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Our emotions determine our -financial success or failure. This is the guiding principle examined by Alvin Hall in his latest -personal finance title, You & Your Money: It’s More Than Just the -Numbers (Atria Books; $24). To understand your own style of financial management, he says it’s first necessary to be comfortable in your own skin: to know and accept who you are, what you want, and what money means to you.
Getting to Know You
Here are eight exercises that will help you get to know your own money habits and tendencies better. You don’t necessarily have to perform all eight; instead, you can pick the two or three that seem most relevant to you and see what they can teach you. The goal of all eight exercises is the same: to help you better understand the role of money in your life. How does money bring you happiness? How does it cause you regret, anxiety, or disappointment? Answering these questions is a vital first step toward defining the kind of relationship you’d like to have with your money–and taking the steps necessary to achieve it.
1 Keep a diary of your spending and the emotions that go with it. Buy a little notebook especially for the purpose and carry it with you everywhere you go for a month. During that time, write down everything you buy, no matter how big or how small. List each purchase and its price. Include items for which you pay cash (like your morning coffee and newspaper) and items you buy with a check or a credit/debit card.
At the end of the day, take a moment to add a brief note describing how you feel about that day’s spending. Do you feel joy? Guilt? Regret? Disappointment? Contentment? What you write will vary from day to day, of course. One day you might write, “I’m so excited about the new shoes I bought today.” Another day you might write, “I feel bad about spending so much money on snacks and drinks today. I really meant to save that cash for the weekend. Hope I can do better tomorrow.”
There will be times when keeping the diary feels like a total bore or a nuisance. You’ll be tempted to quit. Don’t! A full month’s worth of notes will tell you a lot about your money habits, good and bad, and help you understand the ways in which your money habits bring you happiness and grief.
2 Examine your sources of income. List everyone who provided you with any money during the past year, along with the amounts you received. A few of these sources will be obvious: the salary paid by your employer or the income from your own business, for example. Others may be easy to overlook. Did you receive any _payments from the federal, state, or local government? Did your parents or other family members give or lend you money? Did you win money from a lottery, a contest, or gambling? Did you receive money as a