The #1 Money Rule to Live By: Understand The Psychology of Money
In this episode of The Mel Robbins Podcast, Mel Robbins and Farnoosh Torabi focus on understanding and overcoming financial fears. They acknowledge that anxiety around money is a common human experience, regardless of one's financial situation. They offer strategies for reframing fear as a motivator for positive change, encouraging listeners to use it as a tool for clarifying values and priorities.
The discussion covers common money worries like providing for basic needs, job loss, and unexpected expenses. Torabi and Robbins emphasize the importance of financial autonomy and literacy, especially for women. They guide listeners in understanding the roots of their financial fears and leveraging their achievements to build confidence in addressing them constructively.
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1-Page Summary
Understanding and Addressing Financial Fear
Fear of Money Is Normal
Mel Robbins and Farnoosh Torabi affirm that experiencing fear about finances, regardless of one's level of success or debt, is a universal human response driven by our innate desire to protect limited resources. Robbins shares her own experiences, and Torabi notes that understanding one's upbringing with money is key to recognizing current financial fears.
Reframing Financial Fear
Instead of allowing fear to paralyze us, Robbins encourages facing it as a motivator for positive change. Torabi suggests using fear as a tool to clarify values and priorities, leading to a deeper understanding of what we want to protect. By reframing fear as an opportunity, it becomes a chance to engage with personal values before making financial decisions.
Common Fears and Anxieties
Robbins and Torabi highlight worries related to not having enough money for basic needs or goals like owning a home and funding education. They discuss the anxiety of losing wealth and financial security, detailing fears like job loss, failed investments, and unexpected expenses depleting savings. Torabi also notes societal pressures that discourage women from prioritizing their own financial ambitions.
Overcoming and Leveraging Fear
Torabi advises tracing financial fears to their root, which could be personal experiences or inherited from parents. She encourages visualizing worst-case scenarios to motivate taking proactive steps. Both hosts suggest reframing fear as a motivator for positive financial behavior like saving and investing. Torabi discusses using achievements to gain confidence in addressing fears constructively.
Financial Autonomy and Power
The hosts stress that control over one's money is a fundamental human right, not a luxury. Torabi describes financial independence as the ability to make choices aligned with values and priorities. She views money as a tool for good that can build stability. Robbins and Torabi particularly encourage women to prioritize financial literacy and wealth-building despite societal pressures.
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Counterarguments
- While fear about finances is common, not everyone experiences financial fear to the same degree; some individuals may have a more optimistic or carefree approach to their finances.
- Understanding one's financial upbringing is important, but it is not the only factor that influences current financial fears; other factors such as personal experiences, education, and personality can also play significant roles.
- Reframing fear as a motivator for positive change can be effective, but it may not work for everyone; some people may need additional support or strategies to manage their financial fears.
- Using fear to clarify values and priorities assumes that fear is a rational response, but sometimes fears can be irrational or based on misinformation.
- The list of common financial fears may not be exhaustive or universally applicable; individuals may have unique financial concerns based on their circumstances.
- The idea that societal pressures discourage women from prioritizing their financial ambitions may not take into account the full range of experiences and attitudes of women across different cultures and socioeconomic backgrounds.
- Visualizing worst-case scenarios as a motivational tool could potentially increase anxiety for some individuals rather than motivate them.
- The assertion that control over one's money is a fundamental human right may not consider the complexities of economic systems and legal frameworks that can limit personal financial autonomy.
- The encouragement for women to prioritize financial literacy and wealth-building is positive, but it should also acknowledge that systemic barriers can make this more challenging for some women.
- The concept of money as a tool for good does not address the potential negative impacts of wealth accumulation, such as income inequality and materialism.
Actionables
- Create a "fear journal" to document and analyze your financial fears, noting how they influence your decisions. By writing down your fears, you can begin to see patterns and triggers that may stem from your upbringing or societal pressures. For example, if you notice a recurring fear of not being able to afford a home, you can then focus on creating a targeted savings plan to address this specific concern.
- Develop a "values-based budget" that aligns your spending with your personal values and priorities. Start by listing your core values, such as education or stability, and then review your budget to ensure your spending reflects these values. If you value education highly, you might allocate more funds to courses or books, even if it means cutting back on less meaningful expenses.
- Engage in "financial role-playing" with a trusted friend or family member, where you simulate conversations about money that you find challenging. This could involve practicing how to negotiate a raise, discussing investment strategies, or setting financial boundaries with loved ones. Through role-play, you can build confidence and prepare for real-life financial discussions that may otherwise be a source of anxiety.
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Understanding and addressing the psychology of financial fear
Mel Robbins and Farnoosh Torabi discuss how to approach and manage the common and intense feeling of financial fear that affects many people regardless of their financial status.
Recognize that experiencing fear about money is a normal, universal human response
The hosts affirm the universality of financial fear, noting it's a normal human response driven by the innate desire to protect limited resources and navigate the high stakes of personal financial decisions. Mel Robbins openly shares her own experiences with the fear of not having enough money, and Farnoosh Torabi echoes this sentiment, explaining that financial fear is often tied to "what if" scenarios and is simply part of being human.
Robbins underscores that this fear can be present regardless of one's level of success or debt. Torabi points out that understanding one's upbringing with money is vital to recognizing current reactions to financial concerns, including tendencies to either be frugal or to overspend.
Reframe financial fear as an opportunity rather than a paralyzing force
Instead of allowing fear to paralyze us, Robbins encourages facing financial fears head-on as a motivator to make positive changes. Torabi suggests using fear as a tool to clarify values and priorities. She believes that tackling such fears can lead to a deeper understanding of what we want to protect and a better grasp of our financial aspirations. By reframing fear as an opportunity, it becomes a valuable chance to engage with your personal values and what one wishes to protect, making it a critical step before making any financial decisions.
Torabi also arg ...
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Understanding and addressing the psychology of financial fear
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Counterarguments
- While experiencing fear about money is common, not everyone experiences it to the same degree, and some individuals may have developed resilience or strategies that minimize financial fear.
- The assertion that financial fear is universal may overlook the varied cultural attitudes towards money and risk, which can influence how fear is experienced and expressed.
- The idea that financial fear is tied to "what if" scenarios might oversimplify the complex psychological and socio-economic factors that contribute to financial anxiety.
- Suggesting that financial fear can be present regardless of one's level of success or debt may not fully acknowledge the very real and different financial pressures faced by those in poverty compared to those with more resources.
- The emphasis on understanding one's upbringing with money, while important, might not account for the fact that some individuals can still struggle with financial decisions despite having a healthy financial education in their youth.
- Reframing financial fear as an opportunity could be challenging for individuals who are in the midst of financial crisis and for whom fear feels insurmountable.
- The advice to face financial fears head-on and use them as a motivator for positive change may not be applicable to everyone, especially if their fear is rooted in trauma or past financial hardship.
- The recommendation to use fear as a tool to clarify values and priorities might not be practical for those who are in immediate financial distress and for whom long-term planning is a luxury.
- The notion that tackling financial fears can lead to a deeper understanding of financial aspirations assumes that individuals ...
Actionables
- Create a "Fear Audit" journal where you document each financial fear as it arises, noting the specific trigger, the underlying "what if" scenario, and the values or goals it's connected to. By keeping a record, you can identify patterns in your fears and start to understand their origins. For example, if you notice that you often fear unexpected expenses, you might realize that having a safety net is a core value for you, leading you to prioritize building an emergency fund.
- Develop a "Financial Fear Playbook" that outlines proactive steps for common financial fears. This could include a list of questions to ask yourself or a financial advisor, potential solutions, and resources to consult. For instance, if the fear is about market volatility affecting your investments, your playbook might suggest reviewing historical market trends, reassessing your risk tolerance, and considering a meeting with a financial planner.
- Engage in a monthly "Values ...
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Common financial fears and anxieties
Robbins and Torabi discuss the common financial fears and anxieties that plague many individuals, highlighting worries related to the cost of living and societal expectations.
Fear of not having enough money to cover basic needs or achieve financial goals
Robbins speaks to the prevailing fear of never having enough money, which manifests in the anxiety of being unable to afford basic living standards and substantial life choices. These fears extend to not being able to buy a house or send children to college.
Robbins describes the gut-wrenching anxiety of checking a bank account and fearing it may be in the red. This extends to concerns about not being able to provide for basic needs like groceries or extracurricular activities for children. Similarly, Farnoosh Torabi discusses the fear of never being able to buy a house, tied to concerns about not achieving wealth or security.
The biggest fear is the fear of not having enough money, a fear with a realistic edge in today's expensive world. Robbins specifically points to anxieties like not affording a certain neighborhood, educational costs for children, and sufficient retirement savings. The anxiety of not being able to retire, with worries about insufficient funds due to increasing costs of living and healthcare is also addressed.
Anxiety about losing hard-earned wealth and financial security
Anxiety around financial security occupies a substantial share of these fears. The fear of losing everything loomed over Robbins for years as she recalls being terrified at the thought that she and her husband might not be able to pay bills or could face financial ruin due to $800,000 of debt from a failing business venture.
She lists anxieties such as running out of money, job loss, failed investments, and fears of unexpected expenses depleting savings. The encapsulating fear that "something bad ...
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Common financial fears and anxieties
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Counterarguments
- While it's true that many individuals fear not having enough money, it's also important to recognize that financial literacy and planning can mitigate these fears. Proactive budgeting, saving, and investing can help individuals feel more in control of their financial situation.
- The anxiety of checking bank accounts can be countered by the argument that regular monitoring of finances is a healthy habit that can lead to better financial decision-making and early detection of potential issues.
- Concerns about retirement savings may be valid, but they can also be addressed through various retirement planning strategies and tools, such as employer-sponsored retirement plans, IRAs, and diversified investment portfolios.
- The fear of losing wealth and financial security can sometimes be exaggerated and may overlook the resilience that people often show in the face of financial adversity. Many individuals have successfully navigated job losses or financial setbacks through adaptability and resourcefulness.
- The fear that "something bad ...
Actionables
- Create a "financial anxiety journal" to track and understand your money-related emotions. Start by jotting down your feelings every time you think about money, noting what triggers anxiety and what brings relief. This can help you identify patterns and develop targeted strategies to manage your financial fears, such as setting aside a small "worry fund" for unexpected expenses or practicing mindfulness when checking your bank account.
- Develop a "wealth affirmation habit" to combat discomfort around financial ambition. Each morning, write down a positive statement about your relationship with money, such as "I am capable of creating financial abundance in a way that aligns with my values." This practice can help reshape your mindset and normalize the pursuit of wealth, especially if societal expectations have made you feel guilty about such ambitions.
- Engage in "scenario planning" to ease fears of financial instability. Once a month, take an hour t ...
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Strategies for overcoming and leveraging financial fear
Financial fears can significantly influence one's relationship with money. Robbins and Torabi discuss strategies that can help individuals overcome and leverage these fears to improve their financial situation.
Trace the origins of your financial fears to understand where they come from
Robbins suggests that understanding the origins of one's financial fear can influence their current relationship with money. Torabi advises that when experiencing financial fear, tracing it to its root is essential to determine if it's a personal fear or one inherited from parents' past experiences with scarcity. Torabi points out that these fears might have once served as motivation for becoming a super saver but may become counterproductive if they persist despite having savings and a job.
She notes that tracing fear to its root can be enlightening, such as a fear of losing money that might originate from childhood experiences, like seeing parents go bankrupt or lose their jobs.
Visualize and plan for potential worst-case financial scenarios
Torabi encourages individuals to confront their financial fears by imagining worst-case scenarios and figuring out how they would respond. This visualization helps people understand that in times of crisis, they would not simply freeze; instead, they would be mobilized to take action. For example, researching unemployment insurance or examining their budget to see if it can cover expenses while they get back on their feet are proactive steps someone could take.
Additionally, she suggests that if fearing retirement, one should visualize being at an advanced age with the need to work and not being able to spend time with loved ones. This scenario can be a powerful motivator to take action now to avoid that undesirable future.
Refram ...
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Strategies for overcoming and leveraging financial fear
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Counterarguments
- Understanding the origins of financial fears may not always lead to overcoming them; some individuals may require professional help to address deep-seated anxieties.
- Visualizing worst-case scenarios could potentially exacerbate fear and anxiety in some individuals rather than prepare them for crises.
- The strategy of using fear as a motivator might not be effective for everyone; some people may find that it leads to increased stress and decision paralysis.
- The assumption that everyone has achievements to look back on as motivation can overlook the experiences of individuals who have faced consistent setbacks and may not feel they have successes to draw from.
- The advice to use fear to drive financial decisions could be seen as simplistic and may not take into account the complex psychological relationship some people have with money.
- The strategies ...
Actionables
- Create a financial fear journal to pinpoint specific anxieties and their origins by writing down your fears and then tracing them back to the earliest memory you associate with that fear. This could reveal patterns and give you insight into how your past is shaping your financial behaviors today.
- Develop a "financial crisis simulation" game with friends or family where you role-play different financial disaster scenarios. This can help you think through practical solutions and steps you might take in a real crisis, turning abstract fears into manageable action plans.
- Start a "fear-facing" savings challenge where you set a ...
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The value of financial autonomy and power
Financial autonomy is a cornerstone of personal freedom and empowerment. This concept is vital in recognizing that control over one's own money is not just a luxury—it is a fundamental human right.
Recognize that having control over your own money is a fundamental human right, not just a "nice-to-have"
Financial independence provides the freedom to make choices aligned with your values and priorities. Torabi and Robbins stress the importance of financial autonomy, suggesting it allows one to shape their future and that of their family. Torabi describes financial independence as the ability to make choices independently, offering the autonomy and confidence to navigate life's decisions.
Understand that money is a tool that can be wielded for good, not just a source of stress and conflict
Embracing financial power enables individuals to support not just themselves but also their loved ones and their community. Torabi speaks to money's potential as a versatile tool that can build bridges and heal, rather than create strife and exert control. One woman's story exemplifies using financial fear as a catalyst to take control, start a business, buy a house, and raise children, showcasing money's ability to establish stability.
Encourage women to prioritize building their own financial literacy and wealth
Amid societal pressures and gender norms, women, in particular, are encouraged to prioritize building financial literacy and wealth. Torabi asserts it is a birthright for women to have access to personal financial resources like a bank account, credit card, and income source. She also hints at a need to confront the financial guilt and fear that especially women face due to societal expectations that may discourage t ...
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Counterarguments
- Financial autonomy, while important, is not universally recognized as a fundamental human right in the same way as rights to life, liberty, and security.
- The assertion that financial independence is crucial for personal freedom may not account for cultural or societal contexts where communal living and shared resources are the norm and highly valued.
- The idea that money is a tool for good can be challenged by the notion that the pursuit of money can also lead to negative outcomes like greed, corruption, and environmental degradation.
- Encouraging women to prioritize financial literacy and wealth may overlook the reality that not all women have the same starting point, opportunities, or support to achieve these goals.
- The focus on individual financial control might not address systemic issues that can prevent women from achieving financial autonomy, such as wage gaps and glass ceilings.
- The emphasis on financial autonomy could inadvertently undervalue the roles of family and commun ...
Actionables
- Start a financial book club with friends to boost your financial literacy together. By reading and discussing one book on personal finance each month, you can collectively grow your knowledge and hold each other accountable for learning. For example, you might start with a book on budgeting basics and progress to more complex topics like investing or retirement planning.
- Create a "values-based budget" to align your spending with your priorities. List out your core values and design a budget that allocates funds to activities and causes that reflect those values. For instance, if you value education, you might set aside a portion of your budget for courses or donate to educational charities.
- Challenge yourself ...
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