Hey everybody, it is another beautiful day in New York and I am back with my friend Chelsea today We are going to talk about how to change our relationship with money You know we talked about what emotional spending is and why we do it now She's gonna offer some tools and tips and tricks and ways to get back on track. So let's go meet up with her See what she's got to say Thank you so much for making time. Again. Thank you for having me again a little bit If you don't know who this is, this is Chelsea Fagan from the financial diet.
Tell them all the wonderful things you do I'm Chelsea Fagan. I am is very smart. Well Within reason. Yep, I fall on a bell curve.
I Am a writer. I'm the founder of a media company called the financial diet We're actually in our offices here in Manhattan. It's very exciting. We're very excited Katie here We also make a youtube channel as part of what we do called the financial diet And I'm someone who loves talking about money because it used to be a very taboo subject for me and now it is not Yeah We were just joking before we started filming that we both live in like Taboo stigmatized areas and I love it because we have to talk about it, right we do so today We are here to talk about how to change our relationship with money in our previous video If you haven't watched it well link in the description.
We talk about emotional spending. What is it? Why do we do it?
But now I'd like to roll into because you know, I love to offer tips and tools How do we change that relationship so that when we are making purchases they're good purchases, and we're nothing's a hundred percent I know we're still gonna impulsively buy that one thing that we probably shouldn't have but Yeah, so first like what is emotional spending again just in case people forgot emotional spending is gonna be any kind of spending that is More tied to a heightened emotional state than to any real need in your life or any real value in your life And if someone's worried that they are emotionally spending what's like your first what's the first thing they can do? don't Know I mean so it's it's a couple things right you want to look back at the purchases you've made Again at if I mentioned is going through your statements and highlighting every purchase you don't remember or then you feel bad about and that was mind boggling like it's one of those like insert emoji Apple because I guarantee there's a lot of them Oh, yeah There always I mean we have to do QuickBooks for businesses if anybody's keeping track of their own expenses and you have to look at it and be like what was that and put it in the right category and sometimes I'm like Remember that and that I was like wow that's gonna be like eye Opening totally and you know, if you can't even remember them that those purchases were not valuable to you Another thing is to always have something At home like a little put it in your budget like a little Break glass in case of emergency kind of like feel better kit It has all your favorite things in it so that if you have a particularly bad day, you know You have something to go home to and you don't have to rush out and make it even worse and not budgeted for purchases Yeah, it's like catching you and you're in that emotional state exactly, which is honestly make I'll be honest That's when I make my worst decision was when I've had like a really like shit day and everything is going wrong And then I'm like, I'm gonna do it screw it. I'm gonna go buy the thing I want Oh and lastly, especially for online shopping give yourself total permission. You say if after 24 hours, I still want this thing I will buy it and give that permission and then wait 24 hours and nine times out of ten You'll be like in the clear light of day I do not need that thing and I think something there's something a big about permission. Mmm because I don't know if you guys feel this way, but once I give them myself permission to purchase it, I like don't want it anymore Oh totally she's a very weird like a thought process to be like It's the child in me going back the other videos talking about how childish. I am about my spending sometimes I beg I want to do it and that's why I'm going to You know, trust me I might know better.
I don't do better but I think that I definitely once I say like Yeah If you want it just do it just buy it or whatever or I talked to Sean and have it like yeah if you want That jacket just get it and then I'd be like, I don't really want anymore exactly. It was really valuable to you You should give yourself permission to buy it, but you need a clear mind to decide what is actually valuable to you Yeah, so it's like take a beat Give yourself permission think about it And then go forth if you want go like that Oscar interesting. Okay, very cool. So this break in case of emergency I love that idea.
I kind of think of it as like a spending safety plan to kind of stop you from your expenses in your budget But I'm curious so when I was thinking about this video my first thought was like we're gonna have to budget and then I was like I Don't want a budget. How do you recommend? People start that because I definitely have a road block where I'm like that sounds scary and overwhelming and where do I even start? First and foremost remember that you have a budget you're just not tracking it You already are spending in different categories at different amounts You're just not Looking directly at it because you don't want to because you probably know that you're gonna find stuff in there that you don't like So that's the first step. So even if you're not setting any Boundaries on categories even if you're not changing anything start by actually Analyzing how you are spending I used when I first started an app called mint because it does it all for you I've looked into that was it helpful So helpful it is it creates every month like a little pie chart of like this is what you're spending on this This is what is the normal spend this is you know, you went crazy and this this month I don't even send you alerts for when you're going over a certain amount in a category That's nice it really I'm someone who was very reticent to do that manually and that really helps But you can also do it using Excel or whatever is natural to you But don't for the first month even worry about changing your habits or setting limits Just for the first month commit to knowing what you are currently spending then once you look at it I find so it I'm sure that there is psychological data to back this up But I always find that the second you are actually looking at the numbers you are going to be infinitely more motivated to have control over them because it's so much easier to Justify reckless spending when you're not keeping track of what that actually entails And you're not keeping track of what that means in terms of your savings or what that means in terms of your goals So as soon as you get track of those numbers, I find that you probably won't even need a nudge into the next step Yeah, but if you do the next step is then just deciding like you should have at least one or two categories We're like wolf.
Do I really need to be spending that amount of money? I'm starting to work backwards from there and seeing where you can cut out and start to set little challenges for yourself like I want to save 5% more this this month or I want to spend 10% less in this case or it's attainable. I like that It's almost like and I think it's because I know therapy well So I like try to apply it to what I already do is like we can't when I tell people to like try to change The way they talk to themselves about themselves It's like you have to track it first. You can't change what you don't know.
Hey everybody, it is another beautiful day in New York and I am back with my friend Chelsea today We are going to talk about how to change our relationship with money You know we talked about what emotional spending is and why we do it now She's gonna offer some tools and tips and tricks and ways to get back on track. So let's go meet up with her See what she's got to say Thank you so much for making time. Again. Thank you for having me again a little bit If you don't know who this is, this is Chelsea Fagan from the financial diet.
Tell them all the wonderful things you do I'm Chelsea Fagan. I am is very smart. Well Within reason. Yep, I fall on a bell curve.
I Am a writer. I'm the founder of a media company called the financial diet We're actually in our offices here in Manhattan. It's very exciting. We're very excited Katie here We also make a youtube channel as part of what we do called the financial diet And I'm someone who loves talking about money because it used to be a very taboo subject for me and now it is not Yeah We were just joking before we started filming that we both live in like Taboo stigmatized areas and I love it because we have to talk about it, right we do so today We are here to talk about how to change our relationship with money in our previous video If you haven't watched it well link in the description.
We talk about emotional spending. What is it? Why do we do it?
But now I'd like to roll into because you know, I love to offer tips and tools How do we change that relationship so that when we are making purchases they're good purchases, and we're nothing's a hundred percent I know we're still gonna impulsively buy that one thing that we probably shouldn't have but Yeah, so first like what is emotional spending again just in case people forgot emotional spending is gonna be any kind of spending that is More tied to a heightened emotional state than to any real need in your life or any real value in your life And if someone's worried that they are emotionally spending what's like your first what's the first thing they can do? don't Know I mean so it's it's a couple things right you want to look back at the purchases you've made Again at if I mentioned is going through your statements and highlighting every purchase you don't remember or then you feel bad about and that was mind boggling like it's one of those like insert emoji Apple because I guarantee there's a lot of them Oh, yeah There always I mean we have to do QuickBooks for businesses if anybody's keeping track of their own expenses and you have to look at it and be like what was that and put it in the right category and sometimes I'm like Remember that and that I was like wow that's gonna be like eye Opening totally and you know, if you can't even remember them that those purchases were not valuable to you Another thing is to always have something At home like a little put it in your budget like a little Break glass in case of emergency kind of like feel better kit It has all your favorite things in it so that if you have a particularly bad day, you know You have something to go home to and you don't have to rush out and make it even worse and not budgeted for purchases Yeah, it's like catching you and you're in that emotional state exactly, which is honestly make I'll be honest That's when I make my worst decision was when I've had like a really like shit day and everything is going wrong And then I'm like, I'm gonna do it screw it. I'm gonna go buy the thing I want Oh and lastly, especially for online shopping give yourself total permission. You say if after 24 hours, I still want this thing I will buy it and give that permission and then wait 24 hours and nine times out of ten You'll be like in the clear light of day I do not need that thing and I think something there's something a big about permission. Mmm because I don't know if you guys feel this way, but once I give them myself permission to purchase it, I like don't want it anymore Oh totally she's a very weird like a thought process to be like It's the child in me going back the other videos talking about how childish. I am about my spending sometimes I beg I want to do it and that's why I'm going to You know, trust me I might know better.
I don't do better but I think that I definitely once I say like Yeah If you want it just do it just buy it or whatever or I talked to Sean and have it like yeah if you want That jacket just get it and then I'd be like, I don't really want anymore exactly. It was really valuable to you You should give yourself permission to buy it, but you need a clear mind to decide what is actually valuable to you Yeah, so it's like take a beat Give yourself permission think about it And then go forth if you want go like that Oscar interesting. Okay, very cool. So this break in case of emergency I love that idea.
I kind of think of it as like a spending safety plan to kind of stop you from your expenses in your budget But I'm curious so when I was thinking about this video my first thought was like we're gonna have to budget and then I was like I Don't want a budget. How do you recommend? People start that because I definitely have a road block where I'm like that sounds scary and overwhelming and where do I even start? First and foremost remember that you have a budget you're just not tracking it You already are spending in different categories at different amounts You're just not Looking directly at it because you don't want to because you probably know that you're gonna find stuff in there that you don't like So that's the first step. So even if you're not setting any Boundaries on categories even if you're not changing anything start by actually Analyzing how you are spending I used when I first started an app called mint because it does it all for you I've looked into that was it helpful So helpful it is it creates every month like a little pie chart of like this is what you're spending on this This is what is the normal spend this is you know, you went crazy and this this month I don't even send you alerts for when you're going over a certain amount in a category That's nice it really I'm someone who was very reticent to do that manually and that really helps But you can also do it using Excel or whatever is natural to you But don't for the first month even worry about changing your habits or setting limits Just for the first month commit to knowing what you are currently spending then once you look at it I find so it I'm sure that there is psychological data to back this up But I always find that the second you are actually looking at the numbers you are going to be infinitely more motivated to have control over them because it's so much easier to Justify reckless spending when you're not keeping track of what that actually entails And you're not keeping track of what that means in terms of your savings or what that means in terms of your goals So as soon as you get track of those numbers, I find that you probably won't even need a nudge into the next step Yeah, but if you do the next step is then just deciding like you should have at least one or two categories We're like wolf.
Do I really need to be spending that amount of money? I'm starting to work backwards from there and seeing where you can cut out and start to set little challenges for yourself like I want to save 5% more this this month or I want to spend 10% less in this case or it's attainable. I like that It's almost like and I think it's because I know therapy well So I like try to apply it to what I already do is like we can't when I tell people to like try to change The way they talk to themselves about themselves It's like you have to track it first. You can't change what you don't know.
So if we haven't paid attention to what we're spending We're gonna have to just be aware before we can even consider Making changes because how do we even know where we're at? Like if you asked me today, like how much do I think I spend each month on eating out which I love I'd have no idea but once I'm able to like see that tangent and be like ooh. Mm-hmm.
I like that wolf I shouldn't be You really need to confront yourself with your own habits, and it's very easy to ignore it's also very easy to ignore if you're doing just like you know profit and loss essentially if you're just like I took in this much I saved that much, you know, that's that's mixing everything into one bucket and therefore less Insightful to to taking action in individual categories where you actually could make a huge difference Another thing to remember a lot of times people look at a budget as restriction It depends what it sounds like to me It is important to remember that it is the opposite of restriction in the sense that you are giving yourself Permission to save more you are giving yourself the tools needed to save more that money is still yours In fact, it's more yours than if you were giving it to a bunch of stores or whatever true so one of the things that I think helps people psychologically the most in Making a budget is having at least one goal that feels really exciting to you. Mm-hmm Your emergency fund which is going to be about three months of total living expenses that you have in an easily accessible bank account For in case of emergency. Yeah, get laid off car breaks down. Whatever.
It may be. That's the most important savings goal It's the most fundamental to day-to-day adult life, but it's not the most fun one So if you add on savings goals, at least one that is something exciting to you Like maybe a big trip in the future or a new big thing that you've been looking to add to your life That is going to help really reframe in your mind. What savings means and what it means to how? Thirty dollars more in your account because you spent $30 less on take-out. It means I'm that much closer to this thing That is meaningful to me.
If you don't have anything really meaningful that you're saving for and like it or not Once you get really into saving something like retirement can feel very exciting and very validating But for most people it's not gonna be the thing that really gets them to make good choices So you want to make sure you have at least one savings goal that really feels exciting. Yeah, and that makes sense It's like what brings you joy what's gonna motivate you because there are going to be days when we have that emotional spend urge right and if we have another goal that we're like, you know what I Know this will pass. I really want to take that trip to Europe or whatever or visit my mom. I haven't seen her No, I don't know whatever it could be or buy that sweater. I've been looking for looking forward to That'll keep you going in those moments and I think that was one of the like when I was thinking about emotional spending in particular the therapist to me was like you're gonna have to have some coping skills so that when their urge to Spend maybe when we don't want to or that like I can do it or whatever it is that triggers you figuring out what triggers?
You and triggers that spending that you immediately wish you hadn't done Having some different ways to cope with how you feel instead of spending absolutely, like yeah something I think that also gives people a lot of Energy towards spending better and being more conscientious with their money is tracking their net worth a lot of people this can be tough for a lot of people initially because a lot of people carry a lot of debt Which means that their net worth may be negative Yeah, because it my student loans like could probably run any many people many Millennials in particular have more debt than than assets but the net worth number Which is basically just what you have minus what you owe essentially. That number can be Incredibly motivating because it's a tangible overall number that gives a very clear snapshot of your financial health and is something very very Tangible to build every time you save an extra hundred dollars your net worth increases by a hundred dollars when you start investing When you start having a stronger portfolio when you let that in horizon take its course and you start to have that That compound interest playing into it you get to look at it as much as you want and say look where I am versus where I was a year ago and When you use programs? especially that will help like chart it on an actual chart like my husband and I when we look at our net worth it's like We moved to America. We got a new apartment and then it's like ooh Chelsea's company started making money anything and you get to really track A very macro picture of the decisions and the life that you're that you're building But you also get to look at it in individual numbers, which is incredibly satisfying Yeah, and I think also like I don't know if you think this weighs into it, too but some and you guys can tell me if I'm wrong in those comments, but I think that sometimes we Have this like roadblock of success financially where because I'll hear from a lot of my viewers that like they self-sabotage so we'll see it like going well like Oh things are Increasing Chelsea's company's finally making money and we're doing well and you see it like bum bum bum, bum And then you're like and I make a really bad choice because I feel like I'm not worth it Is that common - or am I just like making things up?
I would say that probably what is very common with people and I'm susceptible to this as well. Is that people get? Too comfortable and they feel like either I can afford to be irresponsible for a while or They feel like I've been so good I should really reward myself and their definition of reward is it was like crazy is spending too much money Because like I do the reward rub Like I did really good today and I'll go go out to a nice meal or something or a nice thing I mean, I don't think it can be manageable that can be manageable but for a lot of people it might be something that really does derail their progress, you know, they might be like Oh, I've paid so much of my student loans like screw it I'm gonna take this, you know luxury trip to to go visit a friend or whatever. It might be and if it's something that you've budgeted for and that you can afford sure why not but it's kind of like you know people often we call it the financial diet in a large part because the only quote unquote diet that ever works is something That you can actually do every day and as part of your life and then people often have a similar relationship to food You know, I see such a correlation with that especially eating disorder I think I've talked about this before but my patients who tend to be on the more restrictive side with food restrictive money I think my patients who tend to be on the more binge or purge bulimia binge eating disorder They tend to binge with money as well Like they'll over spend all of a sudden and you know blow their budget and it's and it's it's really difficult also if you have that tendency, which many people do with money to feel like okay, I've I've earned it or I've been so good I can afford to you know be bad for a while clinical hate that kind of phrase enough But I can't afford to be bad.
Then a lot of people get on that cycle. Well, you know screw it Yeah I already you know didn't save anything this month I might as well just you know in for a penny in for a pound as they say and That is the kind of thing that can derail years of work And again huge correlation with food huge correlation with anything. That's how we reward ourselves how we control ourselves.
What are What is the level of? What is the level of value that we feel? Entitled to at any given time the level of reward the level of indulgence, you know It's really really hard for people not to spiral with these things even people who are conscientious Yeah And maybe that's why it's like important to to see a budget not as such a restriction Because those of us who have that binge urge will feel Immediately in this binge restrict cycle where we restrict and then we you do it overspend or like some kind of sabotaging behavior it's more like how do we Find ways like that break in case of emergency. I love that because then that's still a little bit of a reward So we're not all or nothing.
It's getting out of that black-and-white thinking that's really what it is it totally we have to be like hey, okay, so then work it really hard and For me, I know that I need a reward to keep motivated. So I'm I'm saving money towards this bigger reward but today instead of I don't know and instead of eating out at this place that maybe is like only 15 dollars I'll do the $20 place and that'll be a treat for me and finding those small ways to Reward without sabotage. I have a try in that regard. Like I need rewards constantly like, oh, I'm like a dog I'm like a Pavlov And I need your treat piece of cheese and we're gonna keep going So one thing that I highly recommend for longer term goals things like saving for retirement or building your net worth Is to in your planning for these things build in Prizes, you know build in things like the to that budget that once you hit that you can go you let's say you pay off one of your student loans you have already built into that that I have budgeted five hundred dollars after that to take a trip to go visit my friend, you know, or I've got my net worth up to a hundred thousand dollars with that I get to redecorate an entire room in my house that I've been meaning to redo whatever this But make sure that it is something that you are planning for and is part of the deal that it's not just about the saving that it's also about how you celebrate that because one thing that I like to remind myself of is That you could get hit by a bus tomorrow like you could and a lot of people who get very into money in savings become Extremely they get kind of almost like a hoarder mentality of money and they delay delay delay delay Because they want to see that number go up. They want to retire it.
Where do you enjoy it? When do you would enjoy it? You know? Yeah, I believe in Distributing that joy and that value throughout your life because again, you don't know how long you're gonna be here you can't take it with you my Dad my grandpa my mom So I was like that where he just saved and saved and saved and saved for and he died he did I thought that was bleak. I'm sorry.
No, but he did it was like when I was in college he passed away and he Never like treated himself, and it was just crazy to me Because I thought what did you save all that for like not that you should spend everything so you're left with nothing But like there's a nice way to have rewards built in and I think that that is something that that is important for me Too cuz I'm like that I need a little treat to keep me going so Yeah, okay. Those are all helpful tips and that's a lot of like a Lot of money, I don't know like food for thoughts I can't I'm got a workshop that I can't come up with a way to weave in money in the for food-for-thought But it's a lot to digest if you could go back in time and Give 20 year old you advice or 18 year old you what would be that advice that you'd give? her then because I know we have a lot of people out there who maybe are In that stage where maybe they grew up with not is it not enough or not as much or are making bad choices? Like what would you tell that you back? Then that you think will be the most helpful? Well, if it's any consolation to the viewers wherever you are financially at 20 I guarantee you you're better than I was at that age.
I did every terrible thing You could possibly do with money in terms of getting myself into debt going to collections. I got arrested for Related to money issues on paper moving violations. They suspended my tags my license and then I was driving on it I ruined my credit score. I got into consumer debt.
Basically every bad decision I made and all of that was happening For what I consider to be the most Petty reason which was just wanting a better life feeling entitled to a better life And I defined that in really dumb teenage terms, which was having nice things Going out when I wanted to all of that stuff and I would tell that person First of all, I would be like so he did you like locked in a basement Not allowed to access credit cards or anything but functionally what I would tell her is that what you define as a good life is Completely ephemeral. It's completely based in Temporary and fleeting Joy's that have no real value What is a good life? what will feel what you want to feel what you mistake for being rich you think being rich is just it's buying a bunch of Shit being rich is not having to worry at night because you know that you will be okay that you know You can afford mistakes you know that like if you get a ticket you Can pay it and it won't go to collections and spiral out of control. It means if someone in your family Needs help. You can fly out to see them.
It means you could even loan money to someone if they needed it It is a feeling of being It's a feeling of security. That's that's really what you're after and you'll never ever get it this way Yeah, and I agree with you. I think that like Buying goods only It's it's just a thing. It's like one of my one of my friends who has children She says she doesn't like to buy them things She likes to buy them experiences and it's more about like spending time together doing something cool And I think putting more of our energy behind Experiences and shared things with people that we care about is is really where it's at and that I can't yeah being secure It's that security it is and don't get me wrong like that I love things we are do I love like I love my my home is like my favorite thing in the world I love decorating it and thinking about and being in and hosting people on it.
I love it But if if that love cost me the ability to be able to pay like a medical bill yeah, or You know be able to visit my family or whatever other things that basic security provides It would ruin all of that pleasure because it's built on sand ya know. It's so true Thank you for sharing all of your tips. And I hope you for having me you hope you found this like Helpful and validating to know that you're not alone.
Like we all make poor money decisions I think the more that we talk about it the more we understand it the better we can all be I agree and It's great that channels like Chelsea's exists and she offers all sorts of wonderful tips and tricks and just such useful information So I will link her channel and everything down in the description like I said We answered a lot of your questions over on her channel already so you can go over there and see us You know doing our best to help you out, too. Um, thank you so much. Thank you for having me.
Love to be here Yeah, and we will see you next time, right?
