I’m Sneha, and I’m a chrometophobic, aka a person that has a fear of money.
This used to be me a few years ago. Well, almost. If anybody asked me to describe my relationship with money, I could summarize it in one word. Awkward.
Growing up, I didn’t learn too much about good financial habits. While I certainly observed how my parents managed the household finances, these observations didn’t immediately translate into action when I started working and earning.
The fact that my parents have always been conscious spenders, never overdoing anything, somehow led me to believe that we don’t have enough money. Like them, I too, would never overspend, which is great. But as a side-effect of this, I was always uncertain what to spend on and what not to. What’s the right way to look at spending? And how do I eventually grow my money?
When I was in college, I took up commerce. I did well in every subject. Unfortunately, there was no subject in the syllabus that dealt with building a sustainable relationship with money. By the time I realised that I needed to take charge of my finances, I was filled with fear and apprehension towards money management. After graduating, it took me nearly three years to finally accept that finance is one area of my life that I haven’t given due attention to. And no, the realisation didn’t come to me all of a sudden one fine, sunny morning.
Curiosity leads to learning
I left my hometown and moved to a new city. It was a conscious decision with the idea of becoming more independent. Oddly though, more than my newfound freedom exciting me, I was eager to take on my fear of money. I wanted to challenge myself to overcome the hesitation and awkwardness I felt towards personal finance.
My natural curiosity led me to read what the most successful people have to say about financial independence and money management. So I started reading books and listening to podcasts by people such as Robert Kiyosaki, Jack Ma and Bill Gates.
The knowledge they shared was invaluable, but I don’t think I was ready for it yet. Things like investing and dealing with loans and credit cards was not really what I was seeking. Their words of wisdom, though, did give me some understanding and I began with an approach of my own. Because I didn’t know what the best approach was, I thought of first eliminating the bad approach. I decided to start small.
1. Budgeting, the first stepping stone
The word “budget” tends to be associated with being miserly. Just like my false belief about my parents’ spending patterns led me to think we have less than we actually did, this myth around budgeting can be misleading.
I had never set myself a budget in the past. But slowly, the thought of having a budget began to appeal to me. Miserly or not, it seemed like something an organized person would do. And that’s who I wanted to be. So, without any clear understanding of the benefits a budget would bring, I dove right in.
A fresh excel sheet open in front of me, I started dividing my expenses into some basic categories that I usually spend money on. And for the first time, I tried to put a cap on each of these categories. I must tell you that this was an uncomfortable exercise. I had no idea what the cap should be. What’s the limit that I should put on these categories?
This question led me to write down whatever expenses I was making and keep a weekly track on it. It took me a while, but with time, I got better at facing the discomfort.
I didn’t even realise when this small exercise started to build my confidence, helping me build a strong emergency fund and also preparing me to make better financial choices! The act of setting a budget and spending within its limits helped me eliminate the bad approach of “don’t spend too much”, and shift to a better approach of “spend, but keep a watch”. It helped me define a few more mindful habits which I’ll discuss further. 🙂
2. Savings, a secret that everybody knows, but only few understand
The thought of saving money didn’t come to me naturally. People around me would say that it’s good to save x% of one’s salary, utilizing whatever remains for expenses. This idea, though somewhat new to me, made intuitive sense. I thought of giving it a try. And that’s how my second month of budgeting saw one small change.
I first decided how much I want to save and then divided the remaining amount into the budget. I had no benchmark to go by. Not knowing what my savings rate should be, I decided to experiment with 60% savings and 40% expenses.
Fixing these percentages for myself, made things all the more interesting.
I learnt the art of prioritisation. Saving before spending made me understand that while saving is important, it is not urgent. Which is why many of us tend to postpone doing it. It’s easy to overlook the important things and side-line them simply because they are not urgent. I also reflected on the two words we hear ever so often, “needs” and “wants”.
Once I started looking at things from these points of view, I started to measure my need to spend on something with the following filter:
- Needed AND Important
- Not needed, but Important
Sure, this is not a comprehensive filter, but it helped me eliminate unnecessary expenses; especially when I was too confused about whether I should dig into my savings or not.
Again, this practice helped me eliminate the bad approach of spending on things that are neither important nor urgent. A better approach replaced it, that of prioritizing my savings; savings that were not urgent but important in the long run.
3. Tracking expenses, the most underrated habit
Speaking of spending on unnecessary things, have you ever come across a situation when you were totally excited to get your salary on the first of the month, but the next moment you saw that almost all of it was gone?
I used to experience this a lot. The minute some money got credited to my bank account, I would be thrilled to see the account balance increase. But within no time the balance would fall to what it was before the amount was credited. “How does this happen?”, I would wonder.
Well, guess who had been stealing my money secretly?
Me! My inability to track where I was spending money, clearly pointed to the fact that I was after my own money. I was the thief!
When I decided to take the budget route, tracking each and every expense I made was a minor yet transformative habit. The idea sounded quite funny to me in the beginning. One day you are writing “money spent on rent” and then the next day, “money spent on my favourite pastry.” There’s a wide range of things we spend our money on.
Sometimes painful, but always super-effective
To my surprise, this exercise benefited me a lot. I was tracking my expenses not just after the entire month, but every week. I was able to see which category of expenses I am still under-budget on, and where I am about to enter the red zone (the zone where you are so close to dipping into your savings for the month, that you better be alert and try not to spend anymore in that category).
But more than that, keeping a record of all my expenses enabled me to reflect upon my spending pattern, something that mental accounting can never do. And because of this, I was able to alter my budget and plan for the next month with more realistic figures. I could tweak the numbers as per my current life situation. This made me so much more open to the idea of tracking all my expenses on a regular basis.
With this, I took charge of my account balance. I no longer remained oblivious of it until it went down to zero.
Small Changes, Big Impact
These were some very small changes that I made with my finances. In fact, more than a “change” they have become an integral part of my life, a robust structure that I now follow with ease.
Budgeting happens so smoothly that it has become second nature. And if I don’t log my expenses for the week, or don’t close my budget sheet at the end of the month, I feel a mental nudge telling me that I’ve missed out on something important.
However, towards the end of my short journey I want to emphasize on one of the biggest changes that doing all this has helped me achieve.
4. Goal-setting, for which you don’t have to be a millionaire
I used to find “goal-setting” very overwhelming until I started looking at it from a personal finance context.
Many of my friends, after listening to my “budget superpower” story, told me that I could have just started out with a goal of buying some fancy “thing”, like a car or a watch, and then start saving towards it.
A lot of people start this way, and it isn’t wrong. Somehow though, it didn’t sound practical to me. First of all, I don’t know if I would still want that “thing” after 3 years of saving for it. Secondly, a goal like that doesn’t motivate me on a real time basis to be more financially independent.
A new way to look at goal-setting
What I did like about the idea of “goal setting” is that I can start with short-term tangible goals. I wanted to learn the art of setting and achieving progressive goals for myself.
And this is the journey that I am currently on. I don’t have a goal of saving for a particular thing in x number of years yet. But I am pushing myself by making a list of just three things I want to learn/achieve in terms of personal finance every three months.
One of the goals I wanted to achieve in the months of July-September 2020, was to get a health insurance policy for myself. I wouldn’t have pursued it with so much dedication had I not written it down and pasted the sheet where I would see it when I woke up every morning. Before this, my previous 6 month goal was to build a decent emergency fund for myself.
The tough part isn’t writing these goals down. The tough part is to continuously keep up with them and strive to be better everyday. Some goals may require some sort of discipline to be built, some may require my time and attention, or some might make me realize that my original goal needs to be modified.
The beauty of setting these short-term personal finance goals is that it helps me define the direction in which I would like to move forward. And achieving these little goals helps me progress, one step at a time.
Overcoming the Fear of Money, Embracing Challenges, Building Confidence
I am channelizing my fear of money into these goals. They are helping me overcome my narrow mindedness about money, slowly but surely. I have come to realize that my parents’ way of looking at money wasn’t bad, it was only a bit conservative. All I did was add a little more open mindedness.
I would have always stayed fearful of money matters had I not taken a charge of it. Moving to a new city to figure out how to be independent helped me make friends with Budgeting, Savings and Expense-tracking. These new friends then introduced me to their much wiser friend, Goal-setting.
It’s been almost 15 months since I started working towards building these habits into my life. They have helped me overcome a huge amount of fear towards money. As the basics have started to fall in place, I have naturally developed a curiosity towards the things I couldn’t understand earlier.
Everyone has a different way to look at money based on their experience. My learnings from the experience so far is that just earning more money isn’t a solution to get out of the fear of financial problems.
It doesn’t matter how much you earn. What matters is how you deal with it.
Once you step into understanding money and how you behave with it, you wouldn’t just overtake the fear, you would develop a natural curiosity towards one of the most important aspects of our lives, finance. And an irreplaceable sense of confidence in your abilities. Once you accomplish these little changes, there’s no end to the million opportunities and positive outcomes you could befriend in this journey of personal finance. 🙂
