Every year, the American Psychological Association surveys people across the United States about stress: its sources; its intensity; and how people are responding to stressors. The 2020 survey found that nearly 2 in 3 adults (64%) said that money is a significant source of stress in their life, and this statistic wasn’t surprising — “Regardless of the economic climate,” APA CEO Norman B. Anderson, PhD said, “money and finances have remained a top stressor since our survey began in 2007.”
In this episode of The Agent of Wealth Podcast, Marc Bautis is joined by Bob Wheeler, a financial expert, motivator, and author of The Money Nerve: Navigating the Emotions of Money. Tune in to learn how to uncover and understand your financial habits, limiting beliefs and emotional blocks around your finances to create a healthy relationship with money.
In this episode, you will learn:
- How financial habits, behaviors and emotions come to fruition.
- How to have conversations about money with your children and spouse.
- How to create and enforce good financial habits, like saving and paying off debt.
- Practical tools for improving money management.
- And more!
Disclosure: The transcript below has been lightly edited for clarity and content. It is not a direct transcription of the full conversation, which can be listened to above.
Welcome back to The Agent of Wealth Podcast, this is your host Marc Bautis. On today’s show, I brought on a special guest — Bob Wheeler. Bob’s a financial expert and motivator, a book author, and the founder of The Money Nerve. Bob, welcome to the show.
Thanks a lot, Marc. Great to be here.
I’m excited for today’s episode, because I think the connection between emotions and money is really relevant in today’s world.
Absolutely. Many people think they don’t have emotional attachments to their money, but they do.
So, how did you get started working with people’s relationship to money?
Well, I’m a CPA (Certified Public Accountant). I own a tax practice and have about 1,000 clients. As I was working with my clients, I noticed that they would frequently do the opposite of — what I thought was — sound practical advice. That was interesting to me.
At the same time, when I got my CPA license, my finances were a mess: I was terrible with money. So, I went on a personal journey and started to look at my own financial beliefs. As I started doing my homework, I realized that I had a lot of emotional issues around money that were tied to decisions I’d made as a kid.
Then, I started exploring the topic with clients. I discovered that a lot of them were going through the same thing. Even though they were millionaires or billionaires, there was still emotional baggage that related back to what they grew up in, what they were taught or some experience they had. And that got me really curious. So, I started diving into it more.
Do you think most people’s emotions, or how they react to money, is learned behavior? When I was growing up, financial literacy was not taught in school. In fact, any classes about finance were very limited. So you picked up habits from your parents, which could have been good or bad. Has it gotten any better? Where do people learn about money now?
Where Do Financial Behaviors Come From?
Well, financial literacy is still not taught enough. I guess we’re supposed to learn financial habits through osmosis — it’s just supposed to happen.
“Most people are not having conversations with their kids about money. Most adults are ashamed to have conversations about money.”Bob Wheeler
When clients come to me, they’ll say, “I’m sure you’re judging me. You must think I’m a horrible person.” I’ll say, “No, I’ve been in the same boat. I’ve made the same mistakes. It’s all good.” What happens is, from a young age, we make decisions based on our environment. I’m talking when we’re five, six, seven-years-old. We start telling ourselves, ‘I’m bad with money’ or ‘I’m good with money.’
Or, maybe, we realize that our mom and dad always fight about money, so we avoid talking about it. Then, we start to internalize it. So there’s a lot of shame. And then we’re the only one, the only one that doesn’t know. Everybody else appears to have it together, except for us.
In today’s culture — with social media — we look at snapshots of other people’s lives and think they have it amazing. People don’t show when they’re filing for bankruptcy, or when they’re grinding through the mud. We’re only seeing a picture of this perfection, and we think that’s the measure.
Yeah, that makes sense. Going back to kids, and is there a right way to teach them about money and creating a positive relationship with it?
How to Have Conversations With Your Children About Money
I think the best place to start is by having a conversation. It doesn’t mean you have to disclose stressful or overwhelming aspects of money — like bankruptcy or credit card debt. After all, you don’t want to terrify your kids. But you can certainly do this: When your child says they want a toy, you say, “Well, we have to make choices. And sometimes we have to choose between eating, paying the rent or buying toys.” Or, if they already have a lot of toys, propose that if you buy the toy, they have to choose two existing toys to give to charity. We can have these kinds of conversations.
Fast forward to when they are adults. Let’s say they’re having trouble with money or their relationship/emotions attached to it. What’s the first step to correcting the issue?
The First Step to Creating a Healthy Relationship With Money
The first thing is to take an assessment. Ask yourself:
- Where am I at?
- Where am I not?
- What am I trying to get to? (I.e. save for college, save for a house, save for a car)
- What do I need to get there?
- What tools can I utilize?
So, for example, if you are trying to buy a new car, you may need to start putting away $300 a month — depending on the car you want.
That’s what we help people do: Set a goal and figure out the baby steps to get there. These goals and strategies are unique for each person.
In this assessment, do you get into specific habits that people have developed throughout the years? For example, people who spend as soon as they’re income is deposited. Is it challenging for people to correct this kind of behavior?
Absolutely. What I’ve found is that clients tend to spend toward their comfort, and tend to keep their savings where they feel “safe.” For example, a person who is comfortable with $5,000 in their bank account. Let’s say that they receive an inheritance for $50,000. They will spend right back to the $5,000 that he or she had to begin with. That’s our comfort level. Some people are comfortable spending everything in their checking account, as long as they do not overdraft.
What do you think causes that type of financial behavior?
I think a lot of people don’t know any better. While they may know they should be saving, they’re not quite sure how to do it. A lot of people plan on saving eventually, like when they get a bonus or a windfall. This never happens. That moment never comes.
Tip for Saving: Start Small
Just start by saving $5 or $50, depending on your income. Create the habit using baby steps that are digestible and don’t hurt. Then, it makes it easier to increase savings over time. But I think a lot of people just don’t know better.
I see that situation you were describing earlier about inheritances a lot. People revert back to what they know. I’ll see people spend it all very quickly, just because they are used to keeping their bank account at $5,000, for example. If it has $50,000, they’re going to spend $45,000.
Exactly, and 10 years down the line they’re thinking, ‘Oh, I could have bought a house with that money.’ They could have.
The other thing you mentioned is to start with baby steps. I promote that a lot, specifically with saving in a 401(k). I think a 401k is a replacement for pensions that were common years earlier, and they have — like everything — pros and cons. But one thing that’s good about them is they automate savings. So, in addition to implementing baby steps, I do recommend automation [of savings] as well.
I think automation with savings is great, and it’s a way that we can trick ourselves for the better. I used to love using credit cards, I thought it was free money. But I had to pay it back almost double by the time interest is tagged on. But what I did was set up seven different bank accounts with different online banks.
And I started moving $20 to one, $5 to another and $30 to another. And I just had it happen. Eventually, over time I had built up $3,000 in one account from saving small. I thought, ‘Oh my God, this is fun.’ Next, my goal was to save up $6,000. This process changed my mindset, but I had to trick myself into getting started.
Do you use the different bank accounts almost like the profit first methodology, where they have a purpose?
How to Create Purpose Accounts
I do, I have purpose accounts. For example, I have a business account, a guilt-free/play money account, a rental property account, a mortgage account, a household account, etc. I’ve laid it out so that I know each account, what needs to get funded. Then I have all my savings accounts that I like to put money into as expenses. That’s a budget item. Putting money into my savings account is an expense.
That’s like the modern version of the envelope system.
We’re all digital now, but I’ve talked to people recently who are still using cash in the envelope system. And if that works for them, go for it.
You know what? It works. I sometimes tell some people to use the envelope system for three months just to get the feel of it, if you can’t quite grasp it with the digital.
I see that a lot too, people need structure and discipline. Having multiple online accounts or envelopes gives them a good framework. It’s also useful for taxes. Not the W2 employee, but someone who is self-employed or has their own business. It can be so easy to get behind if you don’t constantly put money aside in that tax bucket — whether it’s on a weekly, monthly or quarterly basis.
The Importance of Reinforcing Good Financial Habits
The philosophy of baby steps also works with something like paying down debt. Debt can be overwhelming — many people think they’re never going to be able to get out of it. How do you help someone find financial freedom in regard to debt?
First of all, I ask clients to list all credit card and debt balances. Next to the debt amount, list the interest rate on each account. Then, I recommend paying down one or two of the smallest balances first. This way, clients feel like they got some headway.
And then, as you pay off some of the other credit cards, you then take those payments and apply them to the remaining credit card debt or the remaining student loan debt. For my clients, this feels a lot more digestible.
Now, some financial professionals would recommend people pay off the highest interest rate debt first, but paying off small balances really feels like a win. At the same time, I encourage people to save $50-$100. Some people think that’s crazy, because you’re paying interest by not allocating that money to the debt. But, I’m helping clients create a habit of saving. I don’t think solely paying off debt or solely saving curates a healthy relationship with money.
I think you bring up a good point, that it’s not always just about numbers. It makes sense to get some wins by paying off small debt, then take that monthly expense and add it onto the next debt you’re working off. But also, create that habit of saving. Because eventually when you do pay off this debt, you don’t want to start from scratch figuring out how to save. That would create a battle between going back into debt and learning to save, a brand new habit.
Absolutely, we want to keep reinforcing good habits by rewarding ourselves.
What do you do if you’re working with two spouses and they’re on opposite sides of the spectrum, in terms of how they think about money? How do you get them on a good path forward?
How to Have Conversations About Money With Your Spouse
That’s interesting. We all have different beliefs, and they don’t mean that anybody is right or wrong. I just say, look, there’s just different ways that we all approach finance, so let’s get curious about each other’s perspectives. If one of you loves to spend, maybe then you’re not the one in charge of the household budget. Find your strengths.
So I may ask my clients what emotions come up for them when their spouse is out spending left and right. Or, on the contrary, if their spouse is hoarding every dollar. The reality is, both of those extremes are based on fear. So I work with them, through conversation, to find a middle ground that allows each of them to appreciate their strengths and acknowledge their weaknesses. It’s not just compromising, but finding that middle ground.
But I will say that there has to be communication. If you’re with somebody that’s a constant spender, lives on the edge, gambles and blows through money, and you do not have a high tolerance for pain — that may not be a sustainable relationship.
It’s important to have conversations about money and not conflicts or arguments. We must learn to understand where we’re similar and different, and really communicate that. Say, “Hey, it really freaks me out when you pick expensive restaurants, because I’m thinking we could have made that at home.”
It’s probably challenging, because there’s a fine line between a discussion and a confrontation — where one person feels that they’re getting attacked. But I’m sure getting that communication out there is healthy.
A lot of times that I work with couples I’m helping them lay the groundwork for communication. It’s an acquired skill.
You mentioned where your money habits came from, but I know some developed from your trip to Africa as well.
How Gratitude Can Transform Your Relationship With Money
Yeah, I think some people may resonate with this. Prior to my trip to Africa, I was taught that I am my accomplishments: I needed to go to a good college, I needed to get straight A’s, I needed to get awards — my value was in what I could produce. When I was in Africa, I met people whose average income was $100/person per year, but they were extremely happy. They were extremely giving.
Back in the States, I had purchased a Mercedes Benz, because I needed that. So I was looking at all these people and thinking, ‘How can you be happy? Something’s wrong with you.’ They didn’t have nice things or accomplishments, and it really messed with my mind.
I had to do some soul searching and realized that I was working off of a premise that I didn’t really believe either. But I had agreed to it. Being able to let that go and actually come from a place of gratitude made all the difference in my life. My mindset changed to, ‘Wow, I have so much — I have running water, a car that gets me to work, the ability to buy clothes if I don’t like the ones that I have, etc.’ I realized I had a lot of abundance once I shifted my mindset to gratitude.
It was really mind blowing to realize how much I was attached to my accomplishments, and how much pressure that was putting on me.
Yeah. It kind of puts things into perspective when you’re over there and you see how things go. You’re also the CFO of The Comedy Store, right?
Yes, I am the CFO of The Comedy Store.
How did you get into that?
Well, I was doing stand-up comedy to pay the bills — at the time, accounting wasn’t cutting it — and I was performing at The Comedy Store. One of my friends told the owner that I was a CPA. At the time, The Comedy Store had about $100,000 in payroll taxes that they hadn’t paid. Basically, they were getting ready to close the doors.
So, the owner called me up asking for help, and I said yes. I didn’t expect to be there long, but it’s been 24 years now. I love the store.
Nice. Are you still doing stand-up comedy there, as well?
Not as much, because it’s hard to do stand-up and then come off stage to the employees asking me to sign their paycheck. I do stand-up at coffee houses and other little places, like La Jolla Club, where I can be more inconspicuous.
Nice. Okay, we’re just about out of time. Bob, I want to thank you for being on the show today. How best can someone learn more about you and what you do?
Listeners can check out themoneynerve.com. I also have a podcast and a book. On themoneynerve.com, we have an online course called Mastering the Emotions of Money. Also, listeners can feel free to just reach out. I love being a resource to help people learn to have a better, healthier relationship with money.
Great, we’ll link to all that in the show notes.
And thank you to everyone for tuning in to today’s episode.