The Elephant in the Room – Are You Keeping Financial Secrets?

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“If you want to keep a secret, you must also hide it from yourself…”  –George Orwell

The Merriam-Webster Dictionary defines a “secret” as “kept from knowledge or view”, “not acknowledged” and “working with hidden aims or methods.”   Essentially when we keep secrets, we don’t want others to know what we are up to, and sometimes it’s evidence of our own self-denial because we don’t want to admit to ourselves what we are actually up to!

What a tangled web we weave…

Why do we keep money secrets?  Usually, because we are embarrassed about whatever the secret is, or we are trying to fly under the radar and avoid attention.  According to a recent survey, 40% of us are keeping financial secrets from our friends, family, and loved ones.

What financial secret(s) are you keeping? Money is a topic that many people keep close to the vest even with those they trust the most.  Whether it’s credit card debt, loans, a secret bank account, or a purchase that we don’t want to admit to, there are a plethora of reasons why people keep money secrets.

Often, we keep secrets from others in our lives because we are afraid the truth will be detrimental to our relationships, and hence to avoid conflict, we keep our actions secret.  Keeping financial secrets from family, partners or loved ones puts those relationships on a fast-track to mayhem.

I also think by keeping certain things secretive, we convince ourselves that there isn’t a problem with whatever we are doing, and we allow ourselves to live in denial.  If we don’t admit it to others, and we ignore our behavior, maybe our duplicitousness shields us from acknowledging that our behavior isn’t good for us, and it keeps us from examining why we are acting as we are.

I believe in the eyes wide open approach when it comes to our financial lives – knowledge is power.  Truth in our communications with ourselves and others enables us to be fully engaged in our financial decisions and to formulate a solid strategy that will provide us with control, independence, and clarity.   Money should not have the power to ruin your relationship with yourself or others.



Now is the time for you to do a little financial self-reflection!

We are constantly evolving in our emotional relationship with money and my goal is to help you to improve your relationship with your money, be in control of your money emotions, and not have your money control you! Spend a minute and ask yourself the following questions:

  1. What financial secret am I keeping? From who?
  2. When I reveal it, what am I most afraid of?
  3. If I don’t reveal it, what am I most afraid of?
  4. Is there someone I trust that I can share it with who will help me navigate my way out of it

Nobody is entirely rational when it comes to money.  We have a complex relationship with our money and personal finances, and it directly affects our behavior.  Our personal finances are fluid and involve a multifaceted set of challenges, opportunities, and data that we interact with and have feelings about.  It is a cycle of actions and feelings – you make a decision relating to money that impacts your financial situation and this decision then affects your feelings and future behavior.

The most common emotions many of us experience in relation to money are fear, guilt, shame, or envy.  Maybe we are afraid we don’t have enough money or that we will lose all our money, or we fear being humiliated because of some of our decisions.  We may feel guilty because we feel some of our money decisions have had a negative impact on others, and we might feel shame because we feel our money decisions have let us down and we aren’t living up to our own sense of what is right. Money shame is a powerful emotion that causes avoidance and secrecy and it’s only human nature to want to avoid exposure of decisions we aren’t happy or proud of.

What is your Money Personality?

Ken Honda, an expert in the psychology of money and happiness, and the author of Happy Money: The Japanese Art of Making Peace With Your Money, has identified seven money personality types.  If you can identify which types resonate with you, understand the nuances and pitfalls of each, you can improve your relationship with money by being aware of how you think.  I think we should all do some deep diving into what our money personalities are and not be in denial about it.  I was in denial about my relationship with money for a long time… and I didn’t really want to examine how I really felt about it and its role in my life.  I think money controlled me instead of me controlling the money and to be honest, I think I was afraid of it.

According to Honda’s research, there are seven specific money personality types, and most of us are a combination of types.  They are:

  • The Compulsive Saver - Saves money endlessly, is frugal, financially responsible and money is a source of security.
  • The Compulsive Spender - Frequently makes unnecessary purchases, spends when in emotional distress or for immediate gratification, and has buyer’s remorse after big splurges.
  • The Compulsive Moneymaker - Believes life is better when you earn more, the top priority is growing wealth and making more money and craves recognition for their financial success.
  • The Indifferent-to-Money - Tends to rarely think about money and believes money shouldn’t influence important life decisions. Usually is well-off.
  • The Saver-Splurger - Is a combination of traits between Savers and Spenders because they can be smart with their money for periods of time but then they give into spending impulses out of nowhere.
  • The Gambler - A combination of Spenders and Moneymakers who takes big risks with money is elated with financial wins but gets very deeply depressed about financial losses.
  • The Worrier - Constantly worries about losing money, lacks confidence in their ability to achieve financial freedom, and is always in preparation mode.

My money personality has evolved and changed over time.  As a younger person, I was a Worrier and feared money.  My father is a compulsive saver/worrier and his frugality loomed over me influencing me to constantly worry that I might lose the money I had.  Once I self-realized professionally I became a combination of the Compulsive Moneymaker and the Save-Splurger. Obviously, I need to earn money to feel control – that’s my thing and now that I understand that is my money modus operandi, I embrace it and it helps me in my money relationships. Figuring out your money personality will help you understand your own motivations and help you to communicate your values to others.

Four Steps to do Right Now

1. Make a BudgetA budget is a leading indicator of your future financial health – it is your roadmap for financial independence and achieving a Zen state of mind.  It is a tool for creating a roadmap so you can enjoy your life more, it is not meant to eliminate all fun from your life.  The first step is to get a picture of what your current income is and what your spending looks like now.  If you don’t know how you are spending your money, you won’t be able to strategize about how to marshal your resources to achieve financial freedom.

Determine your after-tax income and create a list of all your fixed costs (your “needs”) and discretionary expenses (your “wants”).  Total all your monthly expenses and compare them to your monthly income. If your monthly expenses exceed your income, you are clearly living beyond your means. First, focus on reducing variable costs to save more. If that alone doesn’t correct the expense overage, evaluate fixed costs, and cut where you can.  You may have to make some short-term difficult decisions to get your income and expenses in tandem. Check out the many budgeting apps that make budgeting less laborious.

2. Eliminate the Enemy – Credit Card debt - After you have your budget set up, determine your outstanding debt balances on credit cards and personal loans, and begin to pay your debt down. Make minimum payments on all but one debt (the one with the highest interest rate), pay that high interest-bearing debt totally off first over time, and then move on to the next, and so on.  Consider consolidating debt with lower interest loans or balance transfers to low-interest cards.  Also, consider debt counseling and debt relief actions.

3. Establish an Emergency Fund - Set up an emergency fund savings account with 4 to 6 months of savings in cash.  According to research from The Pew Charitable Trusts, 33% of American families say they have no money that they would call savings, including 10% who have incomes of $100,000 a year.  Evidence suggests that having an emergency fund, keeps household finances on track, even if there is an unforeseen event.  Having an emergency fund confirms a certain mind-set – a strategic mind-set that isn’t throwing caution to the wind and hoping it will all work out in the event something unexpectedly goes awry.  Emergency savings contribute to long-term financial security because individuals with savings are less likely to incur unsecured debt and other high-cost financial bailouts that often result in long-term indebtedness or bankruptcy.  And you may not be so quick to borrow against your retirement savings if you have emergency cash on hand.

Emergency funds are not just for high-wage earners, regardless of income, an emergency fund is essential to peace of mind!

4. Stay rational in your investment strategy - Once you do steps 1 through 3 and you have some money to invest, set up an investment strategy to endure volatility without permanent capital loss.  How? Through diversification of investments, fundamentals, and a disciplined long-term strategy.  Financial planning will help you identify your financial objectives and how you can achieve them through your investment strategy.  Your financial plan should identify your cash flow/liquidity needs, ability to endure volatility, and your targeted risk-adjusted return to generate sensible growth and income.   Most importantly, once you have your sensible strategy in place built to endure volatility, don’t make emotional investment moves based on fear and panic!  Be a disciplined investor and don’t let short-term fear unravel your long-term disciplined investment approach.

Self-awareness and a clear-eyed approach to our financial lives will enable us to harness our money emotions and keep them in check.  Emotion isn’t always a bad thing because it tells you what you are passionate about, what you really care about.  Emotion makes us feel alive.  Anxiety in moderate amounts can also motivate us to tackle our problems.  Embrace the fact that sometimes money will cause you to feel certain uncomfortable emotions and occasional anxiety.  But knowing that, and understanding your particular financial facts with budgeting, planning, and a rational strategy, you can eliminate the emotion and minimize the anxiety.  And that will allow you to be honest with yourself and others because you no longer have to hide behind money secrets and avoidance!

How to stop the secrecy and money madness

Take the emotion out of your money behavior and decisions by having knowledge of your financial situation through budgeting and financial planning, and having a diversified, intentional long-term investment strategy.

Instead of thinking of a budget as an anxiety-inducing experience, look at it as a step to financial freedom and happiness!  I get it…having a deep look into your financial situation may increase your anxiety level because you’re afraid to face the reality that you don’t have an emergency savings fund, or you haven’t saved enough to send the kids to college, or you are way behind in your retirement savings…  So, guess what comes next?  Avoidance of any budgeting or planning because you feel anxiety.  A vicious cycle that repeats over and over again.

Stop the cycle with self-awareness!  If you confront the dreaded task of having a deep dive into your finances and money behavior, yes, your anxiety may increase in the short-term BUT if you stay with it, and get all your financial facts in order and establish a plan for spending and saving, your overall anxiety level will steadily dissipate as you gain control of your situation through your on-going engagement with your finances. Reality is our friend, period.

Yours in Fiscal Sisterhood…

Kimberlee Davis
The Fiscal Feminist

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