Perceptions of Income – Gross v Net

We need to take a moment to discuss your gross income versus your net income.   In case you don’t know, your “gross” income is the full amount of a source of income (like your paycheck) before taxes or any other deductions are taken out.  After they take the taxes and deductions out of your source of income, you receive what remains and this is referred to as “net” income.  As an example.  If your hourly wage is $10 per hour and you work 40 hours during the week, your gross pay is $400.  But when you receive your paycheck, you notice that it is only $350. That is because they have taken out all of the taxes.  The gross pay was $400, the net pay was $350. Pretty straightforward, right?

Okay, so this is where a lot of programs leave this information.  There is money that is “taken out” of your paycheck and you should know the difference between “gross” and “net.”  But there’s some important information that is being left out, and in my efforts to eliminate our tendency to DISCOUNT the value of anything, we need to look at this just a little bit longer and perhaps from a slightly different perspective.

First, it is very important that when we look at our hourly wage or salary that we give it the total value.  For instance, in the example above, you earned the full $400 and we want to recognize the full amount.  But what happens is we tend to focus only on the net income because that is what you are going to use to pay your bills.  There is a tendency to think of the money we didn’t receive as being “taken out” – which is only part of what happens.  That money is taken out, but it is used to pay for something.  That is to say that you are actually spending that money.  You are spending that money on a lot of things.  Some of it goes to pay for roads, police, military, libraries, schools.  Maybe some of it goes to pay for your health insurance or a retirement account.  Maybe some of it goes to child support.  Wherever this money goes, it is you that is spending it and we want to recognize that it is our money that is leaving our possession.

The point of this discussion is not to argue whether your tax money is being spent well, or what is fair or right, or who is to blame for anything.  The point is to illustrate that the money between “gross” and “net” is money that is spent on goods and services.  It is money that you earned and we do not want to DISCOUNT the value of those resources by not acknowledging them.   So, yes, the money is “taken out” but then it is paid to someone else.  It is not something that is happening to you, it is a process in which you are actively participating.

 

The Perception of Income as “The Solution”

Earning more income can vanquish all of life’s trials and tribulations – true or false?  There is the tendency among many of my students to believe that earning more income can vanquish all of life’s trials and tribulations.  The notion that “when I make a lot of money, my problems will be solved” is an extremely common one. So how do we get more money?  Well, the only two ways that I know of to get more money are to spend less or find additional income.  That’s easy, right?  Wrong.  Why?  Because spending less and finding additional income take additional time and/or energy, and time and energy, like money, fall high on the list of things people would like to have more of, not less.  Ay, there’s the rub!  So the real question then is, how do we get more money without having to expend any additional time and/or energy?  And the answer is…more money is not the answer.  While I do agree that in certain circumstances more income can be beneficial, sometimes money can create more problems than it solves.  If earning more income was a cure-all, then seventy-eight percent of former NFL players wouldn’t be bankrupt or under severe financial stress just two years into retirement.  And the majority of lottery winners wouldn’t be right back where they started financially speaking within five years of winning the lottery. While financial health may begin with an increase in income, it does not guarantee sustained financial health.  Financial health is sustained through the creation and maintenance of assets.

 

 

The Perception of Money

A key concept in Meaningful Consumerism and improving your financial health and  is to understand our perceptions of money and how money operates as a component of our financial health.  However, most people who I work with tell me that they don’t have any money, don’t have enough money, can’t save money, don’t know how to budget their money, and/or feel stressed about money.

So before we can really get any deeper into the discussion on financial health, I recommend that we should probably have a little bit better understanding of this term “money.”  So I’d like to ask you…What is Money?

In all my years of teaching, I have never met anyone who wouldn’t like to have more money.  In fact, the vast majority of my students view more money as the ONLY solution to their financial troubles – their golden ticket to being able to stick to a budget, save money for the future, improve their credit, reduce the amount of stress they experience in their daily lives, and to have a good life.  So, what is money?  When I pose this question to one of my classes, the responses I get are typically verbalized with vigor.  Money is power!  Money is status!  Money is opportunity!  Money is evil!  Money is freedom!  Money is worry!  It’s bad, no, it’s good.  It’s paper, it’s electronic.  It’s imaginary.  It’s government conspiracy.  It’s control. It turns out to be a lot of things.

Let’s use our imagination for a moment.  Imagine you had a hammer sitting on a table.  Does the hammer have any use just sitting there on the table, without a human to interact with it?  No.  The hammer can’t get up and start pounding nails into the wall on its own. All it can do is sit there on the table, patiently waiting for a human to pick it up and use it.  On its own, it has no use.  Sitting there on the table, the hammer merely represents the ability to do several things – some good, some not so good. It could put nails in walls, take nails out of walls, knock something loose that was stuck or push something into place.  On the other hand, it could also smash your thumb, knock a hole in a wall, make dents in things, or potentially seriously injure or even kill someone.  The hammer is simply a tool.  You get to determine how to use it and until it is being used it is neither inherently good nor bad.  It just is.

Money is really no different.  If left sitting in the wallet, it will do nothing.  If left sitting in the bank account, it will do nothing.  It might draw some interest, but until it is used, the interest will do nothing too. By itself, money doesn’t do anything, and it doesn’t do anything to us.  It does not move without us “willfully allowing” it to leave our possession, a behavior commonly referred to as spending.  In order for money to leave your possession, you have to willfully allow it to do so – always.

If you have a $10 bill in your pocket, it can represent many possibilities – but it is neither inherently good nor bad, it just is.  If you have $100,000 in the bank, it might mean a lot of different things to you, but until it is being used, it is neither inherently good nor bad, it just is. That $10 or $100,000 can be used to make purchases that will be beneficial, or it can be used to make purchases that are not beneficial. In the same way that you get to determine how to use a hammer or any other tool, you also get to determine how you will use your money.

So, as a reminder, money is simply a tool.  Money might come in many different forms, like paper, coins, or electronic information, but ultimately, it’s still just a tool and we get to decide how to use it.  All of those other things that we think about money, they are just reflections of what money represents to us.  And it is good to know that about ourselves as well.  But we will come back to this point over and over, money is a tool and it is a neutral object that we use.  Money does not use us.

 

External Barriers to Change – Stress Part 3

Since the chemicals released in the body during the fight or flight response are the primary culprits in much of the psychological and physiological damage associated with stress, let’s have a closer look at the situations which typically cause this type of response.  The fight or flight response is triggered in circumstances of both acute and chronic stress, in response to a stressor that (1) is a real OR perceived attack, harm, or threat to survival, and (2) is perceived as being beyond the control of the person experiencing the stressor.   Well that’s interesting.  Perception seems to be a key ingredient to whether or not the fight or flight response is triggered.  So then, what is perception?  Well, according to dictionary.com perception is the result or product of becoming aware of, knowing or identifying by means of the senses.  Ok, then my next logical question is, is it possible to change perceptions?  Of course I always ask this question to my students and to this day I haven’t found anyone who does not believe that perceptions can change.  So if perception, specifically perception of threat and lack of control, is necessary for the initiation of the fight or flight response, then doesn’t it make sense that if we practice changing the way we perceive stressful situations that are not truly life threatening and focusing on the areas where we do have control, we can begin to reduce the amount psychological and physiological damage associated with stress?  Change your perceptions and take back some control.  Simple.  Not easy.

Next steps – How do we change perception or take back control…?