Conscious Finance
Uncover Your Hidden Money Beliefs
and Transform
the Role of Money in Your Life
Rick Kahler, CFP®
Kathleen Fox
Copyright 2005, 2007 by Conscious Finance, LLC
Published by FoxCraft, Inc., Rapid City, SD
Ebook edition published by FoxCraft, Inc., at Smashwords, 2010
All rights reserved
Second Edition, 2007
Cover design by George Foster
Smashwords Edition License Notes
This ebook is licensed for your personal use only. It may not be re-sold or given away to other people. If you would like to share this book with others, please purchase an additional copy for each person you share it with. If you're reading this book and did not purchase it, or it was not purchased for your use only, then please return to Smashwords.com and purchase your own copy. Thank you for respecting the copyright of these authors.
For permission to quote from this book, contact the authors at www.consciousfinance.com.
Conscious Finance, LLC
PO Box 9101
Rapid City, SD 57709
Part I: Interior Finance
1. Your Relationship With Money
2. Why This Matters: The Rewards of Financial Consciousness
4. The Cycle of Financial Unconsciousness
5. Moving Toward Financial Consciousness
6. Difficult Emotions as Tools for Change
7. Interior Awareness: Tools That Help You Feel
8. Interior Awareness: Working With Others
Part II: Exterior Finance
11. Day-to-Day Money Management and Eliminating Debt
12. Investing and Planning for the Future
13. Estate Planning: It's Not "If," It's "When"
Part III: Financial Integration
15. Practicing Financial Integration
16. Balance and Integrity: Others In Your Life
17. Finding and Working with Advisors
Postscript to the Second Edition
Money has been around a long time but we still know very little about how deeply and profoundly it affects our lives. Our histories, our experiences, our deepest fears and our most cherished goals are inextricably tied to our relationship with money. Rick Kahler and Kathleen Fox have performed a seminal service to the world of personal finance with this breakthrough work which has taken that which was hidden and brought it into the light of CONSCIOUS FINANCE. They'll help you discover the truth about money in your life, and that truth will set you free.
Mitch Anthony
Author, The New RetireMentality
Founder, The Institute for Financial Life Planning
Conscious Finance gently dissolves the curtain we keep around our money beliefs, emotions, and behavior, shedding new light on the part of us that forms the powerful undercurrents directing our financial and life choices. This book is an important addition to the new body of knowledge called Interior Finance. It will become a textbook for those seeking expertise in Interior Finance. But for most readers it will first be received as a great relief to finally understand this unseen side of money, and then be used as a trusted guide to a vital, well balanced relationship with their money.
Susan K. Bradley, CFP®
Author, Sudden Money
Founder, The Sudden Money Institute® and Women, Meaning, & Money®
Rick and Kathleen will show you how to finally take charge of your financial decisions!
J. Grady Cash, CFP®
Author and Retirement Futurist
As a financial planning professional, I am disappointed in many of the self-help books on personal finance that stress the quantitative steps necessary to accumulate wealth and ignore the more important interior issues. Rick and Kathleen have written a wonderful book that helps readers to not only improve their finances, but to improve their lives.
Roy Diliberto, CFP®
Chairman, RTD Financial Advisors, Inc.
Conscious Finance dares to go where very few books in the financial or psychological professions have wanted to explore. It helps the reader look at core money issues in a way that is gentle and supportive. I would recommend this book to anyone who is struggling to understand their frustrations around money.
Dave Jetson, Counselor
What a delight to read a book written by gutsy, down-to-earth people, in plain English, not rife with psycho-babble. A book that, quite literally, EVERYONE! should read.
Nancy Langdon Jones, CFP®
Author, So You Want to Be a Financial Planner
Rick Kahler has been a leader in the Life Planning movement, the most dynamic movement in the financial services industry, one whose mission is to humanize our relationship to money. In writing Conscious Finance, Rick and Kathleen have made a most significant contribution to that movement.
George Kinder
Author, The Seven Stages of Money Maturity
Founder, The Kinder Institute of Life Planning
Rick and Kathleen get to the heart of the etiology and maintenance of dysfunctional money beliefs and behaviors and offer essential knowledge and practical tools for recovery. Conscious Finance is perfect for those who want to take control of their financial futures, both inside and out!
Bradley T. Klontz, Psy.D., C.S.A.C.
Clinical Psychologist, Researcher and Author
What do you get when an accomplished author and one of the top financial planners in the United States begin talking with each other? Conscious Finance is one of those rare opportunities to hear two very personal stories we can all relate to, told with an honest down-to-earth ease that gently leads the reader into that most rarified place, exploring our personal relationship with money.
Ted Klontz, PhD, MAT, MAC, CSAT
Executive Director, Onsite Workshops
Money—it's one of the most powerful and most misunderstood forces in the world. This book helps you to put it in the proper perspective, take the mystery out of its power, and help you to begin to make financial decisions in concert with your life's true goals and objectives as well as your deepest values and motivations.
Steven S. Shagrin, JD, CFP®, CRPC®, CRC®, CELP
President, Planning For Life
Past President, International Society for Retirement & Life Planning
Conscious Finance is a blessing—articulate, clear, and enlightening. It offers help to deal with difficult issues that interfere with financial well-being. The best intentional combination of personal interior and exterior finance that I have seen.
Richard Wagner, CFP®, WorthLiving, LLC
A truly balanced approach to financial "security" and fulfillment, combining tools for both inner and outer growth and transformation. Anyone who is having any kind of money issues can truly benefit from this wonderful book. And for those who already think their relationship with money is on solid ground, this book may help uncover some long-forgotten, hidden beliefs just in time to save you money, time, and a lot of grief.
Marie Jones, Reviewer
Bookideas.com
There's a saying, "When the student is ready, the teacher appears." By the end of 2003, I was ready to change my long-term patterns of behavior around money. I just didn't know it. It took an intervention by my personal manager and business managers to open my eyes. Then the first teachers appeared: Rick Kahler and Ted Klontz of Onsite Workshops. The work that I did with them started me on the way to building a new, healthier relationship with money.
Until that experience, I didn't know there was such a thing as a relationship with money. I was still a teenager when my mother and I achieved our incredible success as The Judds. From the beginning, someone else took care of the money. I never saw it. I had a credit card, I spent what I wanted, and someone else paid the bills. There was money somewhere. I just didn't know how much. I believed that as long as I kept working, it would continue to be there.
In truth, I didn't want to have a relationship with money. I saw money as evil. I didn't want to become greedy and evil, so I didn't want to have anything to do with money. I wanted relationships with people and with music, and I thought money would get in the way of those relationships. Because I didn't want to focus on money, and because I didn't know how to manage money, what happened was that money was using me. Now, I use money. The more I learn about it, the more wisely I can use it.
In the past few years, I have made huge changes in the way I handle money. For one thing, my family has a budget. We use the envelope system, which works really well for us. If I spend more than the monthly budget for groceries, the excess has to come out of my personal allowance. If we don't have money left in the entertainment envelope, we stay home and watch movies. I don't have credit cards any more, except for one business card. I pay in cash instead of using a credit card, and sometimes that actually shocks people. I've had cashiers look at me as if I were an alien when I give them cash and say, "I don't use credit cards." But the envelope system is awesome.
If someone were to ask me how to change a pattern of unhealthy financial behavior, the most important thing I would say is, "Don't be afraid to reach out and ask for help." Ask yourself, really deeply, "Is this working for me?" If the answer is, "No," then have the courage to admit you can't change all by yourself.
Another valuable lesson I've learned is that what I didn't know, I wasn't responsible for. No one ever taught me how to do money. I'm not responsible for the past, because I was just surviving. But now I have a choice. When you learn how to do things differently, you literally give yourself tools.
Since I've been using these new tools to build a healthier relationship with money, I'm seeing less and less of the negative role that money can have in the music business. I'm starting to be surrounded by people who are not driven by money, but who are driven by the human experience. It's ironic, because during the time I was trying to avoid dealing with money, having such people in my life was exactly what I always wanted.
I wanted to be just the 18-year-old girl with a guitar, singing my heart out. Having money didn't seem to match that image. What I've learned is that having money can help nurture and support the spirit of that girl. It allows me to spend more time doing the things I love. My relationship with money now is empowering, because it gives me a chance to make the choices that I want to make.
For me, changing what I do with money is just one part of a recovery journey, which I've described in my book, Coming Home To Myself (New American Library, 2005; paperback, 2007). One of the most important things I've learned about change is to "Suit Up and Show Up." For me that means practicing new behavior, one day at a time. That's the beginning of change. When I buy something with cash instead of a credit card, it reminds me that I have choices, which are sacred. It's a reminder that I now have tools I never had before.
Conscious Finance can be one of your tools to help you create a healthier relationship with money. This book talks about money in terms of both the interior and exterior—the heart and the head. That makes a lot of sense to me. I have always been the heart: the creative, spontaneous artist and dreamer. Someone else has always been the head, dealing with the business side: contracts and planning and organizing.
Today, I am able to make decisions on faith, not fear. I love what I do, but I am no longer defined only by what I do. For the first time in my life, I am able to do business with both my heart and my head.
Wynonna Judd
As with any contribution to the world, this book was not born in a vacuum. We could not have written it without the support and contributions of a number of people.
We want to thank those who unselfishly gave their input by reading and commenting on early manuscripts: Carol Anderson, Julie Cummings, Nancy Langdon Jones, Susan Kendall, Laurie Shaffer, Steven Shagrin, Deanna Sharpe, Curt Weil, Mary Kay Wright, Mary Zimmerman, and Margie Zugich. We especially want to recognize Marcia Welch-Kahler, Dave Jetson, and Rich Colman, who pulled no punches, respecting us enough to tell us what they really thought of a concept or idea.
Mitch Anthony and Bob Veres were generous with publishing information and encouragement.
Our thanks to Julie Schad for all her help with the graphics and in setting up the website. Carolyn Linn's editing skills and directness helped make this a stronger book—as well as saving many trees that might otherwise have died for our verbosity.
We are grateful for the ongoing support, encouragement, and wisdom of the Saturday morning group, with special thanks to Jerry for putting up with so many planning sessions over coffee and bagels.
Rick: There would be no Conscious Finance without the encouragement and guidance of my co-author, Kathleen Fox. It was her "thinking out of the box" that freed me to embark on this project. Not only is she an accomplished writer, a person of impeccable integrity, and a loyal friend, she swings a mean red pen.
I want to thank my biggest cheerleader, my wife Marcia. Whenever the project hit a snag, she would encourage me to keep going. She affirmed my writing when I saw nothing but a jumble of inarticulate words. She was also my biggest critic, who was never afraid to tell me what I had just written was indeed unintelligible garble! She shared me for evenings and weekends with my computer. She is the "wind beneath my wings," steadfastly encouraging and supporting me to reach for the golden ring and live my passion.
George Kinder's seminal book, The Seven Stages Of Money Maturity, and his workshop by the same name brought it all together for me. His book was the first to unite the emotions of money with the knowledge of money. Many of the concepts presented here are based upon his book and his workshops. His genius was brought home to me time and time again during the writing of this book. I am deeply appreciative of his thorough training, passion for the financial planning profession, and most importantly his friendship. Much aloha, George.
I want to especially thank Dick Wagner. His contributions to the financial planning profession are legendary; however, without his contributions to my understanding of interior and exterior finance, this book would have never been written. In many regards this book is a portrait of his passion for financial planning, and it was my pleasure to have been one of the artists.
Ted Klontz is one of the most insightful, creative, wise, and caring human beings I've ever met. Even though he joined me late in my "money journey," his contributions to my process, to this book—and to deepening and broadening the concept of interior finance—are monumental.
Brad Klontz, Psy.D., provided significant academic contributions to the development of the principles and concepts in this book. His passion for financial integration work is second to none.
I am indebted to my fellow Pioneers: David Brand, Elissa Buie, Rich Colman, Elizabeth Jetton, Troy Jones, Gayle Knight-Colman, Michael Smith, Dick Wagner, and Marcee Yager. Their passion for life and the interior journey has nurtured, energized, and supported me in a way I will never forget.
The fellow responsible for me even becoming a financial planner was my friend, mentor, and former business partner, George Chell. George is truly one of the pioneers of financial planning. He not only introduced me to the fledgling field of financial planning in 1979, but he also was my first introduction to "the program" long before I ever understood "the program."
I am grateful to all my friends and associates in the Nazrudin Project who gave me valuable input and who served as a sounding board for my experiences and ideas.
Thanks to my office manager, JoVayne Cappa, who so competently served me for eight years. She kept a steady hand on my financial planning practice, allowing me the time to research, test, and teach the concepts in this book.
The influence and support of my coach, Tracy Beckes, has been foundational in helping me decide how "outrageously" I want to live the second half of my "one wild and precious life."
My deep gratitude to Pete Sweitzer, Laura Longville, and everyone associated with Onsite Workshops, who have given so generously and lovingly of their insight, wisdom, and support.
My children, London and Davin, added to this book by reminding me of lessons long forgotten and providing me with some wonderful insights into my own relationship with money.
Kathleen: One of the blessings of this project has been the fact that two years of collaboration on an ever-evolving book has only deepened the friendship Rick and I share. His integrity, humor, and passionate commitment to the concepts in this book made working together a pleasure. Because of that, I may even forgive him eventually for the wicked enjoyment he displayed at seeing me on the receiving end of another editor's red pen.
I am grateful to the friends in the program who have shared their experience, strength, and hope with me for so long and who supported me through the darkest time of my life.
My deep gratitude to Alvis for believing I could do this and for helping strengthen my belief in myself.
For my children, thank you all for the lessons you have taught me and for the opportunity to be a part of your lives as you make your way in the world.
Managing money wisely sounds simple enough. You just figure out how much you earn and how much you can spend, write out your budget, decide how much you need to put away for retirement, make an investment plan, and follow both the budget and the plan faithfully. The result: a life free of fear, anxiety, guilt, or worry around money. Unfortunately, it isn't that easy. If it were, all of us would have done it successfully years ago.
If you have picked up this book, it is likely that you are not completely satisfied with the financial aspects of your life. You may be struggling with overwhelming debt, worried because you are not saving for retirement, uncomfortable at the thought of spending money, feeling guilty about having money, or just dissatisfied generally with the way you manage your money.
Take a moment to think about some of the difficulties you may have when it comes to money. See if any of the following fit for you:
Do you feel you have more debt than you can ever repay? Or are you consumed with anxiety about your finances, even when your balance sheet would tell you that you have enough?
Do you think money isn't important? Or does money dominate your thoughts?
Do you seem unable to save enough money? Or is it painful for you to spend any?
Do you believe that because you work hard, you will be taken care of? Or do you micro-manage and plan your future to the point of compulsivity?
Are you unable to follow a budget? Or do you have to follow one with painful rigidity?
Do you dither for weeks over major purchases? Or do you buy big-ticket items on impulse and then fret because you may have made a mistake?
Do you feel more of an obligation to take care of others than to take care of yourself? Or are you unable to give to others without feeling angry, taken advantage of, and manipulated?
Do you and your spouse fight about money? Or are you unable to discuss it?
Do you believe you aren't capable of learning about investing? Or has learning more and more about investing not brought you the financial ease and freedom you were hoping for?
Do you see being wealthy as somehow shameful, so you find yourself making decisions that keep you poor, in debt and unable to retire? Or does having wealth seem to separate you from others?
Your behaviors around money may include overspending, chronic debt, hoarding, giving too much to your children, being unable to follow a spending or saving plan, avoiding money decisions, or obsessing about financial security or accumulating wealth. These may generate feelings of shame, guilt, anger, and fear that keep you from enjoying a balanced relationship with money.
Whatever your particular monetary difficulties may be, they are not likely to be caused simply by a lack of financial knowledge. Instead, your self-destructive or ineffective behavior around money may be rooted in your deepest beliefs—beliefs that you don't even know you have.
Many of our financial decisions are governed, not by logic and facts, but by our emotions and beliefs about money.
These guide our choices even though we aren't consciously aware of most of them. Only by becoming aware of these hidden beliefs can we begin to change our financial behaviors and begin to make more conscious and balanced financial decisions. Doing this requires that we learn to blend both the technical knowledge about money (exterior finance) and the emotions and beliefs related to money (interior finance).
Without any doubt, money is entangled with many of the problems in our lives. Our unconscious choices around money are sources of significant conflict, chaos, and pain. For that reason, it might seem logical that both financial planners and therapists would address their clients' emotional issues related to money. Surprisingly, this is not the case in either field.
Working with both the interior and exterior aspects of money requires skills that neither financial planners nor therapists are currently taught.
While traditional financial planners do a wonderful job of collecting the cognitive or exterior financial data, they are woefully under-trained and inexperienced at gathering a client's interior or emotional data. Nor do many of them, oriented by both training and inclination toward the exterior, see any need to do so. At the opposite end of the scale, therapists have the skills to help clients do deep interior work to heal even such painful areas as addiction and family trauma. Yet they are not taught to consider money as a possible component of such emotional issues. Neither are they generally comfortable with exterior money tools. In fact, many therapists—drawn to a helping profession where making money is seen as somehow not quite acceptable—have their own financial difficulties, and they are uncomfortable even talking about their clients' pain around money.
If you are to change the behaviors around money that do not serve you well, you most likely will have to go it alone. That is precisely why we wrote this book. It describes a process we call financial integration that provides the tools you need in order to become aware of your hidden beliefs about money and learn to make your financial decisions consciously and authentically. Through this process, we have been able to change or modify many of our own unconscious and destructive money behaviors. We're also helping others do the same, with exciting results, so we know these tools can work for you.
We offer some strategies for solving your immediate money problems, such as getting out of debt, following through with a retirement savings plan, or managing your day-to-day spending. We also direct you to other resources you will find useful. But providing comprehensive strategies is not our primary purpose. Instead, our goal is to help you learn to heal the underlying issues that create your money problems and keep you repeating them. We want to help you move out of the cycle of financial unconsciousness that keeps you from making good financial choices and living the life you really want. You can learn instead how to make those choices knowledgeably, clearly, authentically, and consciously. You can build a relationship with money in which it is a trusted and valuable servant rather than your master or your enemy.
Is this book going to show you shortcuts to financial success? Not in the typical way you may think about financial shortcuts. It won't teach you a new way to time the stock market or give you an idea that will make you rich overnight. We will show you how to find your own path to financial and personal success, which may end up being shorter than the path you are currently following. Will it teach you how to get rich? Well, it may, depending on your definition of rich. If having a lot of material resources is your goal in life, you can find all kinds of books written on just accumulating, investing, and managing money. While we will teach you the basics of accumulating and managing money, and even a few new strategies you probably have never been exposed to, our purpose goes much deeper.
What this book will do is:
Help you gain more control over your financial life
Teach you how to become more comfortable around making money decisions
Help you use the knowledge and information you've gathered about money to actually make some progress toward your goals
Teach you something about money that goes beyond the knowledge needed to accumulate a lot of material resources
Help you understand why you've made some of the money decisions you have
Help you actually change behaviors around money you've tried unsuccessfully to change in the past
Help you become authentically clear about what you want in life and put a plan in place to get it, using money in a healthy and balanced way as one of your tools.
If you choose to accept and practice what we offer, you will be able to make your financial decisions more wisely, because you will make them consciously instead of unconsciously.
You will find your behaviors around money becoming more integrated with your values and aspirations. You will learn how to stop making destructive money decisions and start making smart money decisions that will nurture you and support your life's aspirations and goals.
Maybe that will help you get all the money you'll need to live a joyful and prosperous life. Or maybe it will help you discover that having an abundance of money isn't really important to you. Perhaps it will help you discover that having money is an important component of wealth, but that it isn't your goal. Or it may help you discover that, for the first time in your life, you can feel at peace earning and having a lot of money. Maybe you will discover you already have enough money or even that it is really okay for you to have enough. What matters is that you will learn to make financial choices that are in integrity with who you are and what is important to you.
Since much of Conscious Finance is about emotions and self-discovery—an unexpected perspective for a book about money—at first glance it may seem idealistic or quixotic. This information, however, is neither theoretical nor extreme. Financial integration is a practical, functional way to use money productively and comfortably in your everyday life. We know it works, because we have seen the results in our own lives and those of others.
This book is divided into three sections. Part I deals with the interior aspects of money, Part II with the exterior aspects of money, and Part III with the ongoing practice of financial integration. Chances are you will be much more at ease with either the interior or the exterior, and if this is the case you may be tempted to read the part that is more comfortable for you and skip through the other. Please don't give in to that temptation.
Keep in mind that, whichever part of this book you want to skip, that is the information you probably need the most.
Throughout the book, we illustrate the process of financial integration with examples from our own lives. From time to time we also include the stories of others. While all of the stories are true, personal details have been changed to protect the anonymity of those involved.
We refer in several places to specific resources, including programs, people, books, and websites. Rather than providing a detailed bibliography or list of resources at the end of the book, we have chosen to put that information on our website. Because lists of addresses and resources become outdated so quickly, this will help us give you the most current information on an ongoing basis. To find those updated resources, go to www.consciousfinance.com.
Just one more thing. Since personal growth means honesty, it's time for a confession. In researching this book, we've read dozens of books on the psychology of money. That's in addition to dozens of other books on personal growth and recovery we've read over the years. Many of those books are wonderful sources of wisdom and change. Many of them include exercises and hands-on activities. Here's our confession: both of us almost never do the exercises. We have shelves full of books without a single pencil mark on the write-in pages.
Yet, hypocritical as it may seem, we've included exercises in several of our chapters. We hope you'll do as we say, not as we do, and actually follow through with the suggested activities. The reason we urge you to do the exercises is simple. You can't read your way to financial balance. (We know—we've both tried it and failed.) It is true that exterior knowledge alone can help us change some of our unconscious and destructive beliefs and behaviors. For the deepest and most painful ones, however, knowledge is not enough. Because those beliefs were learned at an emotional level, changing them must also be done at an emotional level.
We know this is true, because it's what we have done and are doing ourselves. We both have participated in cognitive seminars as well as emotionally focused workshops, groups, and therapy. We have done and are still doing the painful, life-changing work required for deep emotional healing.
We both have learned, sometimes the hard way, that the key to growth and change is more than just increased knowledge or awareness.
The key to becoming financially integrated is doing something different that will actually change our thoughts and behaviors. The way to begin doing something different requires activity as well as information. So please, if you really want to benefit from this book, do the exercises. They are important. We promise they'll be useful. And yes, we've done them ourselves.
Rick Kahler, MS, CFP®, ChFC, CCIM, is a life-long resident of Rapid City, South Dakota. He is president of Kahler Financial Group (www.kahlerfinancial.com), which he founded in 1981 as the first fee-only financial planner in South Dakota. In 2006, he was recognized by Bloomberg's Wealth Manager as the largest financial planning firm in a seven-state region. His firm, which attracts a nationwide clientele, specializes in the integration of financial coaching, counseling, and traditional financial planning.
Rick has served on and chaired the South Dakota Investment Council, managing a multi-billion dollar portfolio. He has served nationally in several leadership capacities with the Financial Planning Association. He is also a nationally renowned speaker and educator. His workshops and seminars draw some of the world's wealthiest and most influential people.
In addition to this book, he is co-author of The Financial Wisdom of Ebenezer Scrooge: 5 Principles to Transform Your Relationship with Money (HCI, 2006).
Rick's work, as the co-founder of Onsite's Healing Money Issues workshop, was featured in Wynonna Judd's book Coming Home To Myself (New American Library, 2005). The Wall Street Journal hailed this work as "an innovative effort that combines experiential therapy with nuts-and-bolts financial planning."
He was a consulting producer of the BBC television program, "Millionaire's Challenge." He has been published or cited in USA Today, The Wall Street Journal, The Washington Times, Self, Woman's World, Money Magazine, Journal of Financial Planning, Investment Advisor, and Counselor Magazine.
Kathleen Fox (www.foxcraftinc.com) has been a writer and editor since 1989 and has edited numerous self-help books. For three years, she wrote a column on stepfamilies for The Dallas Morning News, and she is the author of Making the Best of Second Best: A Guide to Positive Stepparenting. Her checkered career has included working as a legal secretary, building computers and installing networks, and serving as executive director of a company offering workshops and treatment for co-dependency. A member of Toastmasters, Kathleen is an award-winning speaker who presents workshops on financial balance and personal growth.
When it comes to money, both of us are firm believers in the KISS principle. There's just one slight difference. Kathleen thinks KISS stands for "Keep It Simple, Stupid." Her eyes glaze over after 30 seconds' worth of details about amortization, capitalization and diversification. She stops breathing at the merest thought of financial risk, and she'd really prefer to let Rick handle all the details of managing her money so she wouldn't have to think about it. She'd rather read an unabridged dictionary than the financial pages. On the other hand, given the slightest encouragement, she'd be delighted to subject you to a lecture on the difference between "its" and "it's" or why using "impact" as a verb should make you shudder.
Rick, however, thinks KISS stands for "Keeping It Simple IS Stupid." His eyes light up at the prospect of putting together the "perfect portfolio." He can disappear for hours into the world of technical information about investing: co-variances, standard deviations, r-squareds, alphas, and betas. He gets excited about protecting your assets by setting up trusts, which own corporations, which own other trusts, which own goodness knows what else. Rick could tell you more than you'd ever even imagine wanting to know about tax strategies, real estate, asset protection, and investing.
Maybe that's why Rick is the financial planner and Kathleen is the client.
Despite our different perspectives, however, we have both found great success in using the tools of financial integration. We believe you can do the same.
Part I
Interior Finance
"I just don't want to be controlled by money."
This is how Kent, a self-employed furniture restorer and woodworker, explains the financial chaos that fills his life. He routinely pays his bills two or three months late. He sometimes neglects to collect payments from his clients. His personal and business expenses are so enmeshed that sorting them out is a task better suited to a magician than a CPA—which may explain why Kent hasn't filed income tax returns for the past three years.
Kent has to pay full retail prices for his wood and supplies because his credit history is so poor that he can't establish contractor accounts at local stores. Despite the sometimes hazardous nature of his work, he has no health insurance because he can't afford it. Predictable expenses, such as Christmas gifts for his kids or the annual licensing fees for his truck, seem to take him by surprise year after year, becoming emergencies that require creative last-minute juggling. All this financial finagling takes up significant amounts of his time and energy. Ironically, Kent's refusal to deal with finances has exactly the opposite result from what he wants. Money, or the lack of it, does control his life.
Kent, like many others, is controlled by money because he makes his financial decisions unconsciously. Instead of being his tool and servant, the money that he tries so hard not to think about is his master. His relationship with money is upside down.
Do not value money for any more nor any less than its worth; it is a good servant but a bad master.
Alexandre Dumas, Camille, 1852
This quote is often cited to describe someone who is obsessed with making or having a great deal of money. Yet you will notice that Dumas cautions against valuing money too little as well as too much. By trying to ignore money or pretend it is not at all important, you make it your master just as you do by believing it to be the most important thing in life.
We need to learn to give money its balanced and appropriate place in our lives. This does not mean we should minimize its significance. Quite the opposite is true; we need to recognize money for the role it plays in our lives and our society. Dick Wagner, a leading financial planner and theorist, says, "Money is the most powerful and pervasive secular force on the planet." Lynn Twist, author of The Soul of Money, says, "Money is not an option, it is a requirement." Because money is such an important factor in our society, it is imperative to learn to use it consciously. Then you can honor and employ money as the important and valuable tool it is, instead of misusing it to try to meet needs in your life that it cannot fill.
The goal of Conscious Finance is to help you establish a healthy, balanced relationship with money. In such a relationship, money is not regarded as a goal or an end in itself. Neither is it scorned as something not quite "nice" or incompatible with integrity and altruism. Instead, it is appreciated for what it can add to your life, and as a result it is maintained and managed in the same way as any other valuable tool.
You may have never thought of money as something you have a relationship with. Yet you do. Your relationship with money has to do with the way you think about it, behave around it, and feel about it. Yes, you have feelings about money, lots of them, whether you are aware of them or not. You have thousands of thoughts about money, too. In fact, people think more about money than about anything else, including sex. All of those thoughts and beliefs, most of which are unconscious, drive your behaviors around money. That aspect of your relationship with money is called interior finance.
Interior and Exterior Finance
The idea of integralism and interior and exterior was first introduced to us through the work of Ken Wilber. He suggests that everything has an interior and exterior component, and there is an "I" and "we" component to each. For those of you familiar with Wilber's work, we mostly deal with the "I" components, or as he describes them, the upper left and the upper right quadrants. If you are not aware of his work and want to learn more, his book A Theory Of Everything is perhaps the best place to start. However, a knowledge of Wilber's theories is not essential to understanding financial integration.
To some degree, we're using the terms "interior" and "exterior" quite literally. Much of the exterior component of your relationship with money is your environment—the people around you, your financial circumstances, the society you live in, and events and situations in your life. Dick Wagner says exterior finance is "financial information you can see and touch, that you can put in front of your face and see." It is the mechanics of money, such as your checkbook balance, the return on your IRA account, or your will. Exterior finance also includes the banking system, stock exchanges, and laws dealing with finance.
Conversely, interior finance is comprised of what cannot be seen. It includes your emotions, beliefs, and values about money, as well as the way you process messages about money that come to you from the world around you. It also encompasses community and social values, beliefs, and agreements. Wagner defines interior finance as "those aspects of our individual and social relationships with money, including the fact that money even exists."
Another way to put it would be that exterior finance is the cognitive, left-brained, logical aspect of money and interior finance is the emotional, intuitive, right-brained portion. Financial integration, this book's goal for you, is a melding of the two.
At first glance, the combination of interior attributes like beliefs and feelings with exterior attributes like investments and budgets may appear incongruous. After all, to most of us money decisions seem to be left-brained, logical operations. Making wise choices around money ought to require spreadsheets rather than sentiment, equations rather than emotions.
Unfortunately, it's not that simple.
Whether we realize it or not—and most of us do not—our financial decisions are based at least as much on emotion as they are on logic.
We tend to assume money choices are made based on numbers, bottom lines, budgets, and other left-brain factors. In fact, all of our decisions, including those about finances, involve our emotions. We certainly need the cognitive information. But after we've gathered the information, strategized, crunched the numbers and made the lists, in most cases we still make the final decision based on how we feel. As long as that emotional component remains hidden, we don't realize how deeply it affects our behavior around money.
Hidden Beliefs About Money
All of us develop beliefs about money based on messages we receive in childhood. These messages usually come from our exterior environment—from parents, siblings, teachers, and society in general. Some of them are told to us directly, perhaps by parents saying such things as, "Money that you didn't work for is not worth having." Even more messages come indirectly from our observations of those around us, particularly our parents. If we see them spending impulsively, saving fearfully, or using money to manipulate and control one another, we learn to behave in those same ways around money.
As children, we take in this direct and indirect information and process it with our immature skills, internalizing the messages into conclusions about "the way things are." Based on those conclusions, we develop our own sets of unconscious beliefs and thoughts that shape our behavior. These beliefs are not necessarily wrong, but most often they are incomplete or partially true. We follow them unconsciously, never questioning or examining them, because we don't even realize they exist.
When you make financial decisions unconsciously, based on your unexamined beliefs, you will eventually run into trouble. You might have the most complete and accurate information you can possibly get about managing your money or making financial choices. But if you have unconscious beliefs around money that are destructive or limiting, it may not matter how much cognitive information you have. Those hidden beliefs are still going to sneak over from the right side of your brain and sabotage your decisions, resulting in illogical or destructive financial behavior. When this behavior is repeated again and again, it becomes a cycle of financial unconsciousness.
The first step toward financial integration is learning to identify your own hidden beliefs about money and bring them into your conscious awareness.
Once you know what your beliefs are, you can begin to change them in order to develop a healthier relationship with money. Then you can start to use money in a balanced way as a tool to help you accomplish what is important to you and have what you want in your life.
When you begin to understand the issues and beliefs that underlie your financial difficulties, you are likely to uncover painful emotions or memories that seem at first to have little to do with money. In part this is because it is impossible to separate money issues from other aspects of your life. The interior isn't divided into tidy little compartments labeled relationships, work, money, and so on. Your hidden beliefs, emotions, and painful unfinished business from the past affect all aspects of your life, including money.
For that reason, this book touches on areas such as addictions, workaholism, and relationship difficulties that aren't specifically "money problems." When you begin changing one area of your life, you will affect much more than just that one facet of your behavior. You might think of your interior emotions, pain, and hidden beliefs as the central core of a private room. That painful center results in self-destructive behaviors that may take a variety of forms: relationship difficulties, chemical addictions, compulsions, eating disorders, sexual addiction, workaholism, and destructive money choices. Regardless of the form the behavior may take, however, the pain behind it is the same. Money concerns are just one of the doorways through which you can access and ultimately heal that painful inner core.
Applying the principles of financial integration can do much more than help you make better financial decisions. It can help you begin to live life in general at deeper and richer levels. Through this process, you can uncover more of your authentic goals and dreams and learn to align your behaviors with your deepest values. Financial integration is not an end in itself, but a tool to enrich your life in many areas. Like any other tool, this one will require practice and effort if you are to use it skillfully.
Financial Integration
One essential part of that practice is learning to become comfortable with both the interior and exterior components of money. It takes both to change your self-destructive beliefs and behaviors around money.
You cannot make healthy financial choices consistently if you use only exterior or only interior skills.
Most of us approach financial integration from one side or the other. If you tend to be left-brained and logical, you are likely to be comfortable with or already know much of the exterior information in Part II. Chances are you will find it less easy to make sense of Part I. If you are more right-brained and intuitive, the opposite may be true. You might already be familiar with identifying emotions or have done a considerable amount of introspection, but you'll be inclined to skip over the exterior material. Since the whole idea is to become able to blend the two, the section you have the most resistance to is the one you need to read most carefully. In order to change, you will need to be willing to move out of your comfort zone.
You can do it, too, no matter which direction you start from. We both have. At one time, Rick wouldn't have even imagined doing anything feeling-related around finances. He was strictly on the left-brain, spreadsheet, mechanical side of money. Kathleen could do feelings with the best of them, but would have groaned at the very idea of having to learn what "asset class diversification" might mean. Over the years, we've both learned that we're capable of using both the interior and exterior tools. The combination helps us make more of our financial decisions consciously. We don't always do it perfectly, but we're getting better at it, and the process is changing the way we deal with money.
Rick: As you can see from the introduction, I am a busy guy. And yes, I know a lot about finance and business. At an earlier time in my life, I would have told you those exterior aspects of myself and thought I had shared everything that was important to know.
But now my greatest assets and joy in life are my relationships with my family, which includes my wife, Marcia; daughter, London; and son, Davin. Having started a family somewhat late in life, we are still involved with Thomas the Train, Veggie Tales, lost teeth, and allowances while many of our peers are dealing with graduations and grandchildren. Which is not necessarily a bad thing; it certainly gives us access to a lot of good advice.
My awareness that financial decisions have an emotional component developed gradually. For the first 20 years of my career, with its focus on numbers and money, I would have scoffed at the very idea that I might have painful behaviors around money that were negatively affecting my life. I knew how to earn it, how to save it, and how to manage and invest it—what more was there? By the average person's exterior financial measures, I was considered a financial success. Not surprisingly, I was also a workaholic.
Then my first wife filed for divorce. The pain of this experience pushed me to begin attending 12-step meetings and to start counseling to deal with my workaholism and other issues. Over the next few years I began to realize that I actually had a lot of unconscious beliefs and feelings around money that were not serving me well. Very slowly, I began to employ various tools to help me begin to feel and to learn from those feelings. I learned that there was much wisdom to be gained by listening to them, rather than ignoring them.
Kathleen: Most of my financial skills have come from that demanding instructor, Experience. The primary lesson it taught me about money was, "Don't spend it except on essentials." I knew how to balance the checkbook, pay the bills, and do the taxes, but it would never have occurred to me that I needed to learn anything about investing or planning for the future. It was tough enough trying to cope with the present—stretching the current month's paycheck to cover the current month's expenses.
When my two children were young, I started working for a company that offered workshops and treatment for co-dependency. That job may have quite literally saved my life, because it introduced me to 12-step programs and therapy. Not long afterward, I was divorced after 16 years of marriage to an alcoholic. This was a time of self-discovery and personal growth, but also a period of financial struggle. I was almost the sole provider for my children, and I remember all too well shopping for clothes at rummage sales and buying generic macaroni and cheese.
A few years later I married a man with three children. In addition to the emotional challenges that go with building a stepfamily, we faced financial difficulties for several years. At first we couldn't even afford to buy a house, so we lived for several years in a rented one that was too small for our blended family. I managed a busy and often chaotic household while my husband, Wayne, worked hard to build a successful construction business. We gradually worked our way out of debt until we were able to buy the kids' clothes at the mall instead of second-hand stores and to have some financial breathing room. Eventually we became financially comfortable and finally totally debt-free.
We were just beginning to get used to the idea of having enough and to realize that we might actually think about spending some money once in a while. Our house was paid for, the kids were almost all out on their own and doing okay, and we would have been able to travel or do nearly anything we wanted to do.
Then, at age 49, Wayne was killed in an accident. He was a pilot with his own small plane, and he and one of his company's superintendents died in a plane crash as they were flying to look at a prospective job.
All of a sudden my life was turned upside down and shaken to pieces. I was thrust into a whole new set of challenges in the need to deal with the pain and loss, to grieve, and to go on and rebuild my life. Among those challenges were financial ones. Thankfully, I was not left in poverty or faced with overwhelming debt. For me, the toughest part of all the financial decisions was the emotional side. At first, even accepting life insurance and Worker's Compensation payments felt horrible—as if by doing so I were somehow saying that Wayne's death didn't matter. I worried about making financial decisions that were fair to all the kids. I wanted to do everything wisely and responsibly. In settling the estate, I tried to make decisions that Wayne would have approved of, even though he had not made a will to guide those decisions. All at once, I was in charge of managing a significant amount of money, and it didn't feel like mine to manage.
In the midst of all these challenges, I attended one of Rick's workshops. The understanding it provided was a valuable tool as I made my way through the financial complications that had suddenly become my sole responsibility.