052 | Reactive Money Management

Many of us are living on autopilot, making decisions and taking action based on what feels good or what’s comfortable.

This is reactive living, and it’s hard to make the progress you want to make in any area—especially with your money—when you’re being reactive.

In this episode, we talk about what “reactive” means, the role our brain plays in being reactive, how reactivity shows up in our money, and how you can be more proactive with your money.

Lightly edited transcript appears after the show notes.

 Topics Discussed

• definition of “reactive”
• the role the brain plays in being reactive
• being reactive with your money
• how to be more proactive with your money

Listen to the Episode

Resources mentioned

Lifestyle Freedom Starter Guide

Episode 7: Budgeting for Lifestyle Freedom and Financial Independence

Episode 31: Is Lifestyle Inflation Stealing Your Freedom?

Episode 34: “I Work Hard. I Deserve It.”

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Email: hello@rhothomas.com

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Lightly Edited Transcript

Hey friends, welcome back to the show. How are you, I hope you’re doing well and having an amazing day so far. So I am super excited about today’s topic, because we’re going to be talking about reactive, money management. You might be thinking what is reactive money management so before we get into that, let’s define reactive, You know I love my definitions. Merriam Webster defines reactive as occurring as a result of stress or emotional upset. And let me just say, first of all, that this wasn’t the first definition. The first definition was Of, relating to, or marked by reaction or reactants. How does that help me. I really don’t like when definitions include the word that’s being defined because that does not help at all. How am I to figure out what this word means. But anyway, the definition, talking about stress and emotion is a better fit for our conversation today, and it gives more of a context to what the word reactive means than that other definition, and just based on the definition, occurring as a result of stress or emotional upset. I’m sure you can already see that reactive living is pretty common, right, we tend to live a pretty reactive life, and I’d argue that it’s not just about emotional upset, but emotion, generally, like we make decisions and take action, or don’t take action based on what feels good, or what’s comfortable. We tend not to be intentional like I talk all the time about living on autopilot versus being intentional, right. We don’t plan ahead, we make decisions in response to the various circumstances that arise in our lives and we change when we have to. So why do we do this, first of all is in our wiring the brain’s Mo is to conserve energy by being efficient and so a good example of this is like when you drive somewhere you’ve been a bunch of times before and you don’t have to think about how to get there anymore, like you had to concentrate the first time you went to this place and make sure you didn’t miss any turns or that you went the right way on the right street, and all of that. But now you’ve been there so many times you basically run on autopilot. And when you’re already in particular pattern of thinking and behavior. The same thing happens, like you’ve been down this road so many times you don’t even think about it anymore, or have to make any conscious decisions, the brain just gets more and more efficient at executing that pattern. The autopilot function is a characteristic of our lower brain or our primitive brain. So the primitive brain is very much reactive right it’s we’re we’re acting out of emotion, a lot of times fear. We are impulsive it’s our short term thinking we’re not thinking through consequences or thinking ahead. In contrast, our higher brain, or our prefrontal cortex is about being proactive. It’s where we make our reasoned decisions from, you know our logical thinking. It’s where we plan ahead and thinking long term and all of that and so you can see which part of the brain, we want to be using when we’re talking about living intentionally, when we’re talking about planning our lives right. We want to live intentionally we want to make decisions from our higher brain. We want to plan ahead. We want to consider the long term effects of our actions we want to take intentional steps toward our goals. But so many of us are living on autopilot at the mercy of our primitive brains, we’re not planning ahead. We’re not making decisions with the long term in mind it’s about what feels good right now. I want now remaining comfortable seeking pleasure, avoiding pain or discomfort. This thing feels good now so I’m going to do that. And I’m not going to think about the long term gain that I could have by not doing this thing. This is true in so many areas of our lives, but it’s especially true with our money. Many people don’t plan their finances ahead of time. And in fact, I feel like budget is like a curse word to some people, like, I can just hear, you know, people talk about budgets and not wanting to be restrictive and I want to do what I want with my money and all of that. But really your budget allows you to live life and spend your money on purpose. And I talked a lot about that back in episode seven So head back it was all about budgeting for lifestyle freedom. Most people make decisions around money, that are very reactive to the circumstances around them. We’re at the mercy of bills coming in right and unexpected expense comes up, and now you’re thrown off and you’re scrambling to figure out how to pay it, and you see a good deal on something that you weren’t planning to buy, and maybe don’t even need, but you just have to have it so you buy it anyway. There’s a lot of impulse shopping. Amazon is your best friend. Maybe the UPS driver knows you by name because of how many packages are delivered to your house right. Even when you look at the financial apps that are designed to help us be better with our money. Most of them are really focused on looking backward and telling you what happened with your money in the month as opposed to being proactive and helping you plan out what you’re going to do with your money for the month coming up right it’s a very reactive approach. They don’t set you up to plan ahead of time so like you’re sitting at the end of the month and the app is like oh yeah you spent this much eating out, as opposed to, you planning out how much you’re going to spend eating out a lot of our money management is very reactive. It comes from that lower brain right it’s not planned out. It’s not thought through, we’re not looking at how this decision impacts the ultimate goal. It’s just what seems like a good idea in the moment. And it’s hard to make progress that you want to make when you’re being reactive and that’s in any area of your life but especially with your money, right, these kinds of like impulsive. Feel good decisions are how people end up making six figures and still living paycheck to paycheck. I’ve told you before that 25% of households making $150,000 or more live paycheck to paycheck, this is, this is where lifestyle inflation and keeping up with the Joneses come from, which we talked about back in episode 31 this reactive approach to money, based on what feels good in the moment, and also the I work hard I deserve it mentality which I’m pulling out all the archives, right now, right, because we talked about that back in episode 34 And to be clear, none of this is meant for you to use against yourself right don’t beat yourself up for not managing your money differently or not being proactive, if you’re not doing that. It’s not about that, I just want you to make a plan for what you’re going to do with your money to be more intentional that’s like my theme, I’ve been talking about intentionality, a lot over the last week or two. But I want you to be more intentional and be more proactive with managing your money instead of being reactive to different things that come up, or just going off of what you want to do in this moment without thought for what happens in the future. Right. Money is a tool that you can use to buy back your time. But you have to use that tool effectively, which means planning. So how do we do that. First, get clear on your priorities goals and values. What do you care about, what is your why, what matters to you in life. So when you’re clear on those things, then that can guide the way that you manage your money. Second you want to get a good picture of where you are currently in your finances. So figure out where you’re spending your money now, does that align with the priorities goals and values that you identified in the first step. Do you like where you’re spending your money. Do you like how much you’re spending, right, maybe you are fine with the categories that you’re spending in but you don’t like that you’re spending so much in a particular category. And then finally, Create a budget that’s in line with the priorities the goals, the values, tweak the numbers from the second step if you need to write going back to you like what you’re spending in this category but you don’t like what you’re spending in that category or you don’t want to spend in that category at all and you can cut it right, there’s an area that you’re spending in that you don’t care about. But there’s another area that you would like to spend and you can cut to make more room for the things that you do care about. And it’s important to include your financial goals here, so don’t just cross your fingers and hope that there’s some money left at the end of the month so you can save or pay off debt or whatever. Make it a priority and plan for it. And notice that I’m not saying, cut out all the things and have no fun and deprive yourself and live on ramen noodles. Your budget is about planning how you want to spend your money. It’s about being intentional, not about depriving yourself. Also note that when you start this process for the first time you’re probably going to fail at it, you’re going to forget to put things in the budget you’re going to go over budget, and that’s okay. In my experience, it takes about three months to really get your budget together, and that doesn’t mean anything about you. So again, don’t beat yourself up about it. Just keep going, look at where you miss things or where the budget got off track and you can change it for the next month. But eventually, you get the hang of it, and you have this amazing tool for planning what you’re going to do with your money, and reaching your goals. If you need it you can get my free budget template, it’s at rho Thomas comm slash budget. And if you know you’re being reactive and you’ve tried in the past to turn things around and it’s just not working. Come on and schedule a call with me, we will walk through your exact situation where you’re getting stuck and go through a plan for how to fix it. So head to rho Thomas comm slash coaching to set that up. Okay, so that’s it for this week’s episode, I would love to hear your thoughts. You can find me on social media at I am rho Thomas on Instagram and rho Thomas on LinkedIn, please take a second to subscribe to the show and leave a review if you haven’t already. All of that is super helpful for other people to be able to find the show. And finally, please think of a friend or two who would benefit from this information and share it with them because you know, sharing is caring. Alright, thank you so much for being here with me friend, as we close out, I pray that you take the time to identify the areas of your life where you’re being reactive and make a plan for what you truly want. I pray that you will take the information that I shared today, and use it to be proactive in your finances. And as always, I pray that you continue to take steps to regain control of your time, build wealth and live the life of freedom and choice you deserve. Talk to you later.