The language we use matters. It can motivate, captivate, beguile or bore us. This got me thinking about how we talk about the emotionally loaded issue of money. In my work teaching and coaching around money there are two words in particular I’m not happy with: budgeting and pensions. In this blog I’m going to describe why this is, discuss possible alternatives and invite suggestions and comments from readers.
Let’s start with budgeting, that is the idea that individuals track their monthly income and expenditure. By carefully and consistently logging how much comes in and how much goes out is one of the most important practices in personal finance. It acts as a reality check – “do I really spend £65 a month on coffee!” – and provides a process whereby you can create a monthly surplus which can be used to save and invest towards life goals. So far, so good. But to “budget” speaks of lack, of not enough, of depriving yourself of what you really want. There are similarities to dieting, denying yourself what you want. This mindset is of course created and encouraged by the consumer society, which is always telling us that we need more.
What to do? Well one approach is to suck it up, put on the hair shirt and deny yourself what you want because you are on a “budget”. Like being on a diet, just learn to say no. I have moved away from this and have begun to use “cash flow” instead. This has the benefit of descriptive accuracy, as money regularly flows into and out of bank accounts. But it still does not seem quite right, it has an air of bookkeeping about it, with us as our own accountants. The financial coach who runs the Money Whisperer, uses “spending plan”. This doesn’t have the restrictions of “budget”, but maybe it doesn’t highlight sufficiently the role of income or of generating a surplus which can be used for saving and investing the Money Whisperer does of course encourage both of these :). Now, perhaps money tracking has a nice ring to it…
The second word which sticks in the throat a bit is pensions. Younger people switch off when the conversation turns to pensions. Part of this is the idea of pensions myopia – the issue of pensions seems so far away people are reluctant to “see” it. But it is not just younger people, many people in their middle age also don’t want to discuss pensions. This reticence might emerge from emotions and the association between pensions, old age, infirmity and death. But with pensions freedom many defined contribution pensions might be seen as another savings and investments product; albeit with an age restriction on access. Also, as many people will continue to have some form of paid employment after they start drawing their pension the idea that it is a fund you use when you stop working is also less and less relevant. Maybe the route to an alternative is to make a connection between the younger and older self. This might mean using phrases such as “building wealth for your future” or “investing for my future self. I am even considering the proposal that people use an Age Progression App, print out the image of their older selves, pin it to the wall and say to themselves “that’s who I am investing for.” A visual connection to their older self might give the idea strength and traction.
Of course, the really important lesson is the behaviour the words point to and describe. Tracking your money increases the chances you will be able to save and invest. Planning ahead for later life increases the chances you will have enough to support your lifestyle. Both essential personal finance skills. So ultimately it is the process which counts – but the words we use to describe that process carry momentum and weight.
The debate will rumble on - if you can think of alternatives to budgeting and pensions, please let me know at callaghanfinancialcoaching@gmail.com