The following “thought exercises” from Alvin Hall, financial educator and author of You and Your Money, can help you understand your internal money attitudes — and how you’ll deal with the ups and downs that life is apt to throw your way.
Imagine yourself in each of the following three scenarios. These are “thought experiments” (in the phrase made famous by scientist Albert Einstein) that can help you better understand your approach to money. Devote fifteen minutes to each experiment. Read the description below, then jot down on a piece of paper all the thoughts, ideas, and fantasies that fill your mind as a result. I predict you’ll find them very revealing.
1. The Windfall. Imagine suddenly receiving a gift of half a million dollars. What would you spend it on? Would you devote some of the money to helping family, friends, or charity? Would you use it to start a business, or to invest? Would you go on a shopping spree or book a dream vacation? Would you pay off your credit card bills or the mortgage on your home? Don’t just fantasize vaguely: draw up a list of your expenditures, including your best estimate of the number of dollars involved for each.
Also think about how you would change your life if a lot of money fell into your lap. How much of the windfall would you try to preserve? How long would it take you to run through it? How soon would you have to go back to work? Would you consider moving to another part of the country or the world? Would you make any changes in your family relationships (such as getting married — or divorced)?
The results of this thought experiment will expose some of your deep-rooted dreams, desires, and ambitions. Your answers may include aspirations that you think about every day and others that you rarely allow yourself even to imagine.
What’s the point? Well, you may not really be in line for a half-million-dollar windfall, but maybe you should consider reorienting your life so that you can pursue some of the fantasies this experiment has brought to the surface. You probably won’t achieve them overnight. But maybe over the next five or ten years you can make some of those dreams come true.
2. The Setback. Imagine if you lost your job (or your other main source of income) due to being laid off, the sudden and unexpected absence of a spouse, or the elimination of a government support program. What would you do? How would you search for a new job? How long do you think it would take to find a new source of income? How much money do you have in the bank or in investments to tide you over? Where and how would you cut back on your lifestyle to make that money last as long as possible? How much of your spending could you cut back on and still be happy? How long would your savings last? How would your relationships with your family and friends be affected? How quickly would you begin to panic?
This thought experiment is likely to make you feel a bit anxious. That’s all right — remember, it’s only an experiment. But the kind and degree of anxiety you feel is important. Does the very idea of a setback make you feel extremely frightened? Do you fear you’d run out of options in just a few weeks or days? Or, conversely, do you feel relatively confident that you would find a new source of income quickly? The answers may lead you to rethink your saving strategy, your career plans, and your other assumptions about how you support yourself.
Also consider how you react to the idea of trimming your expenses. Does the thought of having to live on 75 percent of your current income unnerve you? How about 50 percent? Do you feel a sense of shame or anger when you imagine having to talk to family and friends about your setback? Again, the answers may be revealing. If having a wad of cash in your pocket or purse is your main source of a sense of self-worth, you need to reconsider your emotional dependency on spending.
3. The Disaster. Imagine if you had to start your life all over again tomorrow. Imagine if your job, your savings, your possessions, and all your relationships were taken away and you were left with nothing but your education, your natural gifts, and a (paid) hotel room in a strange city for a month. How would you rebuild your life? What kind of job could you find? What kind of job could you tolerate? What kind of home would you seek? How would you look for new relationships, new activities, new interests? Would you be bitter over what you’d lost? Or would you find it a stimulating challenge to create a new life starting from scratch?
This experiment is designed to measure your sense of personal resilience. How much confidence do you have in your inner resources — your strength of will, your emotional stamina, your self-confidence, your intelligence? How dependent are you on external props such as your job, your home, your bank account, your friends, and your family?
Of course, it’s not likely that this disaster scenario will happen to you; most people are never tested to this extreme (although it does happen — just ask the thousands of New Orleanians who lost everything when Hurricane Katrina struck). But it’s a bracing mental exercise to imagine how you would tackle such a challenge.
THE BOTTOM LINE
Engaging in thought experiments like these can be fun and revealing. And each of these scenarios actually happens to people in real life-perhaps more often than you might think. Speculating about them can be a useful preparation for dealing with the ups and downs that life is apt to throw your way. Even more important, taking your money fantasies seriously will teach you more about the relationship between you, yourself, and your money… a connection that’s crucial for you to understand if you want to get your financial house in order.
ABOUT THE AUTHOR
Alvin Hall, author of You and Your Money: It’s More Than Just the Numbers (Copyright © 2008 by Alvin Hall), has been training and counseling a wide range of financial service companies and institutions in the United States and around the world for the last twenty years. He lives in New York City.
MORE ARTICLES BY THE AUTHOR
- 7 Steps to Owning Your Money Decisions — Even When Others Think You’re Being Cheap
- In a Rut at Work? Look at Why You Took the Job
- Read Chapter 1 of You and Your Money: It’s More Than Just the Numbers
- See the book’s Table of Contents
- Watch an interview with the author