We all have an emotional relationship to money, and it can profoundly impact how we lead our business. Some of us have a hyper-responsible approach to never owe anyone by paying bills immediately, trying to spend as little as possible, and buying only the things we need. The opposite approach is to spend money like it grows on trees and let bills go unpaid for months at a time. Both approaches cause problems in a business.
If you want to be able to make the best decisions for your business, you need to create a balanced view of money. That starts with recognizing the emotional hang-ups you carry about money and then taking steps to manage that baggage.
In order to gain financial objectivity as a business leader, you need to confront some major philosophical questions that will tie to your past experiences and emotions.
- What is money? Is it a tool? Is it the definition of your worth? Or is it something else?
- How does your upbringing inform your view of money?
- What does money mean to you? Is it a means to an end? Is it tied to your definition of success?
- Is money something you feel comfortable risking, or does it feel uncomfortable to risk money?
- Do you think of money usually in terms of its limits or its abundance?
It’s a nice idea that entrepreneurs are intelligent enough adults that they can separate all of their emotions and perceptions about money from the way they operate their businesses—but it’s not realistic. As business leaders, we take all that baggage with us into our leadership. As the stress of running a business puts pressure on us and squeezes, all those issues about money can come bubbling up to the surface and bite us in the beehive.
Because of all those different potential hang-ups, we risk the financial health of our businesses if we’re not actively growing in the area of money management. We need to learn about our own perceptions, correcting the wrong ones and mitigating the areas where we’re overconfident. We may need to overcome rampant fears about handling money and seek to understand the rules that govern how money works.
The goal? To get to a balanced, objective position where you can view money as a tool and understand how to use it most effectively to prosper your business.
Strategies to Manage the Baggage
You can’t get rid of all your emotional baggage when it comes to money, but you can learn how to better manage it. By making a conscious effort, you can expand your relationship with money and gain a more balanced, objective view of it. Here are some suggestions for how to do just that.
#1: Surround yourself with other perspectives
Recognize that your perspective on money is probably not universal, and surround yourself with people who think about money differently than you.
We read a story in Patrick Lencioni’s book The Advantage, about a CEO who was comfortable taking financial risks so long as he was in control. However, once his company was big enough that other people started governing the finances, he started giving his leaders a hard time about every penny they spent. Morale tanked, and when the leadership came together to discuss everyone’s frustrations, it came out that the CEO grew up poor and he’d vowed that he would never be poor again.
His ruthless driving of his staff, his scrutiny of expense reports—it all was informed by the pain of poverty he experienced as a kid. Rather than thinking about growth, he was thinking, “How do I protect this company from falling apart, so I don’t go back to being poor?” He could only play defense, and he frustrated anyone’s attempt to go on offense. It was only when he came to grips with his own emotional relationship to money that he gained the clarity to listen to other people who could present different rationales about the best way forward.
Own the fact that you have emotions, preferences, and assumptions about money which may not all be accurate. Seek out knowledge in this area and let that free you from some of the current attitudes that may be controlling your decision-making.
#2: Recognize that your employees have their own emotional relationships with money
Recognize that the people who handle your finances also have an emotional relationship with money—your accountant, your CFO, and so on.
We heard another story from a friend who said that their CFO was always pooh-poohing every idea, saying, “No, we can’t afford that.” Later, it came out that the CFO had grown up with parents who had been shaped by the Great Depression and felt constant stress and fear about money. For this CFO, every new venture seemed like a risk too big to take—but that negatively impacted his company’s ability to take some of the risks that are necessary to grow.
As you hire or promote people into leadership, ask them about how they view and handle money. Your staff needs you, as the leader, to have minimum competency in this area so that you can oversee what they’re doing and have a conversation with them if it seems like they’re making emotional decisions which aren’t in the company’s best interest.
#3: Educate yourself
Invest in your financial education and educate yourself.
Read good books on the subject, like Financial Intelligence: A Manager’s Guide to Knowing What the Numbers Really Mean, by Karen Berman and Joe Knight. Learn the facts about money, and then learn about the attitudes about money that financially successful people have. It’s important to educate yourself on both. Seek out additional books, videos, courses, and other trainings. Constantly pursue continuing education so that you can grow your business and protect your business—along with everyone connected to it.
#4: Find good mentors
Surround yourself with good mentors.
Seek out people who don’t just have opinions about money and running a business, but actually have experience in successfully running a business. You want counsel that’s wise and informed from people who have demonstrated they can manage money and their companies in a healthy way.
When you’re starting out as an entrepreneur, you’ll need to find these mentors through your network. A common scenario is a volunteer advisory board made up of two to four successful people who believe in you and are willing to meet with you once a month. In larger companies, these advisors will likely be among your paid staff.
Build a Better Relationship with Money
You can’t take the emotion out of money, but by becoming aware of your emotional baggage, you can understand why you default to certain behaviors and then work to make better decisions for your company.
Relationships are never set in stone. They are living, breathing things, and your relationship with money is no different. By practicing the strategies detailed in this article, you can broaden your perspective of and build a healthier relationship with money. You can then make the decisions that will best drive your business forward to success.