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How to Change Your Relationship with Money in 6 Steps



The widespread abolition of human slavery in the 19th century was a giant leap forward for mankind. The 20th century, however, saw the rise of a new form of slavery. Instead of chains, the modern-day shackle is not physical. It is our relationship with a monster that goes by many names – lucre, bread, dough, gravy, greenback, loot, pesos, and wad. This beast has caused more struggles, battles, clashes, wars, divorces, fratricides, parricides and suicides than male testosterone, alcohol, drugs, and religion combined. Money is the modern god (or devil) to whom we serve. It is the religion of the 21st century and is the root of income inequality and financial exploitation.


Like all religions, it feeds off ignorance and illiteracy. And its priests never get their fill. There is never enough wealth. It always wants more at whatever cost. We have become greed`s whores.


Most people are in an abusive relationship with money. It controls them, makes them miserable and is a source of anxiety. Money is the master that rules their emotions and is the subject of irrational and stupid decisions. The first step towards financial independence and freedom is to change your relationship with money.


Follow these SIX steps to change your relationship with money.

Step 1: Define Your Relationship with Money

The biggest issue here is defining whether you control your money or whether money controls you. Is money your master or is money your servant? Does it control your moods? Do you use money as a measure of your self-worth? Do you define success in monetary terms? Do you think that rich people are better than poor people? What is your happiest money memory?

Step 2: Seek to Understand How Money Affects Your Moods


The human brain does not react well to stress and money is the source of inordinate stress. Neuroscientists have discovered how chronic stress and cortisol can damage the brain and hamper the decision-making process. This could explain a curious phenomenon that often presents itself in our relationship with money. It has been discovered that the fear of losing $100 is far greater than the joy of winning $100. This curious assymetrical relationship frequently manifests itself in stock market investing.

People tend to sell their winners and hold onto their losers. They buy a stock, it goes up 10 percent, they think they are geniuses and take profits. When the stock goes down 10 percent, they hold onto it and pray that it recovers. It then goes down another 10 percent and they start going to mass, lighting candles and sprinkling holy water on their computers. After another 10 percent decline, they hire a priest to do an exorcism but refuse to sell. The stress associated with market loss causes short circuits in parts of the brain dedicated to making rational decisions. This inertia also stems from the fear of realizing a loss.

Step 3: Understand that Money Should Not be Your Why

Financial freedom requires changing your relationship with money. When you work for money, money becomes your master. It rules your mind, your actions, and your desires. When money works for you, you are flipping that relationship. You are now the master. You are in control. Money works for you and you in turn work for a higher purpose. You need to find that higher purpose. It could be to provide for your family or give back to your community or your country. It could be to free up your time to pursue what you find meaningful. In addition, you want to do business with people that share your values. If money is your why, it will become an endless source of anxiety. You will never have enough. I have traveled to several Central American countries and I love speaking to taxi drivers. There is always an election somewhere and I like to understand how the taxi drivers select their candidates. They often choose the wealthy candidate under the belief they will steal less. In reality, the rich almost always steal more. If you have one million, you want another million. If you have one billion, you want another billion. The thirst for money is insatiable. If money is your why, you will never be satisfied.

Step 4: Don’t Be Envious

Don't compare yourself to someone else or try and be someone else. Jordan Peterson suggests that you should compare yourself today with who you were yesterday and focus on small incremental changes. Set numerous small achievable goals. A fraction of a percent changed every day, compounded over many months and years will yield outstanding results. Envy is an illusion you have created in your imagination. The people you envy are not as successful as you think. I have friends who on the surface had the perfect marriage. The wife was exceptional. She was a concert pianist, an artist, she had four amazing kids. She was generous, intelligent, sensitive and funny. She is also gorgeous. They lived in this breathtaking home in an old established neighborhood in Mexico City that was made up of narrow interconnecting cobbled streets. On the surface, the husband was the perfect spouse. Good looking, charismatic, financially very successful. They would ski in Vail over December, Paris in the summer and New York over long weekends. This was the perfect marriage. They then separated and divorced and all the ugly was released. I don't want to go into the details but suffice to say they are not in a good place. The best antidote for envy is gratitude. Focus on everything you have in life as opposed to focusing on what you don’t. This recalibration will yield exceptional results. Envy and gratitude cannot coexist.



Step 5: Give More than Your Take

There was a severe drought in the Indian state of Kerala in the early 2000s. The drought brought suffering to local villagers and farmers. The Coca Cola bottling plant near the village of Plachimada, however, was ramping up its output. The villagers would see the heavily laden trucks come out of the plant and so decided to stage a protest which continued over numerous years. Coca Cola eventually pledged to put more water back into the local aquifer than it extracted. It is important to give more than you take.  Studies in the United States show that entrepreneurs are twice as likely to donate to charities as salaried employees. In 1999, the Wall Street Journal coined the term "philantropreneur" to describe entrepreneurs that donate to charities regularly.


Here are six reasons why you should donate:

1. Experience More Pleasure – the Bible says that it is more blessed to give than to receive.

2. Help Others in Need – there is no lack of people in need in this world.

3. Get a Tax Deduction if donating to a registered charity - pay less tax and help others in the process - this is a win-win.

4. Bring More Meaning to Your Life – there is more to life than working and paying bills.

5. Promote Generosity in Your Children - reinforcing positive traits in your kids is always good.

6. Improve Personal Money Management – anything that gets you to pay closer attention to your bank account is a good thing.

Step 6: Get Educated

Maximilien Robespierre, before his head was separated from his body by the guillotine in the French Revolution, said: "The secret of freedom lies in educating people, whereas the secret of tyranny is in keeping them ignorant". The world is financially ignorant and the tyrants are exploiting this ignorance. Yes, folks, they are skrewing you every day and you are so used to it that you do not even realize it. Sometimes, you even thank them.


According to a 2015 Standard & Poor's Global Financial Literacy Survey, only 33 percent of adults worldwide are financially literate. The bar on this survey was not set high. Respondents were not asked to build complex econometric models or use Markowitz to find the efficient frontier on an investment portfolio. Simple questions about inflation, compound interest and diversification were asked. The notable laggard in the survey was a rising economic power. China's citizens recorded an abysmal financial literacy score of 28 percent. Moreover, literacy scores were not going up.


The Financial Industry Regulatory Authority Inc.'s Investor Education Foundation's 2016 report found that 37 percent of individuals correctly answered four out of five financial questions. This was below the 42 percent reported in 2009. Humans are getting financially dumber, not smarter. Financially speaking, they are becoming more inbred than a redneck at a Trump rally. They have parked their seventy-four wheel mobile home, moved the livingroom furniture onto the front porch and eased into a lifestyle of beer-swigging, finger pulling, tobacco chewing, and weasel hunting. Low levels of literacy are alarming as governments incentivize banks to make financial services available to a wider audience.


Moreover, in the last 30 years, the retirement savings landscape has shifted. Decision-making responsibilities have been transferred to financially illiterate participants who previously relied on their employers or governments for financial security and guidance after retirement. One question that vexes me is why the formal education system has never focused on financial literacy? At school, I was rewarded for translating Livy’s report of the First Punic War from Latin to English and memorizing the difference between igneous, metamorphic and sedimentary rocks.


Education methods have not evolved in over a hundred years when schools were created as receptacles of information. Teachers stand in front of the class dressed in their tweed jackets and comfortable loafers. They orally transfer their knowledge into the heads of their devoted scribes. Standardized testing is then used to assess short-term knowledge retention of subjects that are useless in the real world. School boards control the narrative and ensure that no renegade teachers break rank from the program. The 1989 movie "Dead Poets Society" portrays the impact of a free-spirited teacher who tries to encourage his students to think, feel and seize the day. The movie ends tragically.


This education system is engineered to produce uncreative and loyal employees, not free-thinking entrepreneurs. As in most systems, however, imperfections exist. A minority fringe exit the system before graduating with their entrepreneurial fire unextinguished. Some spend their lives checking in and out of rehab, while others set up multi-billion dollar companies.


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