Taming the pound

Think about it, most people can do £1 + £1 = £2 and get the right answer, even if they need to use their fingers or a calculator.  That’s all there is to money. 

Sure, you might need to scale it up a bit, but money doesn’t suddenly become something different part of the way through, £1 is always £1. But people!  If you have one person, and add another person, what have you got?  You might have a happy couple, a fight, the cure for cancer, a weapon of mass destruction – who knows? 

Some people will tell you that money is really complicated.  They’ll talk about taxes and money supply figures and options etc.  But those are not complications of money.  They are complications of people. 

People dealing with money invent all sorts of ways to think about it.  Thinking is a human activity.  The money remains just money – it’s the representation of it, the meaning it has for us, the desire for it, the fear of it, in other words, how we think and feel, that is complicated.  And the way we think and feel is about the way we are, not about the way the money is.

I’ve been a financial advisor, and I’m now a Chartered Psychologist.  I used to deal with people’s money.  Now I deal with the people themselves.  Trust me on this, the people are far more complicated than the money ever was!

That is a standard question I ask clients.

Some answers I’ve had to that are:

• To spend
• For a rainy day
• Be able to do what I want
• To buy stuff
• Show I’ve arrived
• Make more money
• To give me a lifestyle
• A way of keeping score

Some people come up with the answer that is in the economic textbooks – it’s a medium of exchange.  I think it’s easier to think of it as a means to an end.   So what end is it the means to for you?

Is it to prove something to somebody – and if so, whom?  Or is it a means to get what you really want in life?

Which means you have to work out what it is you really want.

What is it that you want your money to do for you?  And why?  If you want a big house – why is that?  Do you actually have a large family or want to hold Edwardian House parties or something?  Or do you think that, once you get enough money you “ought” to have a big house?  Or you see it as being an investment? 

If it is an investment, or you “ought” to have it, what does it get you?  Maybe you make money on it, although if every other house goes up in value, unless you sell up and live in a tent you aren’t actually making much money.  But say you’ve made money, what do you want that money to do for you?  You want money, you get money, buy something to make more money and are still left with the questions, what is the money for,  what do you want it to do for you?

Most people are so busy trying to get money, they don’t stop to think why they want it, what it means or what they’d do if they got it.

So think about what you want the money to do for you.

Perhaps you make the unconscious assumption that if you only had that little bit (or a lot) more money, you would automatically be happier? 

 Lots of people believe it, but in general it isn’t true. Up to a certain level (in the UK, it’s probably around £50,000 p/a household income, but it depends on where you are in the country and on you as an individual and your circumstances), happiness seems to increase pretty steadily with increasing money. 

Once you get beyond that it might be helpful, at least temporarily, but it doesn’t always help and the differences aren’t great.  Taking an invented example, if your household income goes up £20,000 annually from, say £80,000 to £100,000 it won’t make much difference, certainly nothing like as much in terms of happiness as it going up only £10,000, from £40,000 to £50,000 although the proportionate increase is the same and the difference in money is actually bigger.  There seem to be two main reasons for this.

1. If you can’t get the basics, like food, shelter etc. in modern society even a bit more money is helpful and takes some of the stress away – the stress that comes from not knowing if the children will eat tonight or whether your stuff is going to be reclaimed by the bailiffs.  Once you get to the point where more money means a five star instead of a four star hotel, a new car every three years instead of five or a Sky subscription that gets you 70 more channels with nothing worth watching, it doesn’t do so much for you.  It might feel pretty good for a while, but it doesn’t really remove much stress because you’re not really stressed.  Of course, you might make an unconscious decision to put yourself under stress to chase more!
2. As you get more money, you tend to compare yourself with wealthier people.  So for years, you’ve craved another £10,000 a year. Finally you get the promotion and a £20,000 raise.  You are delighted for a month or so.  Then you move to a wealthier neighbourhood, join the golf club and suddenly you need an even better house and car, and you decide that you need another £20,000 (or more). 

So what do you think – is more money always the answer?  And if not, what is it you want, what values do you have?