Afford Anything - What Your Childhood Taught You About Money, with Rachel Cruze

Episode Date: January 12, 2021

#295: How well do you know yourself and the reasons why you manage money in the way that you do? You might not know at all, or you might have some degree of understanding, but digging into your money story can shed insight on your behaviors with money today. Rachel Cruze, four-time bestselling author and daughter of Dave Ramsey, shares three frameworks that can help us better understand our money habits. For more information, visit the show notes at https://affordanything.com/episode295 Learn more about your ad choices. Visit podcastchoices.com/adchoices

You can afford anything but not everything. Every choice that you make is a trade-off against something else, and that doesn't just apply to your money. That applies to your time, your focus, your energy, your attention, anything in your life. That's a scarce or limited resource. And that opens up two questions. First, what matters most to you? Not what does society say ought to be important,

but what is genuinely a priority in your own life, even if that's weird or unusual. Maybe it's travel, maybe it's home, maybe it's health, maybe it's spending a bunch of money on food. What is it that's a priority in your life? That's the first question. And the second question is, how do you align your daily, weekly, monthly, annual decisions? How do you align your work choices, your money choices, your career choices in a way that reflects that? Answering these two questions is a lifetime practice.

And that is what this podcast is here to explore. My name is Paula Pant. I am the host of the Afford Anything podcast. And today, Rachel Cruz joins us to talk about how learning more about yourself is the key to unlocking the questions that plague you about your relationship with money. So if you're wondering, what exactly do you believe about money and why? Why do you keep making the same money mistakes? Why can't you and your spouse or partner get on the same page about money? How do you make lasting progress?

How do you morph intention into action? and close that gap between your current self and your ideal self. If those are questions that come up for you, I think you're going to enjoy today's episode. Now, Rachel Cruz is one of the most well-regarded personalities in the world of money management. She is Dave Ramsey's daughter. She is a number one New York Times bestselling author.

She has four bestsellers. On social media, she has more than a million followers between Facebook, Instagram, Twitter combined, she's got almost half a million newsletter subscribers in her newsletter about money management. Through the experience of covering this topic for so many years, Rachel became curious about why we behave the way we do when it comes to our money.

Why is there a gap between how we want to behave and how we actually behave? Why do certain aspects of handling our money generate fear or anxiety? or greed, why do we feel the way we do and why do we act the way we do? She became very curious about that. And through her research, she developed three frameworks that offer insight into our behaviors, our thoughts, and our stories that we tell ourselves about money.

Now, by understanding the origin of our beliefs around money, we become more self-aware. And through that self-awareness, we can begin to course correct. So whether you are naturally a saver or a spender, whether you are naturally somebody who is an aggressive investor or a conservative investor, regardless of where you fall on the money spectrum, these frameworks can help you find balance, find a middle ground that allows you to build a healthy relationship with money. Now, the three frameworks that we're going to discuss in this episode are the four money classrooms, the seven money tendencies, and the six fears that most of us experience around money. So, three frameworks, four classrooms, seven tendencies,

These six fears, there's a lot of numbers going on. Let's get started. Here is Rachel Cruz talking about the importance of self-discovery and self-awareness when it comes to managing our money. Hi, Rachel. Hey, Paula. How are you? I'm great. How are you doing? I'm good. Thanks for having me on. Absolutely. Rachel, you decided to dig into the why behind the way that people treat money. I know you and your father have said a lot about the how, the seven baby steps. What made you interested in the why aspect of it, the behavioral finance aspect of it? Yeah, probably about three or four years ago. I kind of went on this, my own personal self-discovery journey, if you will, where I was taking a bunch of personality tests.

I found out about the Enneagram. I was in some counseling. I read the book, the birth order, because I'm a middle child. And I'm like, I just really wanted to dig in and figure, okay, why am I the way I am? And with all that awareness, I feel like I was a better wife, a better mom, a better friend. I was better at work, just in general. And then I thought, okay, well, how will this impact my money if I started asking these questions? And gosh, Paul, it was like I went in this black hole and I couldn't get out. I was like, there is so much here. And so I thought this has to be my next book because I talk about the how to do all the time, how to budget, how to get out of debt, how to invest, how to build wealth, how to give. And,

personal finance, it's 80% behavior. It's only 20% head knowledge. So the head knowledge is just a small piece of it, but doing this stuff is what's going to affect change. And so I thought, okay, well, why do we have the behaviors we have with money? Why? And so I started asking that question, and I just realized, wow, this has to be my next book. Right. And it absolutely makes sense. I mean, you hear that in nutrition and diet and exercise all the time where I can learn all the information, all the knowledge necessary to live a healthy lifestyle, but I'm still downing a pint of Ben and Jerry's by myself on the couch at night. Yeah, that's exactly right. You have to put all this into practice. Yeah, and I love the parallel between health and fitness and even

money, because it is so true. There's so much discipline that has to take place, but it's in order to do something better, right, to have a better future and to have hope that that future is better than your present. Where are you on the Enneagram, by the way? What's your Enneagram number? Oh, are you an anagram person, Paula? You know, someone of all things, this is very random. Somebody who hosts a podcast about anyagrams reached out to me and asked me to be a guest on his podcast. And I said, I don't know why you reached out to me because I don't know anything about this topic. Oh, how funny. It was. It was. It was. Like the godfather of this. It was. Like the godfather of the enneagram. That's so funny. Yes. So I'm an enneagram three, that number. And so it sounds crazy. And

like I've taken, again, all these personality tests. But honestly, the enneagram was the most in-depth. And it was the most accurate. I was like, wow, because it talks about what number you go to and weakness and strength and all of it. And it is so stinking spot on. It's crazy. It's crazy. Can you describe what a three is and how you think that affects your relationship with money? Yeah. So a three, I'm an achiever. That's the number. number. So there's nine types with the enneagram so that I'm type three. And so there's a lot of performance driven achieving is really what it is. I mean, I long to make progress. I work hard, all of that. But easily, threes, our jobs can kind of become our identity. And so I have to really,

really watch out for that. But not just our jobs, but other things in our life. Like we care about what people think of us. Sadly, we're more image conscious than other numbers on the enneagram. And so for me as a three, yeah, I really looked at this. I was like, man, this is so interesting because in the latter part of the book, I talk about why we save the way we save, give the way we give and spend the way we spend. And for me, that spending aspect was so convicting because I realized, wow, how much of my money do I spend because of other people versus just me? And so I've learned to put this filter in place to say, okay, if I buy this thing and nobody sees it, do I still want it? And so it's those kind of filters I've had to put in place for my own life. And a lot of it was because I realized,

well, I am a three. I'm naturally lean, you know, these ways. And so I have to watch out not to be the unhealthy part of that. Speaking of unhealthy parts of it or unhealthy relationships with money, how's that for a segue? There we go. I love it. You created a model, a four quadrants that represent four major money classrooms. Tell us at a high level, what are money classrooms? What does this model represent? So I talked to a lot of psychologists and counselors and stuff as I was writing this book to really dig in and understand, you know, our why behavior and understanding that a lot of who we are as adults has to do with the nurture part of our lives. It is our childhood. And so your home growing up was your classroom in life. So you learned lessons in that

classroom that some you take with you into adulthood. There's other lessons. I'm sure we wish, we all wish we could unlearn from our childhood. But really, that's our. classroom and that's where we learned about money as well. And money is communicated in two ways in a home. It is communicated verbally and it's communicated emotionally. And so as I was writing this book, I was seeing these two parallels and I thought, oh my gosh, this creates a quadrant like God gave me a graph and I'm so excited. It's so perfect. And so yeah, it creates these four money classrooms. So that first money classroom is the anxious money classroom. And this is if you grew up in a home where money where the verbal side of communication was closed and it was emotionally stressed. So you knew

there was tension around money. You knew, you know, maybe toward the end of the month when bills were due, tension and stress was high. But you never really could pinpoint why, because it wasn't talked about. Classroom number two is where it is verbally open, but emotionally stressed. So lots of tension, lots of conflict, lots of fighting probably. You heard your parents have the same money fight over and over again. Maybe they fought with extended family members about money, but ooh, it was out there and you heard it. Classroom number three is the unaware money classroom. And this is where it's verbally closed and emotionally calm. So in this money classroom, you may have grown up kind of with your head in the sand when it comes to money.

You probably just didn't really think about it because it was never talked about and it wasn't a big deal. And then classroom number four is definitely the healthiest money classroom. And this is the secure money classroom. And this is where it's very very. verbally open and emotionally calm. So to be in this classroom, you don't have to have a ton of money. You could have $10 or $10 million, but in this classroom, money was controlled. There was a plan and there was lots of communication around it, maybe between your parents, if they were there or if you had a single parent, you knew that they were budgeting. You knew they were doing things because there was a level of control over money and they weren't scared to talk to you about it.

How do these frameworks apply in households where some aspects of money were discussed and some were not. So for example, your parents may have discussed day-to-day aspects of money, like there's a sale on bananas and bread at the grocery store, or even something maybe a little bit bigger, like discussing, budgeting for a trip to Disneyland, but there was no discussion around some of the bigger issues like retirement planning, tax planning. I mean, of course, in an age-appropriate way, but there was no discussion about investing or any long-term financial planning. It was all the daily grind. Yeah, there's probably a moderation to this. And so I would say a pure open communication where you could be confident. Yeah, that group in this household is when money was talked about in a tactical way. So like you're saying, the daily grind. But also talking about investing, also talking about the future teaching, literally teaching what these money terms are and what they mean. But then there's also the emotional side of money to be taught. And a lot of families don't engage the side as much. But the emotional side of learning contentment, learning generosity.

learning these things around money, that money is not good, money is not bad. But when you put it in the hands of a person, like they determine whether they use it for good or use it for bad. More like the philosophical side of money. So there's two ways to communicate about it in that way. So for some people, though, the tactical side, the daily crime, maybe it was enough. You know what? I learned about investing in college and I'm fine with that. Like there may not have been this tension filled that, yeah, it was so close.

But there are some households where for sure money is just not talked about at all. Like you had no clue where your parents stood on it. Maybe they mentioned one or two things at the grocery store, but that was it. No discussion. You just didn't go there. You know, I'm glad you brought up the philosophical side of money because that's the other element of money discussions is sometimes people do talk about it, but they talk about it in money negative ways with statements like money is evil. People who have money are evil. There are some of these ideas around money that can lead to unhealthy feelings about money.

100%. Oh, I totally agree with you. Yes. And I see this a lot, sadly, that, yeah, you grew up with parents that were like, oh, well, they have a lot of money. And they trash people, you know, that have or quote, unquote, well, off, or vice versa. Maybe you came up from a well, family, and they're like, oh, well, those people are lazy over there. I mean, who knows, like, whatever it is. But yeah, there is that philosophical side and making sure that it doesn't go the negative. Yeah, you're seeing money as a tool in your life. It's not who you are. Are there people then who might live in a couple of these different money classrooms, the anxious classroom, the unaware classroom, like is it possible to kind of toggle between a few of these different worlds?

It is, depending on the season of life, I think, and what's going on with your parents. Because I think, you know, if they always had a steady job and everything was predictable, you may have stayed in one quadrant, but if they had a big life event, a loss of a job, a pandemic in 2020, you know, whatever it may be, that can shake it up. So like my story, for instance, I was born the year my parents filed for bankruptcy. And so my earliest memories, you know, four or five, six years old, I would say I kind of grew up in that fourth money classroom. I mean, my parents by that point had kind of dug themselves out of that financial hole and they were really gung-ho about controlling the money they had and talking about it and not making those mistakes again. But as I wrote the book, it's funny, I even had dinner with them. And I told them about the quadrants and all of this. I was like,

yeah, I kind of feel like y'all weren't perfect as parents by any means, but I do feel like you did a great job kind of honing in on that number four classroom. And they both looked at each other and started laughing. And I was like, what? And they're like, yeah, because your memories don't start when you were a baby, because we were definitely classroom number two, the unstable classroom for many, many years, but you just don't remember. So I think you can shift classroom to classroom and for my readers. I really met my push is to go to that classroom number four with your current nuclear family to say, yeah, create that environment where money is controlled and that level of stress is down and that you're willing to talk about it, that it's not a taboo subject. But going back to how you grew up is what's

important. And to know, yeah, maybe I went between classrooms, you know, one and three or whatever it may be. You're a middle child. Your older sister is Denise, right? Yes. Yes. Does she remember classroom number two from her youth? Not as much. She does have a lot of vivid memories of being at a store and, you know, asking to buy something. And it was more of a sharp, no, of course not. No, no, no, no. Like, more of that. Like, they went to a consignment sale or a flea market or something. And they were like, okay, we can buy things here because we can afford them. Like, she has more of those kind of memories. Nice. So as people are listening to this, let's say that there are some listeners who are thinking, like, wow, I totally relate to one of these four quadrants. As adults now who are trying to unlearn

some of what we've learned as children. What can we do going forward to put this knowledge into action, depending on what quadrant you came from. How do you develop a healthier relationship with money? Yeah, so it's interesting. I'm talking to people when I wrote this book. Some people unintentionally became the same classroom that they grew up in just because it's the only thing they knew, you know, either you just talk about money or you don't, or it's just always stressful or it's calm. Like it just kind of became their current environment. Or people went to completely opposite. And they said, I'm going to do exactly opposite of what my parents did. And so I think to say, okay, here are, to list out, here are habits that I have today that I really don't like. Like,

I don't like the fact that I, when I'm sad or bored, I go and spend money. So what coping mechanism does that come from? Did I watch my mom do that? Or did I see this? Or did that feel good when X, Y, or Z happened in my childhood? Like, really, really digging in and asking more of those why questions, I think is important. And so for the, the closed verbal money classrooms to know that, yeah, it may be hard to engage in conversation. It may feel very vulnerable and scary because you feel like it's going to cause conflict if you engage in conversations about money, but to do it. Still talk about money even when it's hard.

Sometimes it can feel like, oh, yeah, well, especially that classroom number three, the unaware money classroom, a lot of people in that classroom, I find that if they're married, they just let their spouse handle everything. And they're like, oh, yeah, well, my wife's got it taken care of them. I don't worry about it. Because it just feels good, not knowing. It's like that ignorance is bliss. So I would say that the downfall of that classroom is you have to engage.

You have to get your head out of the sand and say, okay, yeah, that may have felt good as a child. But now I'm an adult now and I have to engage my money reality. You mentioned having conversations. What are the characteristics of a productive money conversation as opposed to a conversation where you're just sort of rehashing the same old, same old, but not really getting anywhere? Yeah, I would say if it starts with your spouse, that's usually where money conversations. are if you're married in the household. And so I would say, number one, to ask your why, you know, to talk to each other about, hey, here's why we want to handle money well.

Here's why I am scared to talk about money. Here's why I don't want to bring this up because this is how you react. Here's why. Like, ask the why questions. Just go big. Like, you really do. Go big and go why. And then number two, make sure you're not being defensive and or nagging. Like, there can be that element of like, oh, well, you always do. this. No blaming, no nagging, no shame talking this. Like make sure that both of you come with a somewhat humble presence where you're like, okay, I'm willing to hear you. I'm willing to empathize. I want to know. So again, that number one is to your why. Ask those why questions. Number two, both come with productive type attitudes. And then I would say number three, make something tactical. Like if you guys

have never done a budget before together, do your first budget. Sit down and say, hey, here's our money for the month, and here's where we want it to go and being intentional. Because when you start talking about that kind of stuff, the tactical side, the philosophical stuff comes out of that. You start to talk about the vacations and the family time you want to spend together. You start talking about wanting to go back to school and getting your degree in this field because you always dreamed of doing that. Like you start to talk about those whys as well in the tactical side, which I love. You mentioned both people showing up with humility. What if one person does but the other one doesn't?

That's a great question. Yeah, I would say, again, not in the knacking sense, but I would be vulnerable enough to say it to the other person. So to say, if you notice the other one is more hostile, the other one is not listening, to say it out loud and say, hey, here, here's the story that's been going on to my head right now that I'm projecting on you. So tell me if this is right or wrong. Do you just feel like the way you're doing stuff is the right way? And kind of breaking it down again and asking those questions, I find usually in conflict when you can ask questions and have the other person have to sit and think and answer it. It's a little bit more productive than just the blame game. Let's move to the seven money tendencies. Now, this is a list of seven different tendencies that you came up with after you talked to thousands of people about their habits with money. Rather than listing them all out, let's just go through each one one by one. The first money tendency, and this is probably the most obvious one, savor versus spender. Yes, savor versus spender. So in these tendencies, I always point out that there's not a right or wrong. So there's not a moral compass to any of these. And the extremes of these can be unhealthy. So again, you'll probably lean one way or the other. Moderation I have found in life is probably the best, the best medicine, but you're naturally going to lean one way or the other. So yep, that's spender versus saver. This is usually an easy one for people that you're either naturally more of a saver. You know, if I give you $100, are you more naturally inclined to just save it and put it. away for the future or are you thinking about what you want to buy and you just want to go spend it.

So for me, I'm a spender. I have always been that way. I still am. I have learned to save money because, again, the extreme side of a spender, if I spend everything I make, I'm going to be broke and that's not going to be good. And if you save everything you make on that side, then you won't have a life. So like we need both. Balance is good. But yeah, I definitely lean more spender. How do you lean, Paula? I lean saver. I naturally lean saver. And in my early 20s, I leaned saver so hard. to the point where it was unhealthy. So I've had to walk myself into spending. But the root of that, the root of leaning saver was a lack of confidence. Like in order to spend money, I need confidence that I will be able to make more. Yes. That's so good. Yes. And that's the other thing too,

is I'm like with these tendencies, yes, digging that level deeper to know, okay, well, why do I think that I am this way? Right. Some of it is just pure personality, but others is the environments. Yep, the environment even you grew up in or your current state. Yeah, exactly. Money and security can lead to saving to the point where it's unhealthy. Yep, exactly. We'll come back to this episode after this word from our sponsors. Fifth Third Bank's commercial payments are fast and efficient, but they're not just fast and efficient. They're also powered by the latest in payments technology built to evolve with your business. Fifth Third Bank has the big bank muscle to handle payments for businesses of any size.

But they also have the fintech hustle that got them named one of America's most innovative companies by Fortune magazine. That's what being a fifth-third better is all about. It's about not being just one thing, but many things for our customers. Big Bank muscle, fintech hustle. That's your commercial payments of fifth-third better. The holidays are right around the corner, and if you're hosting, you're going to need to get prepared. Maybe you need bedding, sheets, linens. Maybe you need serveware and cookware.

And of course, holiday decor, all the stuff to make your home a great place to host during the holidays, you can get up to 70% off during Wayfair's Black Friday sale. Wayfair has Can't Miss Black Friday deals all month long. I use Wayfair to get lots of storage type of items for my home, so I got tons of shelving that's in the entryway, in the bathroom, very space saving. I have a daybed from them that's multi-purpose. You can use it as a couch, but you can sleep on it as a bed. It's got shelving, it's got drawers underneath for storage. But you can get whatever it is you want, no matter your style, no matter your budget. Wayfair has something for everyone.

Plus they have a loyalty program, 5% back on every item across Wayfair's family of brands. Free shipping, members-only sales, and more. Terms apply. Don't miss out on early Black Friday deals. Head to Wayfair.com now to shop Wayfair's Black Friday deals for up to 70% off. That's W-A-Y-F-F-A-R.com. Sale ends December 7th. Let's talk about the next tendency, nerd versus free spirit. Yeah, so this is more in regards to money management or the budget.

Some are going to learn more on the nerd side of this. So they just enjoy doing it. Like it's just part of who they are. They love being in control. They love Excel. Usually like every drawer in their dresser is folded and they're very neat people. They know exactly where everything is. And it just feels like, yeah, there's just a level of control they have.

That's more than nerd. And then the free spirit is definitely the one that's kind of like, oh, everything's going to be fine. It's all going to work out. Numbers, stress them out, details, stress them out. A budget feels like it controls them in a bad way. You know, they can't have any fun. And that's more the free spirit. So what's funny, even though this is like what I do for a living, I lean free spirit.

I naturally am not very detailed. I naturally think, yeah, it's all going to work out. It'll be fine. I want to have fun. I just want to enjoy life. That's my natural bent. I've had to learn to pull myself in and say, no, I have to be intentional in budget. And for me, I've learned that a budget is great. I do not resist the budget anymore. But my natural tendency is more free spirit. How about you? Same free spirit. Absolutely. In fact, when I first read

this, I was thinking, I feel like I am both simultaneously. I enjoy the discussion, like the thought element, the academic thought element around financial concepts, and I can go deep into those financial concepts, being nerdy at a thought level. But in terms of how I conduct my day-to-day life, I'm a total free spirit. Yeah, I love that. So great. Yeah. And same, I have struggled with budgets my whole life. I found it restrictive. My way of coping with that is put savings first. Yes. Because ultimately, that's what counts. And so, you know, if you do that first, then you can spend what's left over. Yeah, it gives you the permission to say, okay, yeah, I've done what I need to do. I feel that level of security and that's good. Now I can go and enjoy some of it.

Exactly. And ultimately, it doesn't matter if I'm spending money on restaurants versus on clothes, you know, if I've saved first and the rest is what's left to spend. That's awesome. Let's talk about experiences versus things. Yeah, so when you spend money, do you tend to spend it on more experiential type things, like going to the spa or going to the zoo with your kids or vacation. You would rather spend your money on experiences or would you rather spend it on tactical things, actually buying an item. So I lean experiences all the way. I'm like, I'll do a nice dinner out.

I'll have a massage. Like all that. Oh, I love it all. Where my husband is very much more things. His whole philosophy, he's like, no, if I work hard to make money, I want to spend it on something that I can use over and over and over again and it will enhance my life. Like I just, I want to be able to use it again. And I were getting, you know, not like overly frustrated, but I would always kind of get annoyed because at the beginning of our marriage,

when we were on a newlywed budget, we got married young, we'd got to dinner and he would always just order water. And I was always like, Winston, get a drink, order a drink. And he's like, no, no, I don't want to pay $8, $10 for the, no, it's fine, it's fine. And I was like, no, because to me the whole experience of the dinner, right? Like the drinks, the appetizers, the entree, the dessert, like the whole thing is what I loved and what I valued. And he just didn't as much. And now I wish I had that language like, okay, yeah, it's just because he's not because he doesn't want to have fun. He just doesn't value the experience at the level I do. I read an interesting article the other day that talked about how in 2020, because of the pandemic, people are no longer spending on experiences,

of course. You know, people are no longer getting massages or going to indoor restaurants or going on vacations. And so spending on things has increased dramatically as a result of the pandemic. Can these tendencies switch based on circumstance? You know, will some of the people who have switched to spending on things kind of remain there? Or will they, you know, go back to experiences once that opportunity becomes available again? Yeah, I think it's more naturally and no matter what's going on in the world, right? I mean, yeah, you're forced to probably spend more on stuff versus experiences in 2020. But when everything comes back, you probably, if you enjoyed spending money at going to concerts or going to a game or going on vacation, that will probably

come back to you because it's just naturally how you're inclined, how you personality-wise lean. Right. You're probably missing it more than most. I know, yes. Well, we're in the south, so I think we're a little bit open, more open than some. So we're able to eat, which is good, got to eat, which is my favorite thing in the whole world. So I'm very happy about that. Yeah, outdoor dining would be, you know, when the weather's nice. Yeah, mild winters are really are very good for that. Yes, yeah, yep, take me indoors, for sure. The next tendency is quality or quantity? Yes, so do you tend to lean of, like, again, that $100 example, if I just gave you $100, would you think of three or four or five things to buy with

that or one really nice thing? So people tend to, tend to either say, yeah, I need fewer things, but I want them really nice. I want the quality aspect. Or I'm okay with cheaper stuff, but I want a variety, more of that quantity. I was out to dinner with some girlfriends. This was probably about two years ago because we were planning a trip for a girls' weekends getaway, and we were going to go to the beach and half the table was like, okay, I want to stay in a really nice house, really close to the beach. I could walk there and see get from the window and we can just stay two nights and it'll be fine. Like I want to put our money there. That sounds like a vacation to me where the other half of the table was like, no, we could buy a,

you know, we could rent a really cheap house, 10 blocks from the beach and I'll share rooms and it'll be totally fine. And we could say four nights with the same amount of money. So it was so funny seeing the differences even in planning a trip with girlfriends where I was like, well, so I'm just lean quality. You just want quality and that's what you enjoy where others are more quantity. And so for me personally, I lean quantity. I would rather have 20 pairs of cheap earrings than one nice pair or something. I'm good with the variety. I love it.

I don't need super. There's certain things, of course. I appreciate really nice things. But in general, I'm like, yeah, I'm good buying less expensive and more inexpensive things to have the option where I know people for sure, one of my good friends, she is quality all the way. She's like, nope, I need three nice pairs of jeans, but they're going to be really nice. Right. How do you lean? Are you more quality or quantity? With things, I'm quality and with experiences I'm quantity. Oh, that's good. Yes. Yes. I love that.

Let's talk about the next one, safety or status? So this is more your motivation to why you want to handle your money well. Okay. So when you think, yes, okay, I'm going to buckle down. I'm going to budget. I'm going to be intentional. I'm not going to go into dad. I'm going to do these things. my question for you would be why. Is it more out of safety necessity where I just want to feel safe and secure? I will budget. I will save money. I will do all these things because I want to feel safe and secure. Or is it more on the status side, which status sounds like a bad word. I don't mean it to be. But on the status side, it's more, yeah, I will budget. I will save. I will do these things so that I can go buy a nice car so that I can go on vacation or do the things that I want to do. So why do you want to win with money is really the question?

Is it more out of safety or more out of status? Do those tendencies tend to reflect in the way that people invest? Do people who are motivated to manage their money out of a desire for safety tend to invest more conservatively? I don't know about this spectrum necessarily. There's a tendency we'll talk about. I know in a little bit scarcity versus abundance. And that probably affects investing and saving for the future more than safety versus status.

But it could. I mean, I think your status people could probably want to save in more short-term type mentality because they want to know, yeah, I have this goal and I want to get to it faster because I want to see that result versus safety. They're good putting money away and not touching it. And which one are you? I'm status. I lead more status.

Yeah, I'm like, yep, I will budget. I will do the things that I need to do, but I want to be able to live a great life because of it. Again, where my husband, we're so opposite. He's safety. My sister is safety too, talking to her. She's so funny. I know enough of her life that I know she has enough money saved to redo this deck at her house that she wants to redo. They've been talking about it.

Gosh, Paula, for like three years. They want to redo this deck. And it's been three years. And I'm like, Denise, just build the deck. Like, redo the deck. It's fine. And she's like, oh. it's like yeah but just seeing that amount of money in the bank it just feels good like I don't know if we

really need the deck that bad I'm like you have the money to do it you can do it so it's so funny but again it's just her tendency not and neither one's right or wrong but I think that the extremes of these on any of them again get unhealthy so like the status side for me I have to be careful that I'm not just putting all my value and all my happiness and anything in stuff right it's very easy for me to go to the next thing and think well if I just had that car or if I just could go on that vacation or I could just do this, live in this house, X, Y, and Z, then I'll be good. Status people can get there quickly, so you have to be very careful with that. And then safety people, like you were saying earlier on in the podcast for you, you know, the unhealthy side of that safety is that money

becomes your safety net to the point that it's detrimental, that you almost become paralyzed because you don't want to do anything else with money except for save it. Exactly. And this makes a comment that you made at the very beginning of this interview puts it into greater context where you said, if I bought something and nobody else could see it, would I still want it? Yes. And that's very much a question that a status person on the safety to status spectrum would ask. Exactly. Oh, spot on, for sure.

Yeah, security people don't really care what people think as much. As status people, sadly, we do. So we have to be careful. We have to be very aware. Now, you mentioned abundance versus scarcity. Let's talk about that next. How does it differ from status versus safety? Yeah.

So your scarcity mindset is more opportunity, the tactical side of money, that, yeah, there may not be enough. So there will be a level of maybe hoarding a level of thought process that goes into a scarcity-minded person. Because they just don't know. I don't know what the future holds. There may not be an opportunity to make more money. And then the abundance mindset very much is that, oh, yeah, it will be fine. We can make this opportunity. We can do this investment because there will always be more.

There will always be more. There's always opportunities to make more money. It will be fine. And again, the extremes of those is not good. The glass half full on the abundance side to the extreme can be very unwise. You can make very, very unwise financial decisions with just that mentality. And then yet the scarcity mindset people, I think that they miss out on a lot because they do. They just hold tight and can freeze.

And you have to believe that, yes, there is a level of a tactical side of money that once the money's gone out of your hand, it is gone for now, but the belief that, yes, there probably is going to be some opportunity in the future to help you make more money. Right. Also goes back to a comment that I made earlier that rooted in confidence, the confidence that you can make more, the confidence or the faith in abundance. That's exactly right. Exactly.

And the seventh of these seven money tendencies, planned giving or spontaneous giving. Yeah, so giving is a huge topic that I think is really important in your financial walk to be giving, to have an open hand and to be generous. But some people tend to lean on the spontaneous side of giving where they hear about a great organization or they see someone in need. And automatically they just want to give. It's like their knee jerk reaction. It's like, okay, yeah, I'm just going to give. And then more of the plans side of people, it's like, okay, I'm going to give to this number of charities or organizations this year. I'm going to research them. If they're a 501c3, I'm going to look them up on the

internet and look at their budgets and see where the money's going. And you're very thorough and very thoughtful. Can you be a little bit of both? I mean, I feel like 80% of my charitable giving is planned, but then the other 20% is completely spontaneous. Yes. No, I'm glad you said that, yeah, because my, for Winston and I, I'm more spontaneous, he's more planned. So it's funny. We actually have planned for the spontaneous moments. So we have our planned giving. But we also have a percentage in they're just like you said, that is there, if something comes up, then I'm like, yes, I want to be able to give there. And we have money allotted for that too. So yeah, I think that there, again, that moderation of all of these, I think is really good to say, okay, I don't want to be extreme

on either one. So kind of that moderation on the giving is exactly right. It's exactly, I think, a really healthy place to be. As people listen to this and as they recognize where they are within the spectrum of these seven tendencies, what is ultimately the benefit of that level of self, awareness or self-knowledge? Well, number one, you know what you value. So when you're doing your budget, when you're planning out your future and your life and your money, you can know, okay, yeah, I'm tending to lean this way or that way. And so just that awareness, number one, it's going to be really important for as you plan ahead. Number two, it gives you a level of empathy with other people. So when you have people in your life, whether it's your parents or your kids or your spouse

or a friend and you get frustrated with them when it comes to money, think about these tendencies these and just see, okay, is it because they just lean on one side of the spectrum versus the side I lean on it? Maybe that's why we're missing each other. So it can be a really great communication tool. And then lastly, if you go to any of the extremes on these, you need to be aware. You don't want to live in a scarcity extreme or you don't want to live on a spending extreme. Like if you are on the extremes, have some red flags that you know, okay, I need to raise these if this is where my habits are going and to again kind of push more towards that middle part of the spectrum. Let's talk about, we'll shift the subject and talk about fears related to money.

Fear is a big motivator for sure. And I talked to Dr. Chip Dodd about the subject when I was writing the book because I loved what he says about fear. He said that fear is actually a gift. Fear is just your body's response that you are in need of something. And so when a fear rises up, But I'm not talking about anxiety or anything, right? Like, that's not good. But just this natural fear, figure out what that is because there may be safeguards you need to put it into place. And I think for a lot of people in 2020, they had a ton of fear because 40% of Americans couldn't cover a $400 emergency in cash. 78% of Americans live paycheck to paycheck.

So if you were laid off or you were furloughed, yeah, you're probably going to be freaked out if you're in that statistic because there is a lot of fear that, yeah, there is no. money coming in right now. What do I do? But you can use that fear to say, okay, you know what, I am never again going to find myself in this position. Like, I'm going to put things in place in my life. I'm going to get out of debt. I'm going to live on a budget. I'm going to save money for an emergency fund. I'm going to do some really wise things with my money now because I don't want to end up like this. So you can use that fear to really, really help you in a good way instead of paralyze you and it not be good. Right. Fear can be a motivator rather than a reason to stick your head in the sand. Right. Let's talk about you list six money fears. Let's go through each of those. The top one, and this is one I certainly relate to, being that lack of security, the idea that you might not survive the next calamity.

Yes, yeah, that question, if something happens, are we going to be okay? This is actually the top financial fear for women, that lack of security, and it's a real one. So if you have this fear, figure out, okay, is it more on the tactical side? Because maybe you don't have. have an emergency fund or, you know, that you have a lot of bills. So yeah, that fear is going to be real. So what can you put into place to help that? Then there's the emotional side. And this is kind of where I fell into the boat. Gosh, it was probably April or so. I mean, I went to bed a few nights in April thinking, are we going to be okay? Like on paper, Winston and I, we're good financially. Like, we have no debt. We have savings. We've been doing this plan for 10 years, a decade now. So like we've made progress. We're good. But I still, even in even if the paper said it was fine. My fear, I saw this emotional fear of what is happening in our world.

Like, are we going to be okay? And for me, I realized, man, I think I put too much security and my money that there is an element where I was like, wow, if this whole thing is shaken, do I lose who I am? Like who I am as a person, like how much of that identity as I put, have I put that safety net being in a bank account? And so for me, it was a good check just to say, wow, Rachel, I may have gone a little too on that extreme. And it was good. It was a good check for me. But that fear is a big one for a lot of people. Again, that question, if something happens, are we going to be okay? And to what you described, if you realize that you're over identifying with your money and that you've lodged too much of your identity into money management, and I think that's probably something that a lot of people who are

listening to this podcast can relate to because if you're the type of person who self-selects as somebody who listens to a personal finance podcast, you probably do spend quite a bit of time thinking about your money. And if you've been doing this for years and you've built a net worth of half a million dollars, I mean, that is a big piece of who you are. What do you do then when you kind of wake up and realize, wow, my identity is wrapped in this? Yeah, for me, it's a higher calling. And I'm a person of faith. And so there's an element of me that I'm like, you know what, I believe that my identity is in God, like, just to be blunt with you, but like, that is ultimately where I rest.

If everything on the earth is taken from me, where can I have peace? And for me, that's the answer for myself. I mean, I have found that peace and that relationship. And so that's where I have to lean. And so for people, whether it is, whether it is religion, whether it is family, whether it is something, I would say have a bigger why in life than just your bank account. Because when your net worth becomes your self-worth, that can get really defeating very fast because it will never be enough. Like that finish line will continue to move, right? You have

half a million dollars. You think, well, I'm going to go for a million. You go for a million. Okay, I'm going to go for one point five. Okay. I'm going to go for and it just never will ultimately be that satisfaction that you need. So I would say, find a higher calling in your life that it's not just money that is your pure identity. And it is, money is not bad. You know, we are both in the personal, finance space. And I think it's really important to be wise and to have savings and to do things to set yourself up well. But again, if it is everything, it's going to end up being a pretty empty life. And it sounds as though by doing that, that also may address the fear of lack of security when that fear is on paper unfounded. Yeah, where it's not rational, when it is that emotional

side, then yes, yes, pulling into that why, that higher calling is going to help for sure. Let's talk about the second fear, not realizing your dreams. Yes, this was an interesting. one because talking to people and hearing them say things like, oh, yeah, you know, I always wanted to have a garden and have some lands and I will never be able to because I don't have the money. Or I always wanted to take my family on a nice vacation once a year and gosh, time's running out. I'm not going to be able to do that. People have these dreams and fears. I think for a younger generation, it feels like time is on your side and you have plenty of time. But for those a little bit older, Yeah, that fear really does creep in. And so what you have to do is plan your priorities and say,

okay, if money, if you can only do one or two of these dreams, what would they be? And then the things that you can't do, what can you do to shift it where it may not be as expensive or take as much money to do? But you can say, you know what, I'm going to put my priorities and do things that look a little different, but to still be able to scratch that itch of that dream. How do people address this fear when the obstacle isn't just money? It's a combination of money, time, circumstance, health, all of these factors that play in together. Yeah, I think there has to be a level of reality because I think there will be some dreams that won't be realized and there's going to be a level of grief and sadness with that. That, wow, yeah, we're just not going to be able to do that. But again, ask yourself why that dream was for you. What was it about the dream that you loved? So just take, you know, a trip for an example.

I love vacations, fall out all this, you spend on like every example. But say it was that. And it's like, okay, well, why do you want to take that trip every year with your family? Well, because I want to spend quality time with them. Okay, well, why do you want to spend quality time with them? Because I feel like I don't get it at home. Okay, why don't you get it at home? Because I work a lot.

Okay. Well, what if you just cut back a little bit here or there or the weekends that you are home and you're not working? You put your phone away, turn off the TV and go somewhere like a park or go do something. with your family and get that same experience, get that same value that you wanted out of your dream, but it's just going to look really different. Right. The exercise of the five whys or the seven whys. Yeah. Oh, I've never heard that, but that's exactly it. Yes. Ask why, why. Do you ask it five times? Is that the... Exactly. Yeah. I've heard it described as either five or seven. I think the idea is

essentially ask it enough times that you really get to the root of the question. And when you think you've gotten there, ask why again. But yeah, it's that. exercise of whatever it is that you think you want or whatever question it is that you think you have, keep asking why until you get to the root of it. That's good. I love that. Man, I wish I knew about that when I wrote the book. I quoted you, Paula. That's awesome. Oh, well, thank you. The next edition, second edition. That's right. That's right. I'll add you in there. We'll return to the show in just a moment. Get you and your crew to the big shows with Go Transit. Go connects to all the main concert venues like TD Coliseum in Hamilton and Scotia Bank Arena in Toronto and Go makes it affordable

with special e-ticket fairs. A one-day weekend pass offers unlimited travel across the network on any weekend day or holiday for just $10. And a weekday group pass offers the same weekday travel flexibility from $30 for two people and up to $60 for five. Buy yours at go-transit.com slash tickets. Let's talk about the third fear. The fear of essentially the fear of in-eastern. The fear of in adequacy, the fear of being incapable of managing money well or not being smart enough to manage money well. Yes, people will say, you know, I'm bad at math. I can't do this. And I'm like, no. Yeah, this whole fear, it's so great because I'm like, I can debunk this for people because

personal finance, honestly, if you can get to a fifth grade level of math and understanding, you can win with money. You can do a zero-based budget. You can learn about compound interest with investing, like it does not take a master's degree in finance to win. Your behavior in who you are and what you do with your money is vastly more important than what you necessarily have to know in your head. And so being wise with the money you have and then outsourcing in the places that you really feel like, okay, I'm not smart, right? Like, I am not an investing professional.

Like, I don't have the degrees for that. I don't have the licenses. I didn't take the tests. So I have an investment professional that helps us with our retirement. and helps us invest, and that's okay. So the basics, you can do this. Anyone can do personal finance on the basic level. And then when it gets a little bit more complicated,

whether it's taxes, insurance, investing, and there are people out there that that is what they do for a living. So let them help you. Don't just give it to them blindly, but have them walk you through some of these areas in life. So that's the great thing. You can do it yourself 100% in the places that are a little bit more confusing. You can definitely use other people's professional expertise to help you.

How do you evaluate whether or not you're getting good advice when you turn to expertise? How do you develop the judgment to know that you are talking to someone with good judgment? I would say, ask if they have a heart of a teacher or a heart of a salesman. If someone is willing to sit down and teach you and you learn what they're doing and why they're doing what they're doing and they actually take the time, they're probably pretty solid. Other people that are just wanting a commission and want them just to make a buck off of you, you're going to feel it really fast. So I think the character of the person is huge.

And then I would say have enough knowledge, though. We'll take investing for an example. Have enough knowledge that, yeah, if you're putting your money into a mutual fund that you know, okay, here's the history of the rates of this mutual fund and one similar like this and that you can compare and contrast and that you can somewhat know. But I think that the person that's helping you is a big part of the equation. Let's talk about the fourth fear, the fear of external forces, forces outside of your control, the fear that that will hold you back.

Yeah, we'll just name that 2020, right? The pandemic. Yeah, okay, so there are things that you just cannot control. Like, you will not control what the CDC is going to do. You can't control who's going to be in the White House. Like, like, there's a level that you just are not going to control those things. You have to focus on what you can control. what is going on in your household that you can. You can control how hard you work. You can control

the money that you're bringing in and what you're doing with it. You can control the people you surround yourself with. There are elements of your life you can control. And so focusing on those things and not letting the fear of all those external forces that you can't control overwhelm you. So focus on your own actions? Exactly. Yep. And what's in your domain enough that, yeah, you actually have a handle on the outcome. What happens when the fear of external forces becomes so great that it paralyzes you from taking action? I think when fear in general does that, there's a time and a place that you probably

just need to take a step back. And there's probably things in your life you can probably push down on. So like if you feel like you're just like watching the news 24-7, probably a good idea just to turn it off. If you're around people that are just thinking the world's going to end day in and day out and that fear is just overriding them. It might be good just to unplug for a little bit. You don't have to be mean about it,

but just stepping away. If social media has gotten you in this tailspin of this black hole of fear with everything, maybe it's good to step away from a little bit. Take some breather, figure out where are you getting this information and where is this fear coming from? And not that we're trying to, again, be ignorance or put our head in the sand,

but there's a balance of living. And that fear, again, over time, is going to be really, really negative. on your life if you don't do something about it. And so we all initially are going to have fear, right? It's all going to kind of stir up in us. But what we do with that fear and what we decide, is this going to dictate me? Is this going to be the thing I make decisions on? Or do I see it? I acknowledge it, but I put things in place to safeguard myself. That's what's important. All right. Let's talk about fear number five, the fear of past mistakes, the fear that you'll never

be able to get ahead because of what's happened in the past. Yeah, the fear of past mistakes is an interesting one because for some people, they're going to have a larger dollar amount attached to their mistake versus another person. So it may take you longer to kind of climb out of that hole. If you went into debt for something, you know, a bad business deal for 200 grand versus just making a mistake

of buying a purse for $500 or $200, whatever may be. So really focusing on it's not just the dollar amount, but making sure that that mistake does not become you. Brunee Brown talks about this a lot, which I love, that you are not your mistake. Like, that is not who you are. And so when you start to let that define you, that negative self-talk comes in, so you have to look at it as two separate things. And you have to say, okay, this is me as a person.

This is what I did in the past. And yes, I might be paying for it today, but it does not define who I am. Right. And it strikes me as you described this, that there's a dollar amount, but then there's also what that represents as a proportion of your income at that time. So a $150,000 mistake to a person who makes $70,000 a year is on a different level than $150,000 mistake to a person that makes $600,000 a year. Yes, that's a yes, a great point. Yes, it will be very much a percentage of your income and how quickly you can get past that mistake. Yeah, very much so. How do you handle those moments when you just self-flagellate, beat yourself up about things that you've done in the past?

Yeah, I think that there's a level that you have to give yourself the room to possibly do that for just a second to say, okay. Yeah, I am frustrated with myself that I did that. But again, not to let that identify you who you are. I think that's the important part, that you made a mistake, you are not the mistake. and when you can say, gosh, yeah, you probably will be kicking yourself, you know, with some of the mistakes you've made in the past. Sure, I think we've all done that. And we've all made mistakes. If you're breathing air, you've made mistakes with money. But to say, I'm not going to let that become who I am, though. So if you are, I guess, in that cycle, I would say, write it out, put it out there on a sheet of paper, get it out visually, and then have people in your life that can speak truth to you. So whether that's a spouse, whether that's a parent or a friend, but have someone come around you and remind you, that this is not who you are.

Like, this is not you because there's a lot of shame and guilt and a lot of money, mistakes and decisions people have made. So you just have to be aware not to make it that it's you, that your identity is that mistake. You mentioned people speaking truth to you. How do you know when the people around you are speaking truth to you versus they're just telling you what you want to hear? Yeah, I think there's a level of enabling that can go on or a level on the opposite end of that, talking about spectrums of legalism.

So if the rules and the principles are above the relationship, you're probably with a very legalistic person. So if someone is like, well, you didn't do this and do that and do that and this, yeah, they're probably not a healthier person to be around. And then on the other extreme, if someone is just enabling and they're not pushing you and you're not feeling challenged and every time you bring something to them, they're like, oh, yeah, you're okay. It's fine. It's fine. You're like, yeah, well, I've made this mistake 16 times. Like, well, it's okay. It's fine. It's fine.

No, you have to get to a point. You're like, no, it's not. Like, so if they're enabling your behavior, that's unhealthy too. So finding that middle ground, someone that's going to challenge you, hold you accountable, but yet show you a lot of grace. And then finally, let's talk about that sixth mistake that really ties in with it, the fear of repeating the past. The fear of repeating about, yeah, when I was talking to people specifically about their money classrooms, I heard multiple people say, I just don't want to end up like my parents. And so there's that fear of, wow, I don't want to go back to my past.

I don't want what my past was to be who I am. And so you just have to realize that, yeah, there's things you're going to put into place in your life that you will not repeat those past mistakes. And again, if you do, and like we said earlier, they are not who you are. But I think it's important to say, yeah, this is where I don't want my future here. And you can kind of pinpoint and see what that looks like. So what are things you have to put in place to not allow you to get there? Which one of these fears is the strongest for you? I'd say the first.

And I probably wouldn't have said that pre-2020. But looking back now, I'm like, no, it was a real one for me, for sure. And I think if we were not in the position we're in financially, that would flare up a whole lot more on the tactical side, too. In what other ways has 2020 affected your views of money or your feelings around money? It's solidified a lot of what I've been talking about for the last 10 years. I found that people that didn't have debt and had an emergency fund in place and they were silo, you know, they were furloughed or laid off.

There was, of course, still a level of, oh, gosh, they were shaken, but a level of peace that was there versus people that didn't have a plan. And so that's not to shame people that don't, you know, get out of debt or don't live on a budget or whatever, but for me, it proved, gosh, what I teach and what I help people with so much in my longing for people to get control of their money is so, so important and more important than ever before. And then I think, too, we touched on the experiences and things as well, but like it awoke a lot of things were taken away from us. And I think we saw where did we really put our value in our life? And I think it made people question a lot too in a good

way. Question what? Question where they put their value. I think that it's like, oh yeah, if I value relationships and being out with friends and I don't see my family or my friends, I think that that shows you, yeah, your value is probably in a right spot and you're probably grieving that and it's so difficult. But if your value and everything was in stuff and in making money and you lost your job, oh gosh, you could see that could be taken away from you. And that's a scary place, a very scary place to be. And I think it made people reevaluate where they want to put their time and their money. Once this is all over, when we get to the after times, how would you like to direct your time and money? I think I will. I have three littles at home right now. And so I think I value being home

more than I ever did. It makes me, I drank a little bit more wine during the pandemic than I probably did pre-pandemic. But I value my family more than I did in my kids, specifically and wanting to be around more for their stuff. I mean, I'm able, our kids are in school, schools are open in Nashville, Tennessee. That's where I am. And to be in a drop off line and take Amelia and bring her home and all of that. I enjoy that part so much more than I thought I would because I just never really gave myself the bandwidth to do that a lot because of work. And so for me, I think that it reminded me and kind of awoken this new part. And I'm going to embrace that more. That's nice. Well, Rachel, thank you for spending this time with

us. Absolutely, Paula. Thanks for having me on. I really appreciate it. Of course. Where can people find you or find your book if they would like to learn more? Yes. Know yourself, know your money. It's out anywhere books are sold. So you can check it out there. And then Rachelcruise.com. And I also have a podcast, the Rachel Cruz show and all over social media. So Facebook, Instagram, all the places. Thank you so much, Rachel. What are the key takeaways that we got from today's episode? Well, in today's episode, we discussed three different frameworks for thinking about our relationship with money. For the key takeaways, let's review each one of these three frameworks. Now, we'll start with the first framework, and it's the framework of your money

classroom. Your money classroom is a metaphor for how you grew up, the environment that you grew up in around how you dealt with money. And there are four money classrooms. The framework is essentially a quadrant. And that quadrant ranges along a spectrum of, on one axis, a spectrum of low communication to high communication. So verbally closed off versus verbally open. That spectrum is one of the axes of this quadrant. And then the other axis of this quadrant is emotionally, was it calm or was it stressful? So if you imagine a quadrant with these two different axes, one that's a spectrum of communication low to high, and the other that's a spectrum of emotion, calm to stressful,

those two axes form this quadrant. If you turn that quadrant into a two-by-two matrix, now we have four money classrooms. And those money classrooms can be described as anxious, unstable, unaware, or secure. The secure classroom, the secure-classroom, the secure end of that quadrant, is when you are highly communicative and emotionally calm. It's that top right corner of the two by two matrix. But catty corner to that, that bottom left-hand corner, is the opposite.

That's the anxious quadrant. It's where you are emotionally stressed and verbally closed off. You're not communicating. So if you imagine these two spectrums as the X and Y axis and you draw a diagonal line, And that diagonal line is going to stretch from anxious to secure based on the openness of your communication around money, as well as the feeling calm versus stressful around money. And so that diagonal line, ranging from anxious to secure, those form the bottom left through top right boxes of this quadrant.

But let's talk about the other two boxes of the quadrant as well. you've got instability, and that instability comes from an environment that is verbally open. You're highly communicative about money, but it's an emotionally stressful topic. And so that instability forms another box in this quadrant. And then you also have unaware. In the unaware quadrant, you are neither talking about money, nor are you stressed about it. It's simply not on your radar. And so those four quadrants, essentially those four money classrooms of anxious, secure,

instable, or unaware, those form the four classrooms that you grew up in in your home environment when it comes to your initial impressions around money. And it's entirely possible that perhaps throughout your childhood, you shifted from box to box within this quadrant, you shifted from classroom to classroom. I think you can shift classroom to classroom to classroom. And for my readers, my push is to go to that classroom number four with your current nuclear family to say, yeah, create that environment where money is controlled and that level of stress is down and that you're willing to talk about it, that it's not a taboo subject. So in our families today, given that we can't change how we grew up, in our families today,

in our lives today, how can we work to create that calm, controlled, and openly communicative environment around money. Well, first, start by recognizing one money habit of yours that you don't like and ask yourself why you have that habit. If you spend too much money late night online shopping, or if you ignore your money for weeks or months at a time, some negative money habit, something that's adversely affecting your life, why is it that you have that? What's the root of that? Ask yourself that question and, discuss that question openly with your family, talk about money, even if it's hard, because talking about it helps you engage with that reality.

Now, during these conversations, it's important that the conversations are productive, that you're actually making forward progress through the conversation rather than just rehashing thought circles. Rachel says that in order to have productive money conversations with your family, you need to be rooted in understanding why. The purpose of the money conversation is to explore that why. To ask your why, to talk to each other about,

hey, here's why we want to handle money well. Here's why I am scared to talk about money. Here's why I don't want to bring this up because this is how you react. Here's why. Remember, the key is not to shame and not to judge. Don't make the other person feel defensive. and if you've never created a budget together, try doing so because often philosophies around

money surface when you are doing a tactical activity such as budgeting. Now, if your partner still doesn't budge or your partner becomes hostile, then you could respond by being more vulnerable. Tell them what's going on. Hey, here is the story in my head that I'm projecting onto you. So please, tell me if this is right or wrong. By role modeling that openness and that vulnerability, you may be. be able to encourage your partner to also become more open and more engaged around conversations

pertaining to money. And so that is the first key takeaway. The first key takeaway is a review of the framework of the four money classrooms. Key takeaway number two, let's review the framework of these seven money tendencies. We often find ourselves along these seven spectrums. There's the spectrums. There's a spectrum of savor versus spender, nerd versus free spirit, experiences versus things, quality versus quantity, safety versus status, abundance versus scarcity, and plant giving versus spontaneous giving. So those seven ideas exist along a spectrum. And if you have an awareness of where you land on each of those seven spectrums, then you'll have a stronger sense of what's important to you.

Well, number one, you know what you value. So when you're doing your budget, when you're planning out your future and your life and your money, you can know, okay, yeah, I'm tending to lean this way or that way. And so just that awareness, number one, it's going to be really important as you plan ahead. Recognizing the different extremes of these tendencies can also give you greater empathy during money conversations that you have with others, like your spouse, your partner. even siblings or friends. It's harder to judge somebody when you can acknowledge where they land on the spectrum and where their story is coming from. And it's humbling to know that,

number one, that you're not perfect, number two, that there are no quote unquote right answers, that there are money tendencies and spectrums along which we all exist. Rachel cautions against living in the extreme. If you go to any of the extreme, if you go to any of the extreme, on these, you need to be aware. You don't want to live in a scarcity extreme or you don't want to live on a spending extreme. Like if you are on the extremes, have some red flags that you know, okay, I need to raise these if this is where my habits are going and to kind of push more towards that middle part of the spectrum. And so that is the second key takeaway. The second key takeaway is a review of the seven spectrums of money, the seven money tendencies. Finally, key takeaway number three,

Let's review the framework of the six money fears. Many of us hold deep-seated fears around money, and Rachel identified six. They are lack of security, not realizing your dreams, fear of inadequacy, fear of external forces, fear of past mistakes, and fear of repeating the past. Let's talk about these. So lack of security is that fear that you may not be able to survive the next disaster. It is a fear that plagues many of us. There are a lot of people in the Afford Anything community and in the financial independence community

who are diligent about saving and investing because they like the security that money and assets provide. They're driven by a lack of security. I'll speak for myself. I'm certainly driven by that fear of a lack of security. In many ways, that can be a good thing because a healthy amount of fear is motivating. But when it's experienced to excess, then rather than being motivating,

it can be paralyzing. And also in the process of trying to amass enough security that we feel like we will be able to survive the next disaster, we may in that process end up over-identifying with our money. The antidote to over-identifying with money is to be rooted in some type of a purpose some meaning that is bigger than the money itself. Have a bigger why in life than just your bank account because when your net worth becomes your self-worth, that can get really defeating very fast because it will never be enough. Like that finish line will continue to move. And so that is one of the six money fears, that lack of security.

Another one of the six money fears is not realizing your dreams. If you plan your priorities, pick one or two dreams. maybe your dream is to travel the world with your family. Maybe your dream is to have a certain type of home. Pick a couple of dreams and then ask yourself why you want that dream in the first place. Because the motivation behind why you want that dream could hold the real answer. It could hold deeper insight into what's motivating that dream. And once you understand what's motivating that dream,

that understanding of the motivation, that understanding of the root of your dream could help assuage some of the fear that you feel around the possibility that you may not realize that dream. Why do you want to take that trip every year with your family? Well, because I want to spend quality time with them. Okay, well, why do you want to spend quality time with them? Because I feel like I don't get it at home. Okay, why don't you get it at home?

Because I work a lot. Okay, well, what if you just cut back a little bit here or there or the weekends that you are home and you're not working, you put your phone away, turn off the TV and go somewhere like a park or go do something with your family and get that same experience, get that same value that you wanted out of your dream, but it's just going to look really different. And then as Rachel discusses, four other fears are the fear of inadequacy, which is the fear of not being smart enough, capable enough, responsible enough to be able to handle your money well. There's the fear of external forces like, hello 2020, when we saw that there were these external forces that were outside of our control that made huge impacts on our life, our work, our money, our health.

And so that fear of external forces, which is closely related to the fear of losing control, that is another major fear. There's the fear of past mistakes. The antidote to that is realizing that you are not your mistakes. you can give yourself room to be frustrated, but also give yourself grace and talk to others who will hold you accountable in a compassionate way, in an empathetic way, so that your past mistakes can be a source of learning and growth rather than a source of shame. And then there is also the fear of repeating the past. You hear this come up when people say things like, I don't want to end up like my parents did,

or I don't want to end up like my grandparents did. If you fear repeating the past, put structures in place to increase the probability that you won't repeat the past. Set yourself up for success in whatever way that requires. Be specific. That might mean getting a higher education. That might mean starting a business. That might mean increasing your savings. That might mean improving your health. Whatever it is that you fear about repeating the past, identify particularly what that is and then ask yourself, what one small action can I take to break the cycle and to end up in a better situation than what I came from?

So what should you do if you become so paralyzed by fear that you can't take any action at all? Here's Rachel's advice. I think when fear in general does that, there's a time and a place that you probably just need to take a step back and there's probably things in your life you can probably push down on. So like if you feel like you're just like watching the news 24-7, probably a good idea just to turn it off. If you're around people that are just thinking the world's going to end day in and day out and that fear is just overriding them, it might be good just to unplug for a little bit. So these three frameworks, the framework of the six money fears, the framework of the seven spectrums and the framework of the four classrooms. These frameworks are the major takeaways from this conversation with Rachel Cruz

about the importance of understanding yourself, self-knowledge, in order to improve your relationship with money. That is our show for today. If you enjoyed this episode, please share it with a friend or a family member. We also have a 31-day challenge. It is a new year. It is 2021. What better way to kick off the new year than to embrace a challenge

in which every single day for 31 days, you will get an email with an idea, one main idea, as well as a question and an action that is associated with that idea. Now, these ideas that come from the 31 day challenge relate to improving your life in the realm of finance, habits, productivity, goal setting, all of the things that are most likely taught most of mind at the beginning of a new year. So to join the 31 day challenge, you can join for free at afford anything.com slash 31 day challenge. That's afford anything.com slash 31 day challenge. An amazing way to kick off the new year. It's an amazing way to harness the enthusiasm that I hope you feel around the beginning of 2021 into an arena that has direction

and structure. So harness that enthusiasm into choosing your goals wisely, breaking those goals down into manageable actions and incorporating those actions into your routine. All of that is what we discuss in this 31-day challenge. So again, sign up for it at afford-anything.com slash 31-day challenge. Thank you so much for tuning into this episode and thank you for being part of the afford-anything community. My name is Paula Pant.

This is the Afford- Anything podcast to make sure. that you hit subscribe or follow in whatever app you're using to listen to this show. I will see you in the 31-day challenge updates, and I will catch you in the next episode.