Spending

Have a good answer to this money question or you'll 'sabotage yourself,' says financial psychologist

Financial psychologist Bradley T. Klontz says if you’re lucky enough to have the money you need during the coronavirus pandemic, ask yourself this key question.

Twenty/20

More than 22 million American jobs were lost in the past six months; stock markets have been up and down; and people are generally anxious about what's in their bank accounts right now.

If you're lucky enough to have the funds you need despite all the recent economic turbulence, ask yourself one key question, says Bradley T. Klontz, an associate professor of financial psychology at Creighton University: "Why is it OK for you to have money when other people don't?"

Answering this question is not about comparing your finances to anyone else's, he told The New York Times. It's about seeing money as a tool, rather than as a measuring stick.

Having a satisfying answer is crucial, "particularly if you come into money fast," he says. "If you don't have a good answer, you're going to sabotage yourself. You're going to find ways to get rid of it." Or, he warns, you could end up feeling disconnected from and less active in your community. Remember that "we're here to make the world a better place," and money can help you do that.

Wasting time on comparisons or feeling guilty isn't helpful as it can lead to impulsive decisions or distract from your long-term financial goals. Instead, it's important to know how to maintain a budget no matter your net worth, and to understand how you earned your money and what you want to do with it, including how it can help you make good, productive decisions.

Understand what money means to you — and have a plan

A 2019 study from Applied Research in Quality of Life analyzed people's views on wealth and materialism by breaking them into two categories: "happiness materialism," or the belief that wealth indicates a happy life, and "success materialism," the idea that wealth means success.

The first can be problematic, the study found, since it takes "time, energy and money away from other life domains that make an important and positive contribution to present life satisfaction," such as family and health. The belief that wealth is an indicator of success, however, can enhance one's drive to work toward a better standard of living.

VIDEO2:4702:47
Explain money to your kids with this video

Video by Euralis Weekes

Viewing money as a way to buy shiny things isn't the full picture, in other words. But if you see finances as part of your well-being, it could motivate you to focus on bigger and more long-term goals, like opening a high-interest savings account and investing.

So make a plan for your money, Klontz says, and do something good with it if you can, too, like helping the community.

Why it's smart to give money away

Giving back if you're doing well at a time when many Americans are struggling doesn't only help your community. It can also bring you an increased sense of worth: "Giving to charity makes us happier; especially when we freely choose to give," a 2017 report from the Utah State University College of Science finds. "Whether we have a little or a lot of money, how we choose to spend it matters most to our happiness."

Even as the pandemic closed businesses and forced layoffs, 56% of U.S. households engaged in charitable giving to help their neighbors, according to a report from Indiana University's Women's Philanthropy Institute. One-third gave money directly to charitable organizations, individuals, or businesses. Another 48% took part in charitable giving indirectly.

Whether we have a little or a lot of money, how we choose to spend it matters most to our happiness.
Utah State University College of Science
2017 report

You don't need to have a lot of money to give back. Of the 48% of households that gave indirectly, many did so in small ways, like ordering takeout from a local restaurant or paying for house cleaning or day-care services they couldn't use during quarantine.

You can also donate your time, the Utah State researchers point out. "Volunteering at a charity will do wonders for your emotional well-being. If your aim in life is for you and others to be happy, evidence suggests learning and teaching others to be deliberate in giving of their time and means to charity will have the greatest impact in this noble pursuit."

Don't be afraid to talk about money

Regardless of how much you have in your bank account, engaging in conversations about money can help you and the people around you. Experts agree: Talking openly about finances can break down the taboos surrounding it.

Whether that's in person or online, a community of peers who you can talk to can help you gain perspective to sharpen your financial skills. Sharing ideas and listening to others can let you better gauge the progress of your own goals and make you stay more accountable.

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