So many things in our lives are a result of past experiences. The way we were raised by our parents influences our relationships today. The food we ate as a child impacts our health in the present. And our financial situations from the past shape the way we approach money now.
We all, inadvertently, carry some form of financial baggage. Perhaps we didn’t grow up with ‘enough’ money, we witnessed our parents struggle to make ends meet. For me, I grew up in a financially strained home. Today, I’ve notice that I still carry the same desires I learned from my parents; one of which is to always buy the cheapest of whatever’s available. It’s a habit I’m still actively trying to break, and despite earning a great income, I often feel like I’m still barely getting by.
This is why reflecting on both my distant and recent, financial past has been immensely helpful in understanding the role of money in my life. For me, letting go of my childhood was a big step. Taking an inventory of my financial accomplishments by understanding what I’ve earned in my entire working life, then reflecting on what I can show for it, was a powerful first step to making peace.
Unlocking Your Financial Awareness and Making Peace
I started my journey of making peace with the book Your Money or Your Life. The authors ask readers to perform a simple but emotionally jarring exercise:
Step 1) Calculate your total lifetime earnings – the sum total of your gross income from the time you first started working to your most recent paycheck.
For those who are early in their careers, this may be an easier exercise that you can do off the top of your head. For others, you can do this by contacting the Social Security Administration and requesting a statement of earnings or if you must, by digging through your old tax returns. Regardless of where you get this information, it’s an important exercise to start with, it will provide you with a clear picture of your earning potential. You are a powerful person who can earn hundreds of thousands of dollars into your lifetime, and yes, for some people, even millions. Acknowledging your earning power is the first step to making peace with the past.
Step 2) Calculate what you have to show for all your hard work and earnings. Find out your net worth.
Credit card debt, the mortgage, the value of your home, your car, your savings – take stock in everything you own and everything you owe. To calculate your net worth, subtract your liabilities from your assets. Websites like Mint.com can be helpful to see most of your assets and liabilities in one place.
After taking these first two steps, you may feel shocked and saddened when you see the amount of money you’ve earned over your lifetime compared with your net worth. As painful as it may feel, you’re now in a conscious state of your finances. You have an accurate overview of where you’ve come from and where you are. This in itself is a powerful place to be and can help you plan for your next steps.
Step 3) Let go.
Now is your chance to feel your emotions bubbling up – shame, grief, guilt, embarrassment. Give yourself a moment to acknowledge your feelings, but be gentle and compassionate with yourself. Try not to blame yourself or anyone else. Once you allow those feelings to surface and recognize their existence, it’s time to let go and move forward. You’re now at a fully conscious place in your financial life which allows you to move on with intention and purpose.
Stephanie is the creator of The Empowered Dollar, where she helps millennials fix their finances and find their stride in money and life. When she’s not blogging, Stephanie is designing financial education curriculum that teach millennials and low-income families about smart money management. Follow her @EmpoweredDollar.