Show notes
In this episode we discuss how your money mindset is formed whether it's directly or indirectly and how you can change it to improve how you handle money. We even discuss getting on the same as your spouse by evaluating your own mindsets sepereately.
Resources mentioned in this episode:
7 Day Budget Challenge (www.budgetsmadeeasy.com/budget-challenge/)
Millionaire Next Door (https://amzn.to/2B2iE3j)
Mind Over Money (https://amzn.to/2OLxQdl)
Start with Why (https://amzn.to/2B2vAGu)
About Derek:
Derek Hagen Financial Health Advisor and Financial Behavior Coach
Bio: Derek Hagen is the founder of Money Health Solutions, a financial therapy and consulting firm that helps clients develop a healthy relationship with money and align their money and their values.
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Money Health Solutions (Advice): www.MoneyHealthSolutions.com
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Facebook: www.Facebook.com/MoneyHealthSolutionsLLC
Full Transcript:
Before we jump right in, can you just kinda tell us a little bit about yourself?
Okay. Yeah. So Derek Hagan, I live in suburban Minneapolis and I work, as you mentioned, many health solutions working virtually with people around the country and in Canada actually to help them achieve a stronger relationship with money. I come from a world of high minimum investment advisors and I never really felt comfortable. They're really, because I come from premium, modest, a background, borderline poverty, poverty, and it w it was a different aspect trying to help people whose biggest challenge in life is to make sure their grandparents get the most money from their state. And I grew up in a world where my friends and my family members were now figuring out how to get their money to their grandkids, how to get their money to their landlord by the end of the month. So I wanted to try and figure out a solution where I can help the other 99% I know you know people who don't pay above $5 million to start investing. And so that's kind of where the Genesis of money house solutions came from. Bringing advice to people who are struggling with how to think about money and their relationship with money. So with that, I really love what you're doing with your podcast too because I think we're pretty much aligned in there.
Yeah, I, I was pretty excited when I was reading your bio and I was like, yes, I've got to get you on the podcast because this is exactly what, um, I'm trying to do and trying to get people to think about is, you know, their mindsets and all that. And you know, we had it very similar upbringing. You know, my family is not, uh, was not well off, is still isn't, you know, we're working class and so, um, I really loved that. That's kind of what moved you towards your mission. So kind of can you kind of lay out for me how you help your clients, um, kind of where do you start with their mindset and getting them to kind of make those changes so that they can make better decisions about their money and create better habits with their money?
Yeah, that's a great question. And then I think, and you might know this as well, it kind of starts with understanding that you have a mindset about money or money mindset. Most people don't even, they don't know that they think money is this thing and you've probably never talked about it because we're not allowed to talk about it. And in the United States, and if you do, there's a lot of funny emotions that get sprung up when people start talking about money. So just starting to get people to understand you have a money mindset. So kinda, I run my life around this 80 20 rule. So if we can get awareness, if we can get people more aware that you have a relationship with money or that you have a money mindset that's going to get you above and beyond what most people, most of your friends are doing, because you're now starting to tackle how you think about money.
And that's, it's not easy, but it's, it's step one in it. It gives you most of the way there. So I kind of start with, let's look at our past. You know, what did you learn from your mom about money? What did you learn from your dad about money? What did you learn from it? Your, the interaction of how your family talked about money. And usually when I ask people that and your listeners might be thinking as well, I didn't learn any lessons. You know, cause there's a difference between direct lessons. Here's how check Texas work, here's how your checkbook works, here's how your paycheck's gonna work. Like there's so few direct lessons. So what we do is we get these lessons indirectly. I watched my mom and dad fight about this, therefore I learned this lesson. You know, I watched whatever it is I watched the lights get shut off. And so I learned about this and I watched my friend buy these fancy clothes. So I learned this. So we have an enormous amount of surveys about money that, uh, that are, that actually contribute to what we learn about money, even though most people don't think they learned anything. So it's, it's about starting to unpack some of these memories that we have about money. [inaudible]
and how do you think just in general that there that all of us really all of our mindsets about money, whether we realize it or not, like effects how we spend
our money? Yeah, great question. There's an idea called money script. In a script you can think about it either as like a play or a movie where it's dialogue and you have to read from the script or if you're more tech savvy. A script is kind of like a automated set of rules that a computer follows, but in both cases the script just runs automatically and you don't really have any say so. So money script or these little rules that we've created in the deep, in our minds, we don't know that we're following them without some awareness or some exercises to figure them out. They're mostly built throughout childhood from these lessons, these indirect and direct lessons that we learned. And they're also built from something called financial flashpoints, which is of like the money version of trauma. And it doesn't even need to be a big event that one time where you got embarrassed or picked on at school for wearing the wrong clothes or that one time you saw your mom slapped your brother for talking about money.
These are all true stories that I've seen. These are highly emotional events that happen to us and they all feed these money scripts. And so the money script could be anything and you've heard them, you've heard it. We don't talk about money in this family. You bird, you shouldn't buy anything unless it's the best or your self worth equals your net worth. And there could be competing ones, you know, more money would make my life better is an exact opposite of rich. People must have gotten that way by taking advantage of people. So whatever it is, whatever the rule is for you, they generally fall into four categories. One is the category has the label of money avoidance. So these are kind of people who [inaudible] to have a negative view of what wealth does to people. Money corrupts or rich people are greedy, or, uh, there's virtue in living with less things like that. And a second one would be, uh, money worship. So this is the idea that more money is going to make me happy. I had a little bit more money, my life would be better. It's easy to have these scripts, but when you look at the research, people with 50,000, think 100,000 income would make them happy. People at a hundred, it could be two 50 people at two 50 think it's going to be a million. So it's just this treadmill that people are after trying to figure out how money's gonna make them happy.
[inaudible] it's never enough.
It's like, it's like the money's dangling in front of you and you're chasing it. You're never going to catch it.
Right, right.
And then there's that, Oh, sorry. I'll just finish off that last two of those money status, which is chasing money for status purposes. So were money, worship was chasing money for your own internal reasons. Money status is equating money with success. And then the fourth one is money vigilance. This is probably the better quote unquote of the four because this is, you should always save for a rainy day. You shouldn't talk about money, but taken to an extreme, you turn into Ebeneezer Scrooge where you have an emotional attachment to money and saving and you've not able to use it to, you know, enrich your life. [inaudible]
and that just reminded me, um, I was watching some news program the other day and it was a round table discussion and they brought up, uh, what success means to them. And so everybody was telling, uh, you know, what being successful means. And so that really plays into your mindset as well. And one of them, uh, mentioned that they thought it was how much money you make, that is what being successful is. And so we each kind of have our own idea and perception of even just what successful is. Um, you know, and just like you said, some of it is um, status and how much you make and then you know, others it's, you know, giving to others and you know, maybe the type of job you have, not necessarily how much money you make and things like that. So really, I mean even just stuff like that, when it comes to success and money, it all goes back to that those money scripts like you talked about,
absolutely 100%. And that's part of what people like you and I are trying to contribute to the world is the idea that you have your own values and you have your own definition of success. So please spend some time and figure out what that means to you because if you don't, it's way too easy to be swayed. Now, this used to be just your neighborhood. This is where the Joneses came from. My neighbor bought a new car. I think I need a new car now with social media and everybody's just broadcasting the best parts of their life. Way too easy to think that without a solid foundation of our own values, we let the social media tell us your friends or followers of people that we're looking at. We let them dictate how we should define success. And it does it need not be that way. If you just kind of focus through the lens of what's important to you, it becomes a lot easier to kind of ignore that. You can be happy for people. Look, I'm happy that you bought that new car. I don't value cards, for example. Right. Instead of feeling that guilt or that shame that I don't have that car, it makes it easier to kind of flow through life and be happy for people, for having their values, but recognize what yours are.
Absolutely. Um, and so how do people go about once they recognize, okay, this is what I'm thinking and it may or may not be accurate, um, but this is how I view money. How do they go about kind of changing that mindset so that they can, you know, plan for the future and make better habits?
That's a, that's a great question. So most of the time just having this awareness as part of that 80 20 rule, just having awareness of where these beliefs and behaviors came from. Even if you're not fully accurate, you think this might be where it came from. That's often enough to start to challenge your beliefs cause most people don't know why do I go shopping when I'm stressed out digging and find out that, Oh well let's, because I was deprived. For example, I'm, this was never a one on one relationship, but for somebody who stress shops, it could be that maybe they felt deprived when they were a child or that could be a thousand other rules, but whatever that is, once that switch is in your brain, it becomes a little bit easier to say, Oh, that's why I do that. I guess I don't need to or let me figure out a different way that I can satisfy that my needs when I'm feeling this way are like that awareness isn't enough, but usually it is.
Then you can start to challenge those beliefs and to challenge those beliefs. There's a couple of ways to do it. My favorite is to try to think of a counter example. So whatever belief that you have that's limiting. Can you think of a counter example? So for example, if you remember math class and they start to do proofs and things like this, you can't prove every iteration of an equation. But if you can find one instance where it doesn't work, now you've just proven that rule. It only takes one. So it's kind of the same thing with our beliefs. If I think rich people are greedy, for example, which is kind of a common one, can I think of an example where that's not the case? And the closer to your inner circle, the better. Maybe you've got the rich uncle or maybe you've got your boss or something. Somebody who is, yeah, they're actually a good person and I think they have money. So you can start to [inaudible] start to peel back the layers of that onion of maybe, maybe I've been wrong, maybe I've only been seeing part of that equation. And so you can zoom out and see a bigger picture. It challenges your beliefs. And when you challenged those beliefs, it now opens you up to create your craft new beliefs for yourself.
Oh, that is really good example. That just reminded me of the book, the millionaire next door. I'm sure you've heard of it. And it's, you know, people have this idea that millionaires make $1 million a year or they live like, you know, the celebrities that we see all over TV, but in reality, they're not like that at all. Like they make average income, you know, they don't buy new cars. They were like $20 jeans. Uh, you know, they just spend their money wisely and invest their money. So that really goes back to that belief of, you know, well, I'm never going to be a millionaire, so why even bother like investing or anything like that. But in reality you can be. And so that's kind of one of those money mindsets that you can start to shift. And it's, it's a pretty good book. I mean, it has all the statistics and all that stuff about, they studied a bunch of millionaires. Um, and I think there's some other books similar to that, but that's kind of the most part.
Yeah. And that's when I, I've recommended that one a lot to my clients. It's a, it's fascinating because again, it can become common knowledge for people like you and me in the industry to, to understand this, but sometimes it's easy to forget that the masses, normal people walking around who don't talk about money, they don't know that. So it's like if you, if I give you $1 million and you spend a dollar, you don't have $1 million anymore, so you can't be a millionaire by spending all your money.
Oh, that's good. I never thought of that. We have $1 million. You spend a dollar, you're not wondering where I'm going to have to use that one. That's really good.
So it's a really cheap example of what it means to not spend.
Yes. That's a really good example. So, and I get this question a lot. And so, um, you know, on those podcasts I've talked about, um, kinda help for married couples and getting on the same page and, um, getting like working on your mindsets individually so that you can work in together because obviously you each have your own ways of thinking about money and, but you need to come together so that you can reach your common goal. So do you have any tips and advice for couples that are just really struggling to get on the same page financially?
Yeah, so I'll try to give you the biggest bang for the buck, um, because this is the kind of topic that can take weeks to really, really grasp. But, um, the two biggest pieces that will get you the most way there is first understand that we've all got these basic needs and all of our behaviors are just desperate attempts to try and meet these needs. So you've got, and some of those are opposites too, right? We all have a need for autonomy. We need to make our own decisions. We also have a need for connection. So those are kind of different. So the funny example is, do you know anybody who's kind of felt lonely? So they text people on their phone, Hey, let's go hang out. And then you hang up and you think, Oh man, I really want to be alone.
Yeah. Yeah.
Because those are two competing needs that you have. So we've all got needs and values and the way that we approach shows isn't always productive. So here's a simple solution. If your spouse, and we'll keep this about money, if your spouse comes in home and says, okay, Hey, we need to just got back from the dentist for example, and junior needs braces. Oh, we can't afford bracelets, easy boat. There's a fight. Are you open up the American express bill all of a sudden? Oh, there's like [inaudible] well, yeah. What is more likely? Is it more likely that your spouse is trying to attack you? Or is it more likely that there's a need that's not being met? So if you just take a step back and ask yourself that question, [inaudible] almost almost never the case that they're trying to attack you. There's always some reason that there acting the way that they do it.
Same with you. Everybody has these strategies that we use to meet our needs and our values. So take a step back. Are you trying to harm me or is there something deeper? Now let's talk about what steeper, and this is not making it sound super simple, okay? Because you're going to be emotionally flooded as well. As soon as people, as soon as we hear something that sounds like criticism, it's very common for us to go into defense mode and defense mode sometimes mean a, a counter attack and that's what, and then boom, now you're in a fight. So it does take some time to actually take a step back, cool I and say, okay, well what's happening here? Tell me more about that. Right? Let's get a conversation going about what actually is on your mind. Because when you said that I spent too much money, that was an attack that I don't need to respond to because there's something below the surface that we need to figure out what it is. So that's tip number one is just trying to figure out or it's trying to take a step back and try to get some space between stimulus and your response. Because if you re if you respond too quickly, it's not likely to go super well.
Yeah, yeah, that's important. Especially, I mean not even just for money, but yeah, take a step back and cool off.
Yup. That's a, that's a huge, that's going to be the biggest bang for the buck. And then the second tip in terms of you know, goals and, and what do you want it to life as a family, as a couple and as individuals. This is a neat little exercise. So write down, maybe each of you would write down five or 10 financial goals that you want. So things that you want to spend your money on in the, you can do short term, medium, or long term. But let's just keep it general. Let's write down five financial goals. Each of you. And when you come together and you talk about what were your five, what were my five, maybe there'll be some commonalities and those will for sure going into the couples goal list and then you can start to figure out as you're talking, maybe there are some goals that you didn't think about when you were writing it down.
Those can go on the couples of goal list and then ones that personally has this person been, doesn't have, and vice versa. You can start to think about is there ways that you can accomplish that goal and I can accomplish my goals. Or maybe there's some, you know, some trade offs and we need to make to make something happened. Can we tweak these goals? But starting off with individual goals that you want to do, each of you want to do, and then coming together and having a civil conversation about what does that mean for the, for the partnership. And I'm further, we would ask people, when you see that list of goals, this is gotta be at no shame, no blame conversation. It's too easy to look at that and say, we're not. No, we're not going to pay for all four years of college. You are young that's going into that attack mode again. So let's start and say, okay, well tell me why that's important to you. And you can start to peel back and get to the core of, Oh actually I thought it would be nice to pay for all of doing your college, but I can see your point now that maybe we can only pay for two years or something like that. So avoiding the temptation to judge is, is really hard, but it's going to be very productive if you can get yourself to do that.
Absolutely. Um, and the last general question I have, I always ask everybody what their favorite nonfiction book is because reading is so important. Um, even for your money and just your personal wellbeing and everything. So what is a nonfiction book that you
would recommend? And I have to pick one.
Well, it give me more than one. It doesn't even have to be money-related. It can just be any nonfiction book.
Great. So, um, well so millionaire next door, let's just throw that one on the table already. And then there's a book called mind over money by Brad Klontz and 10 clients, which really tackles the psychology of money. So I'd recommend that one for sure. And then in terms of a non-money related book, start with why by assignments. Sinek is absolutely amazing cause that gets you thinking about how we've all got a reason that we do everything and that often goes unexplored too. So start with why Simon Sinek, mind over money. Brad intent clients.
Awesome. I'll have to check those out. I'll add them to the list and then I always link to them in the show notes as well. Oh, so do you have any last words?
It's done.
Any last pieces of advice?
Uh, last pieces of advice is going to sound like a broken record. But take a step back when you're talking about money and try to call yourself down before responding. Put a little space in between your response and the stimulus and ask yourself why. Even if you have to ask yourself why a couple of times that'll make your money conversations start to go in the right direction.
Absolutely. I mean, and that even works not even um, you know, with couples but also with yourself. You know, if you really wanting like this designer purse, you know, don't buy it right away. Just kind of step back, think about it for a little bit, think about why you want it and then I'll really help you make the decision whether or not you can't afford it or if you really should buy it or something like that. Is that kind of what you're
yeah, that's for sure. And if you, if you go through the exercise to figure out why money is important to you, what are your values, your core personal values, then you can view all your purchases through that. And then that space between stimulus and responses to ask yourself, is this something I value? How will I feel tomorrow if I buy this? Do I even have room for it? So then, then if it's Amazon, if you're doing stuff online, for example, throw it in the cart or throw it in the list. [inaudible] come back to it in three days and see if you still want it because that'll, it gets rid of that. I want it now. Yeah. We all get. And then when you come back and you say, I'm never gonna read that book. Delete.
Yeah, exactly. I do that from time to time. Or then if I just like, I'm like, Oh, I need to buy this. And so I jump on and I order it and then two days later a package shows up and I'm like, I don't even like, what did I order? I don't even remember. Wait, wait, what's coming today? What is this?
Oh yeah, I forgot about that. It seemed like very important at the time.
Yeah, exactly. Um, and where can people find you? So I know you have, um, a lot of resources on your blog and, um, so you want to give people your website and social media where they can find you.
Yeah. The best places to find me are. So I write about the psychology of [email protected] and there are use kind of personal stories and I'm just kind of quick sketches to try to get past to the complexity and really get to the heart of, of the matter and try to help people conquer their relationship with money. So that's the blog and then I offer advice over@moneyhealthsolutionsdotcomsomanyhealthdotblogistheblogwhenelsesolutions.com is the advice side of the business and you can see links to the different social media outlets on there, but those are the two main places people can find me.
Awesome. And I will link to those in the show notes as well of course. And be sure to go check out his amazing resources. I was checking him out this morning. He's got a lot of good free resources for you as well. So thanks so much Derek, for coming and talking with us today.
Special Guest: Derek Hagan.