Are You Trapped in the Cycle of Financial F-Words?

So you've got a great job with a decent income, but it still feels like there isn't enough. Your line of credit and your credit card keep creeping up and it's making you sick to your stomach. Your neighbours are taking their kids to Disney World and you'd love to be able to do that for your own kids, but you can't imagine ever having enough money to make it happen.

If any of these scenarios feel so familiar it's spooky, then Karen Collacutt of Money Coaches Canada will tell you that you're stuck in what she calls, "The Cycle of Four F-Words." These are Faking It, Frustration, Fear and Failure.

Sound familiar? If it does, Collacutt knows how to end that cycle and help you make friends with your money. A new way of doing things begins after the jump.
So, these f-words, what do they really mean? The first is faking it and, Collacutt will tell you that means you don't really know your numbers as far as income and expenses go.

"You don't really know how much your life is costing you, but you're acting as if you know and usually frustration sets in when it becomes clear that you may not be doing as well as you think. Your credit card debt are growing and there seems to be more month than money and you realize that you may not be on top of this money thing."

At that point, most of us usually try to do something about it, like set a budget, read a financial planning book or scale back the spending. If your bad habits continue or you haven't got your finances under control yet, it won't be long before the third f-word -- fear -- starts to set in.

"Fear starts to permeate when the credit cards are maxed out or an unexpected expense comes along. This could be a job loss, an unexpected pregnancy, an illness or maybe it's that the attempt to change your financial situation doesn't work. Since there isn't much of a buffer, things can go off track quickly."

After that, you'll probably start to feel like the fourth f-word -- a failure -- when you realize that you don't know how to solve the problem, especially when you feel like you should be able to get your finances under control. "Not knowing can make you feel like a failure and bring up a lot of shame and blame," says Collacutt. "At this point, you may use your investments or home equity to consolidate your debt, which may leave you feeling like you've gone backwards."

This is where she says the cycle may start all over again, thanks to the false sense of security that consolidating debt that way can create when cash flow has eased up and the pain goes away. This can put you right back into faking it, which helps you ignore the underlying issues that got you there in the first place. Soon the cycle continues from faking it to frustration and fear, until finally you hit failure once again.

"While you're in the cycle many people find themselves making purchases that may seem important at the time, but they grow to later regret. You might spend money because you feel like you should, you're not paying attention or you're trying make yourself feel better with a little retail therapy," says Collacutt

As a result, you find yourself either topping up the credit card because, well, it's already so high what's the difference, or you cut back and you don't do any of the fun things that you want to do. Plus, you become annoyed that the answer always seems to be, "We can't afford it."

Karen Collacutt has been there. In 1999, she and her husband made decent money between them at good jobs and they had just closed on their first house. Problem is, they weren't paying attention to what was coming in and what was going out and didn't feel the debt creeping up. Then, Karen wound up in the hospital and even though she had disability insurance from her job, it didn't cover everything and her income actually decreased to 35% of what it had originally been. Now they were in the cycle and, a year later, had consolidated their debt into the equity of their home, which meant they were right back in the cycle in no time flat. It took the Collacutts another couple of years to break the cycle once again.

No one knows better how to get out of the financial f-word cycle than Collacutt, so how do you break the cycle and make sure your money becomes your new BFF?

To find out how, visit our Make Friends with Your Money article or book an appointment with Karen Collacutt at www.schedulewithkaren.com. You can also visit www.moneycoachescanada.ca to find a money coach in your area, or download Collacutt's free Make Friends with Your Money Work Sheet and get started today.