Know Yourself, Know Your Money | Rachel Cruze

Summary of: Know Yourself, Know Your Money: Discover WHY you handle money the way you do, and WHAT to do about it!
By: Rachel Cruze

Introduction

Get ready to explore your relationship with money and discover the hidden factors that influence the way you handle it. In ‘Know Yourself, Know Your Money’, Rachel Cruze presents the concept of the money classroom, the space where you first learned about personal finance as a child. Understanding the type of classroom you grew up in—be it verbally closed, loud and combative, anxious or unaware—are key to making better financial decisions today. By delving into the different classroom types and the challenges they may present, this summary provides practical tools for creating a fabulous financial future.

Your Money Mindset Starts in Childhood

Your understanding of money is influenced by your childhood experiences. The book emphasizes that financial decisions are explicitly and implicitly informed. How our parents talked about money, or how they emotionally reacted has lasting impacts on us. The book introduces the “money classroom” concept to enable readers to understand why they handle money the way they do.

Money behavior is molded by upbringing, and this is explored in Rachel Cruze’s book. The reading starts with a story of Amanda, a compulsive buyer, and how the overspending led to problems in her partnership. Through counseling, Amanda realized that her spending habits were influenced by her parents’ extreme frugality. This discussion is a practical demonstration of how childhood experiences shape our relationship with money.

Cruze argues that understanding our money behavior requires revisiting our childhood experiences. Parents are unwitting “professors” of a “money classroom,” shaping their children’s financial mindsets with both their verbal and emotional communications about money. The author identifies three different types of “money classrooms”. First, the “Anxious Classroom,” where money is associated with tension. Second, the “Intellectual Classroom,” which only emphasizes the importance of saving but never talks about investing or enjoying money. Finally, the “Indulgent Classroom,” where money is spent only to achieve temporary happiness without thought of future consequences.

The concept of the “money classroom” is an enlightening tool for understanding our view of money. It presents a platform for impeccable self-reflection, exploring our relationship with money in the present, and its roots. The book’s message is that if we want to make sound financial decisions and endeavor to improve our personal finances, understanding our money mindset is crucial.

Talking About Money

Growing up in an anxious classroom impacts how we discuss personal finance. In this setting, financial behavior is rarely discussed but the fear associated with it is constantly felt. This fear can make it difficult to talk to others about money, but it’s essential to improve our relationship with it. Start by telling someone you trust that you have a hard time discussing money and gradually work up to articulating your feelings. Bringing your fears into the open can diminish their power.

The Unstable Classroom and Its Effects on Finances

Some households are vocal about their financial matters, while others keep them silent. However, constant fighting and negative emotions surrounding financial instability can cause apathy towards money for children. Growing up in an unstable environment where there are no solutions, only problems, can lead to a sense of powerlessness. Graduates of this unstable classroom often avoid thinking about money to avoid conflict. The key takeaway is that it’s crucial to take control of your finances and not accept the status quo.

Money and Education

Growing up with money or without awareness of it are both financial drawbacks. Being unaware of money does not make it less important. There are two reasons why kids grow up in the unaware classroom. One is that their parents are well-off, and their children never had to worry about money. The other reason is that some parents chose to protect their children by keeping them in the dark about their financial struggles. However, not being taught about money has its practical implications, and it is essential to understand how it works. It is these life skills that help control one’s finances, and the lack of which often leads to regret and resentment in the future. In the next parts of the summary, we will explore some approaches that can help manage your finances.

Conquer Your Money Fears

Fear is a natural emotion that helps us respond to danger. However, it can also be paralyzing and limit our thinking. Financial worries, in particular, occupy the mind of many Americans who are living paycheck to paycheck. To prepare for unexpected emergencies, the author recommends building a $1,000 emergency fund, which can cover most unforeseen expenses. This amount is achievable with a little effort and can offer peace of mind, allowing you to focus on the bigger picture of your financial goals.

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