If you cannot control your emotions, you cannot control your money.
-Warren Buffett
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Category: Personal Finances
Wealth and Emotions
Out of curiosity I often type the titles of my posts into Google search just to see what pops up. Type “wealth and emotions,” into Google Search or click the link for a glimpse of the wide range of posts published on this topic.
Whether you like it or not your emotions – and how well you understand and account for them – have a huge impact on your capacity to build wealth.
Investing Your Emotions
Most great investors would tell you when they keep their emotions in check they almost never lose and almost always lose when they allow their emotions to rule the day.
It gets even better – all of us deal with emotions differently and are more prone to certain types of emotions than others. For some of us anger is the dominant emotion while for others it is fear, shame, or even happiness and joy. How we interact with these emotions – whether from a place of stress or a place of stability – can either hinder us or help us in our efforts to build wealth.
Consider the recession induced by the sub prime mortgage crisis of 2008. Or the the dot com bubble bursting in 2000-2001. The markets declined rapidly and left many investors watching their portfolios slide down the seemingly endless slope. Individual investors as well as seasoned fund managers panicked and let fear spur them on to sell, sell, sell!
At exactly the wrong time.
When the market is going down you want to buy, not sell. Selling on the way down is how you lose wealth.
The fear incited by watching stock indexes plummet causes normally rational people to forget everything they know about how the market works.
Seasoned investors and most savvy individual investors understand the market will eventually start climbing again and in relatively short time surpass market levels prior to the crash or recession. Over the history of the stock market, the market has always grown.
The key is to diversify your investments, stick to a process for selecting, buying and selling, and sit tight during the storm, possible looking for opportunities to buy more shares of solid mutual funds or index funds at a discount price. Remember when the market is down, shares are generally cheaper, and thus you can purchase more shares for your investment dollars and benefit from the returns when the market swings back up.
If you invested in one or two risky single stocks and the companies are about to implode, you probably want to sell as quickly as possible and contemplate the lessons to be learned while licking your wounds. If this is you, I almost guarantee you bought those stock based on emotions and not on solid research with evidence of long term growth potential.
Emotional Wealth
I tend to be methodical and rational in my investment choices and leave things pretty much alone. My advantage here is that I am a highly rational person who by nature does not tend to make big decisions based on emotions. I tend to do the opposite in an emotional state; I simply make no decisions at all. This is not necessarily a good thing.
When I am in a place of stress, I tend to withdraw from relationships and hold on tightly to liquid funds and possessions. I make choices based on a fear of not having enough or being seen as cheap by my friends when I ask for a separate check. If I don’t think I have enough to split the bill evenly, I will avoid the outing altogether.
The crazy thing is that this fear is often irrational and dare I say selfish. Oh, and then pride steps in and refuses to accept charity when all my friends want is to be gracious and generous out of the love in their hearts.
Earlier this year I started new daily practice of short meditation followed by a brief daily journal right after my daily scripture reading. The meditation allows me to practice awareness and clear my thoughts, and the morning journal exercise gives me an opportunity to set the course of my day.
In my journal I include the scripture I have read, three things I am grateful for, location, weather and emotional state, concluding with random thoughts such as what I need to do that day, things that I am wrestling with, or that kept creeping into my meditation.
Starting the day being grateful and taking time to take stock of where I am emotionally has had a huge impact on my ability to stay balanced.
No matter what we do, we all fall prey to our emotions and all become overwhelmed at times. The idea is not to avoid our emotions, but to learn how to embrace them well and give them space to take their course without bankrupting us financially or emotionally.
Hey, ever heard the phrase “emotionally bankrupt?” Google it.
Wealth & Personality
When I first thought of this particular blog post I had no idea what kind of image I would find to accompany it. When I entered in a few key search words in Adobe Spark, numerous images of colored pencils came up.
Before I get into the meat of today’s post, I want to share something with you. As a child, and even now and again in my adult years, I loved drawing. Especially with pencil. It just had a texture and feel that I loved. Then I took an art class my senior year in high school and fell in love with colored pencils. I created my personal masterpiece (okay, I consider it the best art piece I have ever done) in that class with colored pencil.
So searching for an appropriate image, these colored pencil images really stuck out because regardless of which colors I might like the best, I needed all of them, and sometimes even found new favorites. The real fun started when I realized I could use several colors and blend them in sequence to match the colors I saw in front of me.
The picture you see with this post was perfect…not only did it show different colored pencils which could represent different personality types, it also featured a flower tucked between two of the pencils that I felt represented those personalities that have to be just a little different, who embrace life full on and whom we love to have in our lives (even if they aren’t the best with finances). And thus we blend.
You may have guessed what this post is about if you’ve been following me for any length of time.
It’s about how our unique personalities influence our interaction with finances and wealth.
Most of us realized at an early age that some people were better at math than others, including ourselves (I admit this even with a BS in Mathematics). At some point we also realized that some people were better with finances than others. And they weren’t always the Math nerds (or the business majors).
So this post is about how personality drives our interaction with money and wealth more than intellect ever will.
We are all very different people, with different personalities, different personal tastes, and certainly different backgrounds. What makes us think, then, that we will all encounter and deal with money the same way?
In the American culture we are brought up and educated that we are all individuals who can be whatever we want to be. This is a lie. Not that we cannot achieve what we seek to achieve, but not all of us are cut out to be astronauts, or FBI agents, or accountants, or computer programmers, or even entrepreneurs!
I would like to believe I am an entrepreneur, but I have had to deal with the fact that while I have entrepreneurial leanings, I am not an entrepreneur in the true sense. I know because I am close friends with a few of them, and we are so different in many ways.
What I have figured out is that I complement true entrepreneurs because I easily grasp where they are going and can build the initial infrastructure to support them, although I would likely have analyzed the idea for years without ever acting on it if left to my own device.
But on to personalities – there are so many beautiful and crucial differences between us as humans. Some of us are very serious about finances and spending categories and sticking to a budget, while others see finances merely as means to an end, not worried about going broke if we have experienced a memory of a lifetime.
I for one have struggled my entire life with this and am still learning to let go and simply accept when friends suggest last minute once in a lifetime adventures. I have turned down numerous opportunities that many of my friends would have given me the money to experience.
My personality type tends toward self-sacrifice before asking friends, even to the point of extremes (thankfully, I am gradually learning how to accept the generosity of friends – not an easy task for my personality type).
I ought to at least talk about my personality type. I am an INTJ on the Myers-Briggs/Keirsey Temperament Sorter and a 5 with a 4 wing on the Enneagram. On the DISC profile I am a C with a strong S and dominantly C under stress. In general terms I am an extremely introverted, very rational, process oriented individual who is also creative and fairly in tune with his emotions and understands how personalities interact on a primarily intellectual level – the emotional content is mostly understood through observation, study and knowledge of types. (The links here are only suggestions and are not affiliate links – there are many places you can take the tests for free for initial findings – I do recommend paying for at least one of them as the paid results are often more enlightening).
So I happen to be decent at math and really good at a personal finances and how people interact with money. But I desperately need friends to drag me out to experience things that I would never do on my own. So a balance is always needed in dealing with money – save for the future without missing the opportunities to enjoy the present.
As this topic is quickly outpacing the length of most of my posts, I will draw things to a close here with a final thought, and an invitation for comments if you would like more on this topic. I am only at the beginning of my understanding of how each personality type interacts with money and finances, but am willing to educate myself as needed to answer the call if there is further interest.
Final thought for this post:
You are who you are. If you are terrible with money, you need someone in your life who is good with money. If you are great with money, and maybe a little like me, you need people in your life who know how to live and experience life.
Sometimes they pick up the tab. Sometimes you should. Just don’t die rolling pennies alone.
Wealth and Knowledge
Many of you might believe wealthy people all have high IQs, or all people with high IQs are really wealthy (or ought to be). What might surprise you is how many regular people just like you are are wealthy.
IQ is not a determining factor in one’s ability to acquire wealth.
In fact, acquiring and maintaining wealth has very little to do with head knowledge, and much more to do with behavior. Disciplined behavior trumps a know-it-all every time.
Smart people regularly do stupid things with money and wealth, often losing everything. Why? Because they fool themselves into believing they are smarter than the market and everyone else, and there is no way they can lose. More often there is no way they will win.
Yes, there are some rare individuals who are smart and disciplined and hit the jackpot, but they are extremely rare, and would be the first to admit they are guessing 80% of the time and working overtime to reduce the impact of the inevitable downside.
Knowledge
The most brilliant person in the world can live their entire life as a pauper. Book smarts and head smarts are not effective for obtaining wealth on their own without action and calculated risk.
Knowledge can puff people up in their own minds and make them overconfident, taking action without calculating the risk, or it can cause analysis paralysis, calculating risk to the nth degree and taking action too late or never at all.
Knowledge is good, and it helps to be smart, but you don’t have to be a genius to become wealthy.
Behavior
Dave Ramsey, creator of Financial Peace University and best-selling author of The Total Money Makeover, talks about personal finances as being 20% head knowledge and 80% behavior. Even if you aren’t a math major, you’d probably agree you could do more with $80 than with $20. Four times as much. Sometimes I just like to show of my math skills.
If there is any truth to this percentage split, then why on earth would we put so much emphasis on what we think we know instead of what we do?
Can anyone become wealthy (legally, you criminals) without saving at least some of their hard earned income?
Oh, of course, win the lottery. Sure, they get a huge amount of money all at once, but it rarely makes them wealthy. A quick online search turned up several articles citing the National Endowment for Financial Education as reporting 70% of windfall recipients end up broke.
70% is a lot closer to 80% than 20% if you catch my drift. If you read the myriad articles about why lottery winners go broke, it’s pretty much all about their behavior.
Consider the following scenarios:
- Bob is a regular guy working hard to earn a decent income. Bob decides at age 20 to save $100 a month for retirement and continues to do so until he reaches age 66, yielding an average 10% annual rate of return.
- Sam is also a regular guy working hard to earn a decent income. Sam, however, has a plan. At 20 years of age Sam starts spending $25 a week or $100 per month on lottery tickets, dreaming of that day when he’ll win the jackpot. Of course, Sam wins sometimes, but breaking even is a long shot at best. The odds are actually stacked against him ever breaking even. Yet he continues to play the lottery until he reaches age 66, and let’s say he hits a long shot and breaks even.
Can you guess which one retires wealthy? Yep, it’s Bob. Every time.
Bob invests a total $56,400 over 47 years and ends up with $1,151,000 in his retirement account at age 66.
If Sam breaks even, he ends up with the $56,400 he spent on lottery tickets and won back.
I like Bob’s way better, even if Sam hits the Jackpot. Bob has built wealth through behavior and discipline and is not likely to lose his wealth. Sam, however, has not developed the discipline or behaviors to use money wisely, and odds are he will lose everything long before he is ready to shuffle off this mortal coil.
Conclusion
Let the smart people take all the chances and risk losing everything while you stay disciplined and retire wealthy.
Wealth and Little
“The greatest wealth is to be content with little.”
– Plato
Wealth and Money
Wealth and Money
When most of us think of someone wealthy we think of Hollywood starts or billionaire CEOs. The reason we think of them first is the illusion of how much money we think we know they have.
I say illusion because many of those we consider wealthy, are wealthy on paper only, meaning that most of their perceived wealth is tied up in real estate, stock valuations, or future royalties.
Some of those we consider wealthy actually ARE financially wealthy, like Bill Gates and Warren Buffet, but many of them are not. Think about how many pro athletes, music stars and movie stars end their careers and lives nearly broke.
So what is the relationship between wealth and money?
Money
Money is currency. Money is whatever we are willing to accept in return for supplying goods and services. Money can be paper or coin as we know it in the modern world, or Money can be livestock, potable water, real estate, stocks in a company, or a service in kind of some sort.
Money changes forms as often as it changes hands.
Acquiring money is not the same as acquiring wealth. Wealth is a much broader and more complex concept than money. Wealth far surpasses money as a concept.
Wealth
When we finally grasp what wealth really is, the entire universe opens up to us. When we separate money from wealth, we open ourselves to areas of wealth we might never have contemplated:
- Wealth of knowledge
- Wealth of relationships
- Wealth of integrity
- Wealth of morality
- Wealth of wisdom
- Wealth of experience
- Wealth of inspiration
We can find wealth in whatever we do and wherever we are. It is up to us to perceive it as wealth.
If we are merely looking for money, a paycheck, then true wealth will always elude us.
True wealth comes when we focus on what we can contribute.
Wealth and Work: Rather be doing something Else?
Rather be doing something else?
Let’s face it – we all encounter this at some point in our work, no matter how fulfilling we may find it at times. When our minds wander to other things we’d rather be doing, it may be due to burnout as I talked about in this previous post.
But other times it may be due to unresolved desire to pursue something else.
I struggled with this for years, working a day job in government finance and accounting, while my creative juices were getting little attention. I would find ways to accommodate my creativity in designing reports, but that wasn’t enough.
I have always been fascinated by music, and played piano since 4th grade and french horn since 5th grade, adding guitar in my teens and buying my first of several electronic keyboards. As new technology emerged around digital recording, I resolved to teach myself how to record, mix and master music on my PC (not a cheap hobby through the 90’s and into the new millenium!).
Later on, I also started a small record label and have released a total 7 records, the most recent one on vinyl – who knew we’d come full circle back to vinyl?
But, I digress – we are talking about wealth and work and the occasional pull we feel to do something else.
This is where hobbies, or avocations, come in (from the Latin avocare – “call away”). When we get the feeling we’d rather be doing something else, we are being “called away” from our vocation or work to think about something else. When this happens it is may be due to some aspect of ourselves that is not receiving the attention it deserves.
Instead of fighting this urge to do something else, it is important to pause for a moment and observe what it is we would rather be doing. What is the call or pull that you are sensing? This is a critical step – it may identify a new and distinct calling on your life, or it might identify a part of you that you have been neglecting.
Once we identify what is pulling at or calling us, it is important to schedule time to give it our full attention, even if it is only for half an hour. It is important to actually schedule it, block out the time for it, and commit to doing it as scheduled.
The importance of scheduling is, once scheduled, the distraction of rather doing something else is diminished or even disappears. This won’t work long term if you neglect to address it as scheduled.
The worst thing you can do is attempt to ignore and push through. You only end up wasting energy fighting yourself, and both you and your work suffer.
The Acquisition of Riches
“The acquisition of riches has been for many men, not an end, but a change, of troubles.”
-Epicurus
Wealth and Work
Vocation: A Calling
Our work, our vocation (from the Latin vocare – “to call”), is meant to be a source of wealth for us. While financial compensation is one way for our vocation to be a source of wealth, it is not the sole source, and our pursuit of financial gain over and above every other aspect of our work may make us rich, but seldom wealthy.
The pursuit of financial gain at the expense of one’s calling may make one rich, but never wealthy. [Tweet]
Finding meaning in our work and ways to positively impact the lives of others through our work is the true measure of wealth in our work.
When we continue in a job we hate, regardless of the money it pays, there is little wealth in or produced by that job or ourselves. We go through the motions, miserable and creating misery in everyone around us. This is the opposite of wealth – it is poverty.
When we do not give our all to the work set before us we are stealing from those we are meant to be helping, and robbing ourselves of the wealth gained by a job well done.
There are several reasons why we might find ourselves in such a state of vocational poverty:
- We are in it solely for the money
- We are burned out
- We would rather be doing something else
- We adopted someone else’s calling as our own
- We are too far in to get out now (sunk cost bias)
The good news is we can counteract each of these with discipline and some help from friends, counselors, or coaches.
We’ll examine each of these in greater detail in upcoming posts, exposing the poverty in each, and in doing so discover the way to wealth.
Wealth. It’s more about gratitude than greed.
Wealth isn’t so much what we have or how much, but about our acceptance of what we have, how we use it, whether we give it freely or hoard it, and whether we are a like a stagnant pond or a flowing river, where wealth flows in, through and out again.
Wealth is what we leave behind, not what we take with us, although realizing true wealth in this life assures us of wealth to come in the next, whatever you might believe comes next.
My word for 2016 was wealth. I bought Benjamin Graham’s book, The Intelligent Investor, planning to learn about building financial wealth. I still haven’t read it. My experience with understanding wealth during 2016 turned out to be less about money (and the greed often associated with it) and more about relationships and accepting the generosity of others.
Relationship
I started spending every Sunday with my godson’s family, sharing meals, spending time in conversations, helping out with projects in the yard, sharing the couch with one of two full sized german shepherds, basically becoming part of the family. This made me more wealthy than any amount of money I could have made. It’s also cool to pull up outside the house and hear two little rascals shouting, “Dave Tornstrom’s here! Dave Tornstrom’s here!” (Yes they use my full name. Every time. I think it’s hysterical since most of my friends from college on only knew me by my nickname, Klondike.)
I also reconnected with old friends when they invited me to their son’s 1st birthday party. I have been back many weekends for dinner, campfires, and helping out with the odd errand or two. If I had not accepted the generosity of their hospitality I would never have experienced the joy of hearing a now two year old yell, “Klondike!,” whenever I show up.
A good deal of time last summer was spent outside with friends mountain biking, boating, and camping, reconnecting with my love of the outdoors. This was magnified in my mind later in the fall, when I was feeling somewhat more melancholy than usual, and I realized this was the first summer in about 4-5 years that my parents and I had not spent a week in the Berkshires hiking and soaking in the quiet of a remote cottage.
The Generosity of Others
It may seem strange, but I was also learning to accept the generosity of others and just enjoy it. I am one of those types who, when given something, feels compelled to pay it back, or return the favor. Thus whenever someone was generous with me I felt indebted to them. I can’t stand being indebted to anyone or anything. So most of the time I learned to simply refuse what was offered, or awkwardly attempt to return the favor immediately. This is not wealth.
Part of being truly wealthy is understanding how to accept the generosity of others well. Generosity well received is a generous response to the giver. In this way we learn the value of being generous to others. True generosity is giving with no expectation of anything in return, except perhaps gratitude. Gratitude like love, does no harm. But even when gratitude is withheld, generosity is not nullified. In fact generosity in the face of ingratitude is the most generous, as it is easy to give when a thank-you is expected, but much harder when it is not.
I guess you could say by learning to accept generosity, what I was really learning was the practice of gratitude. I have adopted the practice used by many of listing at least 3 things I am grateful for everyday as part of my morning journal. It is a simple but profound exercise.
Conclusion
What I discovered is true wealth is much more about fostering healthy relationships, engaging in community with neighbors, being generous, and expressing gratitude with every breath we breathe, than it is about money or possessions.
Wealth is yours to decide and yours to define, but yours only for this lifetime.