How to break the cycle of bad financial habits

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Woman stressed about money.
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Our parents teach us some of the most invaluable life skills we’ll ever learn, from basic things like using a knife and fork, to positive habits regarding honesty, kindness, love and respect. Unfortunately, we also unwittingly pick up some bad habits in our childhood home that we carry over into our adult lives – and financial baggage is one of them.

According to recent UK research, children start modelling their behaviours on the adults closest to them from as early as the age of three.

“Early childhood experiences will give you habitual responses to things, and that can include how you manage your financial resources,” says clinical psychologist Dr Bob Montgomery.

READ MORE | How to cope with money anxiety

“You learn by watching how your parents manage their finances and see what works for them. It might be another 20 years before you find yourself in a similar situation.”

The road to that discovery can be costly. Growing up with parents who routinely indulged in expensive treats could programme you to develop a spendthrift habit, resulting in serious debt. Similarly, if you lived in a household that was constantly on the receiving end of cut-off notices and phone calls from debtors, you might find yourself in a similar state of denial when you’re paying your own bills.

FINANCIAL ANXIETY IS RIFE

If you’ve inherited toxic money habits, your first line of defence is to seek financial counselling. And this doesn’t have to cost you a cent. Once you’ve been given money-management tools – such as managing debt, living within your means, and how to set financial goals – by a qualified professional, you may be pleasantly surprised by how easy it is to turn your troubled relationship with money into a much healthier one.

UNPACK YOUR FINANCIAL BAGGAGE

Did you pick up one of these bad habits from your family? Financial counsellor Lyn Brailey suggests trying these simple steps to break the cycle.

  • YOU INHERITED FINANCIAL NAIVETY

Money was a subject that was never discussed in your home, and neither of your parents passed on any guidance. Now you’re struggling to stay on top of your financial commitments, and you feel lost and overwhelmed.

How you can change that:

EMPOWER YOURSELF

Talk to friends who are financially savvy – you may feel a sense of failure and shame having to ask for advice about money, but it’s OK to ask. Or go on the internet and find a financial-literacy education programme.

DRAW UP A BUDGET

Have a clear understanding of the amount of income you have coming in, and what your constant expenses will be: rent or bond, utilities, cellphone, Internet, food, entertainment and travel. It can be quite a shock at first, but this will give you a really clear picture of where your money is going, and that’s the first step in gaining control.


  • YOU INHERITED FINANCIAL RECKLESSNESS

You seek instant gratification, spending money as a reward when things go well, but also when you’re feeling low and your mood needs a boost. But this means your credit cards are always maxed out, so the high you get from shopping leads to a crash later on.

How you can change that

COUNT TO 10

Stop, check yourself, and walk away for 24 hours. This will give the endorphins firing off in your brain a chance to calm down. Over time, neural connections have developed that mean you immediately react with “I’ve got to have it”, so you need to change that response.

SEEK PSYCHOLOGICAL COUNSELLING

What you are practising is a learnt behaviour, and on some level, you are getting some satisfaction from it. So you might have a sense of loss without it; you feel that if you lose this gratification, you lose your identity. You need to explore the issues behind it. What are the triggers? Why do you need this? It may take time, but counselling can give you the tools to help you stop that behaviour.


  • YOU INHERITED FINANCIAL ANXIETY

There was a lot of stress around your home about meeting the mortgage and paying the bills, so you learnt to associate money with fear. Now, no matter how well you’re doing financially, you obsessively cut corners and can’t ever spend without feeling a sense of guilt and angst.

How you can change that:

TAKE SMALL STEPS

You can work your way towards feeling OK about spending money, without setting yourself up for an unrealistic behaviour change. Decide on an item you really want and need, and set some money aside specifically for this purchase so that you’re not spending your savings.

REWARD YOURSELF

It’s very important that you treat yourself when you achieve certain financial goals –it could be a massage or dinner and a movie with friends. Make a vision board to inspire you and help you overcome the feelings of guilt and anxiety.


  •  YOU INHERITED FINANCIAL DENIAL

There was no concept of building wealth in your household–being in debt was the norm. So, like your parents, you rely on credit to get by, pay off the minimum each month, and basically just survive in the moment rather than planning for the future.

How you can change that:

SEE A FINANCIAL COUNSELLOR

This type of lifestyle can’t be maintained. It’s like a deck of cards that will fall down eventually. A financial counsellor may be able to negotiate with banks on your behalf to reduce your debt.

SHOP AROUND

Find a credit card with a better offer, such as interest-free periods, lower interest rates and no fees. Switch to a simple card with no bells and whistles that you use only when you need to. And always make repayments that are above the minimum amount. Even if you pay only R20 more, it can reduce the time it takes you to pay off that debt by up to half.

MENTORSHIP MATTERS – ESPECIALLY NOW

It’s no coincidence that 71% of Fortune 500 companies have mentorship programmes. The influence of meaningful mentorship is well known, and it could be particularly powerful during the pandemic.

An article published in the Harvard Business Review notes that mentorship can help boost confidence.The uncertainty brought on in 2020 by the pandemic had many people feeling lost. Mentors can prove a calming presence during a difficult period.

Here are Santam’s three types of mentoring that could be beneficial to your business:

  • PEER-TO-PEER MENTORSHIP

This is the best approach for a new employee joining the organisation, especially in a remote work set-up. It will help with smooth on-boarding and learning the company’s culture.

  • CAREER MENTORS

Career mentors serve as coaches, assisting mentees to reach professional goals. They help provide direction, and assist anyone hoping to move up the ranks or start a business.

  • LIFE MENTORS

A life mentor is great for someone who is searching for synergy between professional development and one’s greater life journey. A life mentor can provide holistic guidance to integrate personal and professional goals. Currently, mentors should focus on the emotional and social support of mentees. Santam understands that the first1000 days of running your own business are the hardest, and therefore having a mentor with you on the journey is a great way to achieve success.

SANTAM IS AN AUTHORISED FINANCIAL SERVICES PROVIDER (LICENCE NUMBER 3416)


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