How to Transform Your Financial Life
As a result of COVID-19, you may have lost your job, received a decrease in salary, been furloughed or perhaps, nothing has changed income-wise. The following case study is a true story of transformation and promises to inspire regardless of which phase you’re in: survival mode, financial stability or embracing affluence. Topics covered are drastic losses of income, the behavioral finance Affinity Bias, a money script called Money Status, marital stress, personal growth challenges, life transitions and many creative solutions to common needs.
At the age of 23, Becca Smith had no clue how to save money or how to make financial decisions. Her relationship with money was 100% feelings-based, there was no calculator work. It was intuitive and based on desire or wanting something. Becca was already on a healing path with her relationship with food and hoped that tracking her spending would illuminate these patterns, so she hired a money coach. They met at a café and worked on Becca’s numbers together pen to paper.
While the initial experience with money coaching had a positive impact, a few years later, Becca still had to file for bankruptcy. This happened just as she met Sam, her future husband. “It was a humiliating, shameful experience. I had taken awful financial advice about both network marketing and time-share opportunities. I didn’t consult with people I trusted.”
The bankruptcy brought up a lot of difficult memories from the past, specifically money trauma. Her mother’s parents were very comfortable, but then lost significant wealth. Throughout her childhood, Becca witnessed her own mother struggle with shame and misalignment about how she grew up vs. her current reality with a young family. Becca believes she inherited powerful psychic messaging, such that while working for extremely wealthy people as a personal trainer, she had a habit of dissociating and believing, “This mansion and staff is mine too.” There was addiction and fighting in her childhood home and that distorted Becca’s sense of connectedness and safety.
In the beginning of their relationship, Becca and Sam kept their money separate. They were both earning and able to do what they needed and wanted to do. After having been together for eight years and married for three, Becca and her husband reached a standstill. Money just wasn’t flowing smoothly anymore. Therapy and coaching were not foreign concepts, so they hired a financial counselor. The work worked but the person didn’t, and they eventually found the right fit.
Becca and Sam processed and gained awareness on the power dynamics in the relationship and committed to monthly money meetings where Becca’s main goal was to try and make it fun rather than being unfriendly, stubborn and business-like. Becca knew she needed to relax and help it be enjoyable rather than bringing tension and defensiveness to a potentially stressful and confrontational conversation. She did realize how lucky they were to have this conversation about how to spend their money.
They moved from LA to New York City for a promotion for Sam. Becca admits that she was still not only delusional with money, but also a highly sensitive individual. She insisted on having an extra bedroom and laundry in the apartment, a rarity for Manhattan. They ended up paying $1700 over their budget for a high end, brand new luxury apartment and, a few months later, Sam resigned. Since Becca was training rich and famous people, her magical thinking led her to believe they would just work it out.
Fortunately, Sam was had always been aggressive with saving and had a fully funded Safety Net account with more than six months of living expenses set aside in cash. They were able to maintain their lifestyle for a few months before they were forced to face the numbers and downsize to a much smaller apartment in a less desirable location. Sam was focused on finding himself, studying marine biology for fun and considering applying to veterinarian school. They found out Becca was pregnant a few days after moving in to the new place. Sam quickly got reemployed forcing them to switch coasts again. To save money and figure out where they wanted to live, they landed at Sam’s mother’s house. Now they owned a house in LA, but Sam just knew the job was not right and not what he wanted to do. It was out of integrity for him to stay, so he again resigned. In the meantime, Becca was drastically ramping down her business in preparation for the baby and earning much less. They burned through savings.
They tracked every penny they spent during the first year of parenthood. For Becca, early motherhood triggered a version of her former issues with food, orthorexia, an obsession with eating healthy foods. Additionally, as any parent knows when you have a baby, a very emotional survival mode kicks in and people go to any lengths to keep their baby happy and healthy. That led to a slippery slope of buying things and trying stuff, gear and equipment out. Becca would spend $150/week on meat at a high-end grass-fed butcher. She actually thought it was funny and was delighted she was getting into cooking meat. She used local, organic delivery services and would import certain foods from New York. Becca never hesitated to order large quantities, like 20 bags of crackers at a time, for a discount and thrived on being on the cutting edge of food.
She was overspending on groceries alone by $1500/month when it all came to a screeching halt. Sam insisted that they work together to make some changes. With the help of their money coach, Becca was able to uncover two long-standing limiting beliefs. She completed the Klontz Money Script Inventory-|| and not only scored highest on Money Status but identified with the description, “Money Status seekers tend to link their self-worth with their net worth. They may prioritize outward displays of wealth, and as a result can be at risk of overspending. They may believe that if they live a virtuous life, the universe will take care of their financial needs. Many have grown up in lower socioeconomic environments and/or a household that prioritized the financial aspects of social standing. Those that score higher in the area of Money Status scale are more likely to overspend, gamble excessively, be financially dependent on others, and hide expenditures from their spouses.” – Financial Psychology Institute TM
Becca also learned that she has a strong Affinity Bias. People with this emotional bias tend to make irrational uneconomical choices based on how they believe the product or service will reflect their values. The unconscious focus is on expressive benefits, rather than utilitarian benefits. The Affinity Bias typically manifests as buying certain brands because of what owning that brand will “say” about you, i.e. that you are rich, successful, trendy, rebellious, socially conscious, etc.
Common pitfalls of the Affinity Bias are making purchases you personally enjoy (food you eat, movies you watch, clothes you wear, cars you drive) without examining the objective case for each investment. People blind to the Affinity Bias may make spending choices that reflect their environmental, social, governance (ESG) values without examining the objective case for the choice i.e. the founder’s values, the total experience and value add, etc. People with this bias may purchase or invest in “sophisticated” products because of the status they convey. With practice and support, Becca learned to slow down with financial decision making, create a monthly and annual spending plan with accountability and develop her emotional, physical and financial health. Becca found a place of true humility inside and attempted to:
color her own hair
host play dates and go to parks rather than sign up for kids’ classes
sell the BMW for a Toyota
reduce clothes spending from $4000 to $1000 per year
learn to love cheap and convenient grocery stores – their family grocery spending went from $2500/month to “a record $870 in October of 2017”
DIY or delay home improvement projects
stop warning friends coming over for the first time that they live in the “ugliest house in Venice” to absolutely loving her house and hosting weekly family gatherings and many holidays throughout the year – she found creative ways to feed her people through new recipes, less expensive ingredients and being more mindful of quantities
cancel cable and pared down entertainment subscriptions
learn to make good coffee at home
buy towels at H&M rather than Neiman Marcus
go out to eat much less often
let go of gardener and mow the lawn themselves
choose an inexpensive health care plan
analyze all automatic charges for value
spread out self-care appointments
go six months without childcare
have difficult, proactive conversations with close friends setting realistic expectations for birthdays, gifts and travel plans saying, “We have a budget and here’s how much we can pay.”
Facing those friends and sharing their financial difficulty was extremely challenging, but eventually, Sam started working again, consulting for friend. It was a slow progression with very small projects at first. There was a little bit of money here and there. He even offered to work for free at times so he could learn the entertainment industry. Over the course of a couple of years, Sam shifted from earning commission only to commission + payroll + bonuses. Even as income increased, they used the following conservative percentages based on net inome to guide their household spending plan: Housing (including utilities): 30–35%, Food: 18–25%, Transportation: 11–15%, Medical: 6–8% Debt Payments: 10–15% Contributions and Gifts: 2–10% Clothing, Personal and Other: 11–15%. (Sources: Altfest 2007; Grable et al. 2013)
All along, Becca remained clear about non-negotiables like raw, organic meat and vegetables and bones from “up north” for their puppy. Over time, they were able to consciously reintroduce luxuries like cable and a second car. Without any coverage for their child, Becca had to shutter her business. In addition, the intensity of parenting a toddler provoked some postpartum anxiety. When they were able to afford it, Becca saw a therapist once a month. She worked alone on the household finances, without Sam, and reached out to their former money coach a few times a year.
Becca learned to accept and celebrate the phase of life she was in. She had a four year old boy who destroyed everything. They did not want to waste money, so stopped planning to do any cosmetic work to his childhood house. Becca let go of her fashion needs and decided to dress for her relationship with her child, i.e. leisure wear. She valued her time as a mother and now saw how rich and sacred it is to take care of her family. During the financial transformation, Becca became very clear how blessed they are and that many people in the world live on much, much less.
“The biggest wakeup call and lesson was that sometimes you have get off train you don’t been know you’re on. When Sam named my chronic overspending, I was called off the train.” Becca described the hardest part was around her identity and ego. She experienced a lot of shame with the changes in their financial life. She detested not being able to shop freely and worse, trying to prevent her son from wasting food, pouring out bubbles or breaking art supplies. She didn’t want her stress to go into get soup and had to think very seriously about her core values as well as how to take care of herself on a budget. Becca struggled but ultimately let go of caring about social rankings around money and what other people thought of her. She is actually proud of how frugal she’s become. Fortunately, even before she hired her first money coach twenty years ago, Becca had a foundation of transformational work. For her, the depth of inner work was an essential companion to hold the magnitude of healing her relationship with money.