How to have better conversations about money

Reflective listening and a change of mindset will help you to avoid misunderstanding financial topics

Money can be an emotional topic for people to discuss but learning to listen and not judge is important to be on the same page. AP

Money is a taboo topic in many cultures. We may become uncomfortable when it’s brought up, change the subject or find a way to leave the room. Why? Because money touches every area of our life.

Like it or not, we are susceptible to social comparison and money acts as a kind of benchmark. We default to money as our measuring stick because it’s easy to do so, but this creates a vicious cycle that ends with us being petrified to talk about finances.

Once we start talking about money, we open ourselves to being judged and nobody likes that.

A negative consequence of this is that it’s hard for us to talk about money with important people in our lives. It becomes easier to avoid the conversation, keep secrets and end up fighting about finances.

Then comes our default communication style. Most of us approach conversations from the standpoint of getting our message across. This is driven into us from an early age and continues through to our adult life as we learn how to articulate our messages, be more concise and become better communicators.

It’s no wonder, then, that the default mode for many people is to jump into a conversation to try to prove how smart they are, offer unsolicited advice or “win” the conversation.

Taking all this into account, money conversations can be stressful and when stress runs too high, we run the risk of our emotions taking over. We act without the “thinking” aspect of our brain.

Instead, we default to the more primitive part of our brain, which provides a fight, flight, or freeze response.

This emotional takeover happens because one or more of our basic needs isn’t being met. At this time you are far more likely to be aggressive (fight), leave the room or change the subject (flight) or mentally check out of the conversation (freeze).

So, what are our basic needs? There are six.

The first is “belonging” — feeling as though you are part of a group. In tribal times, it was dangerous not to belong to a group.

The second is “autonomy”, feeling in control of your life and able to make your own decisions. If this is not met, you may feel you are being told what to do.

“Safety” or “security” comes next. This can be a literal feeling of safety (shelter, food and water) or relate to the non-survival aspects of our lives, such as unemployment or having insufficient retirement savings.

“Self-expression” is the fourth basic need — when you feel heard and understood. The fifth is “connection”, in which you have healthy, close relationships.

While our need for “belonging” is about being a part of a group, our need for “connection” is about having relationships within that. The consequence of this not being fulfilled is a feeling of being isolated or alone.

Finally, there is the need for “purpose” or “significance” — feeling as though you have a direction in life. When this need is not met, you’re more likely to feel sad or even depressed.

Changing our mindset from trying to convey a point to listening with the intent to understand can be a game-changer.

So, how can we structure our conversations around money better?

Try to articulate your thoughts for the listener so they can interpret what you mean. There is a lot of potential for misunderstanding when talking about emotional topics. You can end up in a vicious cycle and fight based on a few misunderstandings.

One way to avoid this is to check that what you thought the person meant is correct. This is called reflective listening.

Get comfortable with hearing “no” for an answer. This allows the speaker to rearticulate and, most importantly, prevents you from making faulty assumptions.

This is the basis of successful conversations about money.

Focusing on fully understanding what the other person is trying to say before responding will prevent a headache later on.

Reflective listening, paired with your mindset change of putting understanding at the top of your list, helps you to stay on the same page.

When you are on the same page, you turn the situation away from “you versus your partner” towards “you and your partner versus the problem”.

Sam Instone is co-chief executive of wealth management company AES