Math is one of the keys to making your money life work. But if you really want to be successful long term, you have to identify and engage your feelings as well.

How you feel about money comes from your attitudes and beliefs which were formed years ago, primarily in your childhood. That is why seemingly mature adults have very immature behaviors when it comes to money.

Here is an example. Ellen used to baby-sit when she was young. As she earned money, her mother insisted she save it, telling her it was the right thing to do. Ellen disliked babysitting, but her mother insisted. As she worked, she consoled herself with one thought; at least I will have a lot of money. She began to daydream about what she would buy with her own money.

When autumn came and it was time to go back to school, Ellen and her mother went to the bank, emptied her savings account, and used Ellen's babysitting money to buy her school clothes. Ellen was devastated. She had worked hard, and in the end, instead of all the fun and exciting things she had dreamed about, she had new school clothes.

Money Fantasy: Saving is Useless

From this experience Ellen developed a core belief, or as I call it, a money fantasy, that saving is useless. When I met Ellen at the age of 42, her main goal in life was to change her habit of living paycheck to paycheck and to develop a habit of saving money.

Ellen and I developed many creative ways for her to save. But no matter what Ellen tried, soon the money was gone. Only until Ellen rediscovered this childhood story did she realize that her money fantasy, saving is useless, and the related feelings were running her life. Her objective, intellectual mind said, "Of course you can save." But her core beliefs and feelings contradicted her. In the struggle between objectivity and feelings, feelings always win.

That is why all of the self-help books with rules of how to live a prosperous life don't work for everyone. There is a distinction between knowledge and wisdom. To be wise with money, you must identify your core beliefs (money fantasies), the feelings they produce, and use these feelings in harmony with your objective analytical mind.

Recently, while giving a speech to a group of executives, one said to me, "Your philosophy would contradict the rule that most financial planners have which is to pay off your debt and then save." He went on to say that he had once over-extended himself with credit card debt. He accepted the traditional advice, paid off his debt first and then started his savings plan. He confessed that this method was very challenging, because paying off debt had few rewards and therefore didn't produce any positive feelings!

My advice to clients is to pay off their credit card debt and start a savings plan at the same time. The positive reward in terms of how good you feel about yourself and your new savings account pays big dividends in enthusiasm.

Mortgage Options

Clients often ask me about paying off their home mortgage. If you run the numbers on a 15-year mortgage vs. a 30-year mortgage, and you save the difference in the lower payment, the 30-year mortgage always wins, even though you pay more interest. However, how do you feel about having your home debt free? For many clients this is an important milestone in their financial lives. They opt for the 15-year loan and the faster path to debt freedom. Others are very comfortable having debt, and have the discipline to save the difference in their mortgage payments. They reap the rewards of additional cash by generating a larger investment portfolio.

Peace of mind has its own payoff that cannot be quantified in the black and white of mathematics. As you consider the choices on your path to financial freedom, engage your feelings. They are powerful motivators, working for you or against you. Identify them and let them be your ally.

Reprinted from The Sunday Challenger, Mackey McNeill, May 15, 2005