Maturity and Money

The one absolute requirement of a money manager is emotional maturity. If you don’t know who you are, the stock market is an expensive place to find out.
– Adam Smith

I ran across that amazing quote from Adam Smith (an 18th century economist that’s often seen as the father of modern economics) the other day at the library and it’s stuck with me.

If you want to manage money effectively, you have to be emotionally mature. You have to know who you are – not who other people tell you you are or who you think you are. You have to know what you actually need and be able to distinguish between what you need and what you want.

This isn’t just a question of stock investing, either. It applies to everything – the ability to make good consistent spending decisions, the ability to plan ahead for the bigger things in life, and the ability to set goals and priorities and then work towards them.

To put it simply, those hallmarks of emotional maturity simply aren’t held by everyone. I should know – I don’t believe I was emotionally mature at all until I was able to emotionally digest the birth of my first child.

I was able to set goals – but I was rarely able to follow through with them unless my hand was held along the way, either with advising or with other carrots.

I was able to handle all of the basics of personal finance, like paying bills and such – but I wasn’t able to put it in a bigger context, that my choices would affect the rest of my life.

I was able to bargain hunt quite well – but I wasn’t able to really ask bigger questions, like whether or not I needed this item at all.

Worst of all, I was able to see that things weren’t adding up – but I wasn’t able to make the changes necessary to get my financial house in order.

To put it simply, I didn’t know who I was or what I was striving for in life. It took a lot of soul-searching for me to figure it out – a lot of late nights spent holding my infant son, thinking about my life, and talking to my wife.

Once things began to click into place, though, most of the basics of personal finance began to make complete sense to me. My checkbook and credit cards went from being dangerous weapons to being useful tools.

Emotional maturity doesn’t come to each person in the same way or at the same time – nor does it always come all at once. I know people in their fifties and sixties who still have no idea what they want in life (and unsurprisingly, they’re deeply in debt). I know teenagers who already have things figured out and know what they want from life. I know people who are extremely good at saving every dime they make – but they don’t know what their future holds and haven’t even considered starting a retirement plan. I know another person who has a great life plan in place, but often comes dangerously close to undermining it because of his bad spending habits.

Instead, I believe emotional maturity is a journey for each person. We’re all at different stages on that journey – some have barely started, others are well centered. I also believe that there is no true destination along this journey and that you often stop along the way.

How can you continue along your own journey of emotional maturity? Here are five suggestions that helped me figure out my place in life.

Figure out what you really love. Not what you’re supposed to love, or what you think others expect you to love. What do you love? What fills you up with so much joy that you can barely stand it? For me, it’s my family and my writing. The answers may not be as simple for you, and if you really think about the question, you may find that the things you think you’re supposed to love aren’t the things that you really do love.

Throw out the magical thinking. Many people get stuck in the trap of envisioning a great conclusion to some process in their life, but they don’t consider how to get there at all. They instead spend all their energy bopping along to the image of that happy conclusion. Emotionally mature people recognize that you’ve got to work and plan to get there. Look at the things you envision for your future and ask yourself what your plan is for you to get there.

Focus on tolerating and controlling your moods and feelings. It’s very easy to simply ride our emotions and let them lead us. We splurge in happiness, isolate ourselves in sadness, act impulsively in anger, and flee in fear. An emotionally mature person is able to recognize these emotions and not let those emotions change our behavior (at least, not in an uncontrolled fashion). You might have enough control to not punch a wall when you’re mad, but do you have the control to not change your investments when you’re afraid of losses?

Obviously, for some people, this can be much more challenging that it can be for others. The real purpose here is to always attempt to improve your control from where it is now, not to suddenly become a person with perfect emotional control.

Address every avenue of your life that brings you guilt (and other negativity). Many people load themselves up with emotional baggage. Instead of dealing with the problems in their life, they attempt to avoid them or postpone difficult situations. Emotional maturity means thinking about these situations, facing these situations, and doing what you can to resolve them with emotional control.

Accept that you will fail – and learn from it. Don’t assume that everything you touch turns to gold and, even more importantly, when you do fail, be willing to examine that failure honestly and figure out what went wrong. For example, if a relationship fails, don’t simply blame the other person – instead, look at yourself and ask yourself what you did wrong.

These are all steps along a journey towards emotional maturity – and, as Adam Smith points out, emotional maturity goes hand in hand with good money management.

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