No one is "bad with money"
One of the ideas I see in people who struggle to deal effectively with their finances is that they are “bad with money”. I hate this phrase. It leads to so much hurt, shame and frustration, and worst of all it’s tosh! There’s no such thing.
The idea that you can be “bad with money” or “good with money” comes from a simple assumption: that managing money is a single skill and you are either good at it or bad at it.
All-or-nothing.
Binary.
Simple.
Nonsense.
Financial success involves using a wide range of skills together, along with a measure of luck. If you tell yourself there is just one money skill and you don’t have it, you deny yourself the credit for all your existing strengths. This attitude will prevent you from realising what’s really going wrong in your money management and how to fix it. The vague undefined nature of being “bad with money” causes a sense of general helplessness that will always undermine your efforts to improve.
OK, so, what are some money skills?
Self-knowledge - so you understand what you really want, what you really don’t want and what you are and are not prepared to do to get to your goals.
Realistic goal setting - so you know where you want to go and whether that’s possible.
Collecting and analysing data - e.g. what do my bank statements say about my current spending patterns? Where might those have come from?
Planning - what, specifically, do you have to do to achieve your goals?
Research and selecting reliable sources of information.
Prioritising - making effective comparisons.
Negotiating - whether that’s a raise at work, settling a complaint or a getting a better tariff for your bills.
Assessing risk and being comfortable with uncertainty.
Monitoring progress and adapting plans to changing circumstances.
Reading comprehension, ability to identify key information in a lengthy document.
Numeracy skills e.g. to compare value for money from different deals.
Assertiveness - willingness to ask professionals awkward questions; willingness to say “no” to friends or family members when their plans don’t work with yours.
Proactive problem-solving - spotting issues and resolving them quickly.
Organisation to keep on top of your paperwork and avoid missing deadlines.
Communication skills and empathy to navigate conflict around money with people close to you.
Tenacity - for when things are unpleasant or challenging.
Moderation and self-care - so you neither overspend your way into debt nor burn out trying to be over-frugal or hustling too hard.
This is not at all a comprehensive list, but hopefully it gives you a hint of the ways that managing money involves a range of skills in balance with each other and how you will use different skills at different times.
Once you see managing money this way, the idea of being '“bad with money” makes no sense at all. You might be missing some key skills, or not applying them to your finances, because you didn’t realise how they applied. I’m sure you have at least some of them though and once you start thinking of money management as the combination of the right skills at the right time, you can work out how you need to improve.
It all just becomes much more manageable. You can do this. One step and one skill at a time.
For more on all-or-nothing thinking and how it can mess with your finances check out this episode of my podcast Squanderlust.