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New-poor or bad financial behavior


In an article in a Icelandic national newspaper readers are introduced to „new-poor“ individuals. The author of the article described the main reason for being new-poor to be costly education, poorly paid jobs and high cost of daily life due to many children, high food prices, and high rental and housing prices.

This new concept is dangerous and I hope it will not stick in our minds. I hope people never accept they are diagnosed as new-poor.

It‘s most likely that the new-poor people in question are not really poor, but over-in debt. People whose external pressures of society helped them make bad decisions in finance.

In the mentioned article, the solution is to increase support for those in bad financial situations. For example, housing costs should be optimized, financial aid increased and general support would be income-linked to better help the new-poor. These are all good and noble ideas but unfortunately not good for long term because if we do not address people’s behavior then nothing will change in their finances . If you know little about money and make poor financial decisions by habits you will continue to do so even if you acquire more money. Chances are that if you do not take care of your money today you will not do it tomorrow either- because it‘s a habit.

Our personal finances are more of a habit than rational thoughts. Habits we learn from our experience or learn from other people. We see what others do and repeat what we think works. The new-poor do not see their habits in finance. They do not see that they repeat their mistakes and maintain their situation. They do not see that their own decisions made their financial reality. This behavior is largely under the influence of our society. We recognize that it is ok to indebt ourselves for education, cars, mobile phones, in fact everything. Foresight in finance is little and discussions about our finances are a taboo. And when we are over-indebt we put the blame on those who „allowed” us to make all these bad decisions and demand that they take responsibility of our situation. But we made the decision. No matter how poorly thought it was, or whether it was the financial institutions that took advantage of our impulsiveness and desire, it was we who made the decision. We choose the education that delivers low wages, we choose houses that are more expensive than we can afford, and we choose more expensive food than we should buy.

There is no quick fix for the „new-poor “. The society will not save us. What the government can do however is to offer professionals helping people to change financial behavior. As a financial behavior therapist I am working on material to teach consultants and professionals to support and educate people out of their financial situation.

And we can change our situation by examining how we behave ourselves. We can begin to look at the situation as it really is. We can monitor how we can afford to live today. We can begin to prioritize our needs. We can set goals.

Get started today by answering our five financial behavior questions:

• What money, what is our income?

• Where’s the money, what are our expenses?

• Does the money have to go there?

• Do we want the money to go there?

• Is the money supporting your goals?

Why you need financial therapy


Financial problems are behavior problems. We are locked into behaviors and thoughts that have a negative impact on our finances. We let our emotions decide how we spend our money. The way out of this situation is changing our behavior.

The foundation for good finances is gaining good self-control . Self-control is the ability to influence our behavior by overriding our emotions. The individual takes control of his emotions or behavior, and comprises the success or avoid harmful consequences.

Three factors describe the composition of self-control: Goals, self-monitoring, and willpower. Goals consists of our living standards, ideas and state. Our goals are crucial when we want to change less desirable behavior or situations.

Self – monitoring is a way to measure our success. We review our situations and feelings again and again to assess whether we are successful in gaining our goals.

The most important part of self-control is will power. Our emotions have the biggest affect on our willpower . When we are tired or feeling down, experiencing hopelessness or lack of knowledge our willpower is intentionally small. The better we understand our emotions the more likely we are to respond properly to the situation. If we rest properly, eat healthy, and seek knowledge on how to react to any given situation we will be better fit to work towards our goals and more willing to self-monitor our behavior. Self-control is then like a muscle that reaches fatigue if it is only exercised and not rested and nourished properly. Goals and monitoring are then meaningless if we forget to take care of the power source.

Traditional financial advice is based on the first two factors, goals and monitoring of success. But these two factors do not last long if we do not know the reasons why we begin every path with good intentions, but constantly lose our willpower and fail even simplest tasks. Like a car we run out of gas and fail to perform or achieve our goals.

 Financial therapy combines all the factors of self-control. We review our financial position and get an overview. We set goals to reduce debt and start saving. But we take a look at our selfs personally and learn who we really are and how we can change our behavior and find in ourselves the willpower needed to fix our financial situation permanently. We learn that we are human and make mistakes. We learn to deal with fatigue and lack of knowledge. We get tools and power source to improve our lives permanently, in more areas than just financially.

Better finance


Our personal finances are like our fingerprints. None of us use the money in the exact same way. The route to better finances is then a personal journey in which each of us adapts new ways in their finances, and our daily lives.

To lead this journey we have put together five important questions for you to answer in order to achieve an overview of finances and then get control over them.

The questions are:

  1. What money?
  2. Where’s the money going?
  3. Does the money have to go there?
  4. Do we want the money to go there?
  5. Is the money supporting your goals?

Click here to answer the first question

What money?


Our society is based largely on the use of money. We use the money to buy the necessary quality of life such as food, clothing, housing, medicine, health care and transportation, but also improve the quality of life buying candy, computers, mobile phones, entertainment and all that adds life and joy.You can say money has become the central device to access all quality of life. If we have enough money then quality of life expands but if we lack money our quality of life will reduce or disappear.

What money then?

Society is based on the fact that we provide for ourselves and our children with work. Those who are unable to work have the opportunity or the right to compensation from the relevant parties. What money is the salary we receive for our job, social or unemployment benefits, grants or gifts.

The first step to improving your finances is to answer the question “Where did the money come from?”

We need to know how much money we have in hand to pay for the quality of life of our: food, clothing, housing, medicine, health care and transportation. Also, if we have enough money to enhance the quality of life beyond our basic needs.

In my book Better finance are worksheets that help us gather and record our monthly income. You can obtain the income worksheet here (Homework-income).

Next question: Where is the money going?

Where is the money going?


In order to know whether we can afford our way of living, we need to know what quality of life we ​​choose and what we are paying for them. We ask ourselves: “Where is the money going?”

The answer may not be simple. If we do not monitor our daily finances we might not notice that some money goes into this and some goes into that. Therefore we can not find an exact answer to our question. Some might not ever have an answer at all.

That’s why we recommend that you note where each and every money is going. We simply write down how we spend our money. We write down all our expences. We have a worksheet for you to record expenses for each week: financial calendar. You can download and print out the projects by clicking here.

We have two kind of expenses, fixed expenses and daily expenses. Fixed expenses are pre arranged payments such as housing costs, loan repayments, subscriptions, heat, electricity, phone and Internet. Daily expences is all irregular expences such as food, clothes, entertainment, transportation and so forth.

Registration expenditure is the most important factor in changing finances. Without this information is highly likely that we will not succeed in improving our finances.

When we monitor our expences we get a clear picture of where we spend our money but we also get a clearer picture of how we behave in our finances. It is less stressful to know exactly what our money is doing. The knowledge will also help to change the habits of our finances. We monitor where the money goes and ask us:

Does the money have to go there?

Does the money have to go there?


Many of the qualities of life we acquire are needs. We need housing, food and clothing. We need heating and electricity. We need to take care of our health.

As we monitor our spending, we see our needs and how much we ​​are paying for it. We also see how we choose our quality of life. We go to the store and we buy what we like and we buy what we are used to have for dinner. We choose comfortable clothes and we choose furniture. Many of our choices are old habits and it is therefore a long time since we stopped wondering what it costs or why we buy it. If we need milk then we buy milk. It is what we want.

But what do our habits cost? We ask ourselves whether we need to buy exactly this product or if we can buy another similar but cheaper product. We ask if we need to drive the car as much as we do, or whether we have to  many TV subscriptions. We consider all of our quality of life and make a decision whether it is necessary to buy them. By doing that we are changing our habits by choice.

Next: “Do we want the money go there?”

Is the money supporting our goals?


Our goal should always be that the income is greater than expenses – to make more money than we use. Even if it is only one cent we still would have greater income.

In order to achieve the goals we set ourselves, whether it is to save money or pay our debts the money needs to support that goal. The money has to go where we decide. If he does not, we will not achieve our goals.

There are many ways to stick to our financial goals. For example, monitor income and expenses, decide how much we spend on needs and how much on longings. Monitor how well we are doing paying all our debts and act accordingly when needed. But in my opinion it is most important that we monitor how we feel. We could do everything absolutely correct in finances, we could save every penny and deny us all the unnecessary desires to be able to pay all the bills on date. But that would be a miserable life denying us the simplest quality of life just to get out of debt. And it is this misery that could ruin the good work of paying debt and drag us back down to our former usual debt. When we do not feel good about our selves and our lives, it is actually easier to give up and buy silly useless things than it is to be strong and pay all the bills on time.

It is therefore important that we take care of us first and then take care of the finances. We need to build up endurance and ability to resist temptation and find the knowledge to seek help when we feel miserable and are low on our mental energy.

Here are few simple things that help you keep up your spirit. For example, eating nutritious food, sleep enough, set realistic goals that you know you can achieve, and hang around active and positive friends and family, someone who has similar or the same goals and interests as you in finances.


Do we want the money to go there?


At this point we can take control of our finances. We are no longer dependent on money to acquire any quality of life, where our money goes is now dependent by our decisions. We choose to pay our fixed payments, partly because it is needed, but partly because we want to and because we can afford it. We make decisions about where our money is going.

Now it is easy to save or pay down debt because we control it. We find it easier to make ends meet because we choose whether our money will pay for one product or another. We choose whether to purchase selected products and services, whether we save our money, or if we pay our debts faster.

Next: Is the money supporting our goals?