[MUSIC PLAYING]
So this part in our comprehensive guide
to getting good with money is all about the emotional side
of money, which I think I can speak for many of us
is often the most difficult part.
If you feel like money weighs heavily on you,
you are very much not alone.
64% of Americans say that money is a major cause of stress,
with 49% saying they have spent more than they can afford
because of their emotions-- things like stress,
and the boredom, et cetera.
Money is fundamentally emotional,
and it's fundamentally about more than just the money
itself.
And accepting that and gaining control over
how you feel about money is one of the big keys
to getting good with it.
Because you may not always have complete control over things
like your income or your expenses,
but you can gain control of how you feel about these things.
Financial advisor Rick Kahler says only about 20%
of financial planning clients respond to logic and education
alone.
For the other 80%, there are underlying
emotional issues that impact their spending habits.
Some people even need financial therapists
like the father-son duo of Brad and Ted Klontz
to tease out why they have money trouble.
They rely on things called money scripts, which
may have been ingrained into people's minds
and color their relationship with money.
Money scripts include things like, all women are
bad with money, or, your self-worth
is based on your savings, and other harmful and false
beliefs.
And there are probably some money scripts
that you're living by right now without even realizing it
or your ideas that you've internalized about money that
are way more based on emotions or shame
than any kind of financial literacy.
For a lot of us, college is the first time
where we're really confronted with the reality
that money has a huge impact on how we live,
how much finance and class can impact everything around us,
and how coming from different socioeconomic backgrounds
than peers can have a huge impact on how you feel.
Even while many colleges are prioritizing accepting students
from different socioeconomic backgrounds,
studies have shown that students who come from these more
challenged backgrounds often have
a much more difficult time taking advantage of the college
experience.
As we mentioned in our intro video,
I'm someone who experienced financial insecurity when
I was young, and I also spent much of my adolescence
around people who had vastly more than I did.
And so much of my terrible money decisions
were driven by that desire to keep up,
or to look a certain way, or associating who
I was with what I could afford.
And when you're in college avoiding,
spending to keep up with the life you want to live
can be nearly impossible.
Take something like Greek life, for example,
where sorority members can easily rack up $7,000 or more
just on having the proper outfits,
attending the right events, paying dues, living expenses,
et cetera associated with being a part of that sorority.
For an incoming college student that network
of sisterhood and socialization can be a real boon
if you don't know anyone, but it can also
be incredibly elitist and exclusive
to students who can afford the luxurious lifestyles.
And in addition to these economic disparities
being all around us in college, college
is often the first time where many of us
have to handle our day-to-day living expenses on our own,
even if we're still somewhat being
subsidized-- whether by parents, or scholarships,
or student loans.
Even if some bills are covered and out of sight for you,
there are many choices you're going to be making in college
on a day-to-day basis with your money where are the outcomes,
financially, are up to you--
whether you go out for a meal with your friends
or you stick to your meal plan, whether you
buy a cute new outfit for that party,
or you spend that money on the music festival
you probably can't afford.
It's easy to feel like college is a time in which nothing
really counts and you're free to make all
of those terrible decisions, including financial ones,
but they add up and can have a real impact on the relationship
that you're creating with money long-term in addition
to the savings you're missing out on.
One of the biggest mentalities to switch out
of when it comes to money is, it's in my account, therefore,
it's OK to spend.
When I was in college, I lived and died
by that number in my account, and that was the money
that I considered available to me
until I inevitably overdrafted, in which case,
I would just continue to try and spend until they would stop me.
This "in my account, available to spend"
mentality is one of the money scripts
that the Klontzes often encounter with their clients.
It can manifest this feeling of, well, I might as well spend it.
Because if I don't spend it now, I will later anyway.
A similar money script of theirs for people
who come from wealthy or comfortable backgrounds
is, there will always be enough money.
In other words, this mindset can come from a place of privilege
like there will always be more and a place of scarcity
or misplaced practicality-- i.e.
I need to spend what I have now before something else makes
it go away.
This is one of the biggest problems with living off
that one lump sum.
All the money kind of bleeds together,
and it's hard to differentiate what
you have now versus what you need
for later, which is why I categorized
budget is so important.
But if you really still don't trust yourself not
to overspend, give yourself a daily allowance in cash
and leave the rest at home.
There are even people who literally freeze their credit
cards.
But sometimes the emotional side of money
extends beyond just a feeling that money in your account
equals money available to spend.
Sometimes it's about feelings of inadequacy,
and it's easy to think that buying a certain thing
or having a certain thing will suddenly
make you feel a certain way or appear a certain way to others.
And trust me, I have been there.
I once stole my parents' credit card
and got grounded for a month one summer
to buy a pair of UGG boots because I considered
that the thing that I needed to have in order to be cool--
which, like 10 levels of yikes.
We idealistically often like to think of college
as a great equalizer, people coming
from all different backgrounds to learn and grow together.
But anyone who's been to a college campus
knows that that is very much not true,
and socioeconomic differences will display themselves
very clearly amongst the student population.
And while it is true to some extent
that college can act as an equalizer for people
from different backgrounds, with bachelor's degree holders being
about half as likely to be unemployed and earning,
on average, about $32,000 more a year
annually than those with just high school diplomas,
it's less true that it is much of an equal opportunity step
as we'd like to think.
According to the association of colleges and universities,
only 22% of high school sophomores
from lower socioeconomic backgrounds
expect to pursue a college degree.
That means that they are less prepared for the application
process should they choose to pursue it and have fewer
financial resources to pursue visiting and applying
for colleges.
According to a 2016 report from the Pell Institute,
when organized into four income groups, 77% of college students
belong to the top two groups, with students
from the top quarter--
households that made more than $116,000 per year--
accounting for about half of all college degrees awarded.
The lowest quarter-- students from households earning $35,000
or less--
only accounted for 10% of degrees awarded.
So while college may help you gain an equal footing
on graduation, even making it into college in the first place
is going to be much more difficult
from people from those lower socioeconomic backgrounds.
And of course, when it comes to the game of unpaid internships,
I think we all know who has a leg up
and taking advantage of them.
So especially if you are from one of those lower
socioeconomic backgrounds, at college,
you will likely find yourself surrounded
by people who come from different means than you do.
These are people who eat out all the time for meals,
never stick to their meal plan, go on weekend trips,
buy new outfits for every party, and generally
live without having to be all that aware of the money--
things that are well outside of your budget--
which can create a huge sense of FOMO,
where you feel like you're missing out
on the "essential" college experience because you simply
can't afford to do all of the things these other people are
doing, which, in some cases, will inevitably lead you
to spending student loan money on frivolous stuff
or going into credit card debt in order
to keep up-- which are both things that I did.
And it's not unusual or weird of you
to notice when your friends are spending a certain way.
60% of Americans report being curious
as to how friends are able to afford the things that they
post on their social media.
There is a creeper inside of all of us.
One of the biggest ways to overcome
this hurdle of feeling like you have to spend in order
to keep up with those around you is
to get very comfortable with the phrase,
"it's not in my budget."
The more you are clear about your boundary-setting
around money and don't open up the expectation
that you can't join in on certain things the less
you will feel like you have to make up an excuse
or give in to the peer pressure in order to keep up.
In addition, you can start to find
things to do that are ways to spend quality
time with the people that you want to be spending time
with that don't necessarily require a ton of money--
trivia and movie nights at home, potluck dinner parties,
picnics, all kinds of things that
can be accessed at all different income levels
and will still give you that burst of fun college
time with my friends.
Around 80% of people report not communicating it
with their friends when they're overspending,
which is understandable when it can
feel like it's embarrassing or shameful to say that something
isn't in your budget.
But ultimately, if you are not able to get comfortable
with that dynamic, you are going to be setting yourself
up for financial failure.
And if there are people in your social group who you think
would genuinely think less of you,
or judge you, or cut you out if you
revealed not being able to keep up with their spending habits.
those people are not your friends.
Time to x them out of your circle.
Not cool, not cool.
Lastly, one of the most common side effects
of an unhealthy emotional relationship with money
is impulse-spending.
This is spending that you're going
to do that is not motivated by a rational, thought-out need
or something that you even really, on many levels, want.
This is spending that's motivated by a moment-to-moment
emotional state--
things like stress, or anger, or envy, or happiness,
basically times at which emotions
are clouding our ability to make decisions about money
and leading us to want to satisfy
an urge with a quick buy.
And for many of us, online shopping,
especially from the comfort and/or discomfort of your dorm
room, can be one of the easiest ways
to fall into the impulse-spending trap.
If you find yourself online shopping after a bad exam
score or online shopping as a reward for a good one,
you're spending emotionally.
According to social psychologist Jennifer Lerner,
negative emotions like sadness or stress
actually increases the amount of money
you're willing to spend at once because it gives
an immediate, small mood boost.
Buying things does give a quick head of dopamine,
but it's short-lived and an unhealthy coping mechanism
if you find yourself constantly buying things
you do not want or need just to boost your mood.
Having and sticking to a budget with sometimes a little bit
of funny money built in for the times
that you want to just spend without worrying about it too
much is a good way to make sure that you're
keeping these things in check.
You can literally create a segment of your budget
that's dedicated to those impulse buys so that when you
do inevitably occasionally make them,
they're not really impulses.
They're something that you've already dedicated money for.
Or you may want to create a buddy system, where
you have a person you can reach out
to when you're tempted to spend based on an emotion that
may not be rational.
They can give you an instant veto on an emotional purchase
or talk through with you about the reasons for buying it,
and you can do the same with them.
Making sure to plan ahead and have outlets
for when you are tempted to emotionally spend
is incredibly important.
I find that, for me, often, when I'm tempted to emotionally buy,
I like to make myself a little mood board of the saying
that I'm thinking of.
Like if it's a pair of shoes, I'll
take the time to build a little mood board
or outfit around the shoes in question.
It takes up time, it allows me to use my imagination,
and by the time I finish, I often
find that I don't even really want the item anymore.
I just wanted to fantasize about it for a little bit.
If your emotional spending is out of control,
you may want to check out resources
for campus counseling, finding someone
to talk to in a more professional and prolonged way
about why you may be having this relationship to money.
One of the most important phrases
you will ever integrate into your adult vocabulary is,
"it's not in my budget."
You have to be able to be candid about what you can
and can't afford and not allow yourself to get suckered
in to being a part of something or buying something that you
simply cannot afford and just cringing as your credit card
gets swiped at the table.
There can be awkward moments of things like a shared
trip, where bills are split differently,
or a birthday, when not everyone's ordering
the same thing at dinner, but everyone is expected
to pay their fair share.
And making sure that you're comfortable with having
these conversations upfront, and establishing the expectation,
and even sometimes opting out of things if it's not necessarily
something you can afford means that you won't find yourself
backed into a corner financially with friends or, even worse,
acquaintances you don't even really want
to be eating out with.
And if you extend this to people you might live with,
like roommates, you can start to think of it
in terms of very, very proactive steps,
such as a roommate contract.
Just you might upfront want to split the chores that you're
doing or rotate out uses of things like the television,
you should also plan for all of the different little money
things that could easily cause conflict in a household.
You don't want to be left paying a ton of money
for your friend who runs the air conditioning whether they're
home or not because they insist on splitting it evenly.
Proactive planning and agreeing beforehand on the terms
means that you will not walk into a social situation
and be left feeling uncomfortable.
People often act like money and friends don't mix,
but unclear money and friends don't mix.
The truth is that money and friends
have to mix in many situations because a lot
of social activities cost money.
But feeling uncomfortable or shying away
from these discussions only really
ensures that you're going to end up
in situations that you wouldn't have chosen for yourself.
Money is deeply interwoven into our sense of self--
our value, our sense of security, our worth.
But ultimately, gaining a healthy relationship
is about decoupling this sense of self
with how much money you may or may not have
or what you may or may not be able to afford.
Gaining control over your money and having
a comfortable, healthy relationship with saying no
to things are parts of the key steps to making sure
that you are in charge of the narrative around money
in your own life and not the other way around.
It's easy to feel shame, or insecurity, or spend out
of misguided emotions, but it's not
OK to build a life that way.
Gain control over how you feel about money,
and you will start to gain control over how you spend it.
Don't forget to check out the next episode
in our guide to getting good with money
for college students.
And for all things talking about money,
don't forget to check out The Financial Diet here
on YouTube or all around the internet.