depend on the person’s skills or expertise learned through life, the decisions made, and the opportunities created or eventuated during their life journey. It goes beyond awareness and positive thinking. There must be positive action, and in this case, Kim must incorporate financial discipline to manage her spending and increase her savings. It’s all part of the behavioral insights and Money Energy that inform a successful financial plan.
Stay tuned every week as we continue to reveal all 40 Laws of Money Energy.
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1https://www.troweprice.com/personal-investing/resources/insights/financial-stress-is-a-predictor-of-your-financial-wellness.html
2https://www.newyorkfed.org/microeconomics/databank