Whether it’s a childhood of poverty or want, layoffs, job loss, or poor investments, everyone has experienced a financial ‘flashpoint’ in their lives.
These flashpoints are painful, distressing, or dramatic life events that are so emotionally powerful that they leave an imprint that can last a lifetime, often creating problems with money, says financial psychologist Brad Klontz, author of Mind Over Money: Overcoming the Money Disorders that Threaten Our Financial Health.
And, for many, a lack of money isn’t necessarily the biggest issue. Plenty of people struggling with money issues aren’t poor, for instance. Instead, they deal with problem areas like overspending, serial borrowing, financial infidelity, enabling family members – and a general sense of guilt and shame around their financial status. Often, so-called money memories are at the root of such emotions.
How Money Scripts Drive Behaviour
Klontz’s research suggests that while many people may worry about having too little money, there’s no shortage of those who are equally anxious about losing what they have, or who feel uncomfortable for having so much.
These feelings are all due to what he calls ‘money scripts’ – strong emotions and typically unconscious beliefs that many of us learned when young and that drive our behaviour. Most of these beliefs have an element of truth in them, but are still incomplete.
For example, while the script, ‘flying can be dangerous’ is true, it’s not the whole story. What’s missing is that flying is still likely safer than being a pedestrian in a major city, or traveling just about anywhere by car.
Money scripts work the same way, Klontz maintains. While they represent the way you feel about money, they typically don’t paint the whole picture. As a result, operating as if they’re the complete and absolute truth, without regard to context, can be disastrous – and ignoring them altogether can be even worse.
Four Main Types of Money Thinking
Klontz has identified four broad categories related to beliefs about money: money avoidance, money worship, money status and money vigilance.
‘Money avoidance’ is a set of beliefs that include anti-wealth statements such as ‘rich people are greedy’ or ‘money corrupts people.’
Not surprisingly, those who fall into this category tend to have low incomes and net worth. They also tend to be younger, which may reflect their inexperience.
Often, Klontz maintains, such beliefs are rooted in low self-esteem and childhood experiences in which money was misused or misunderstood.
Childhood Experiences Influence Adult Thinking
‘Money worship’ beliefs are centred on the idea that more money or more possessions will make a person complete, even though there’s little research to support this view.
Money worshippers often connect greater wealth with happiness. Related beliefs include ‘more money will make you happier’ and ‘it’s hard to be poor and happy.’
At the extreme, worshippers tend to become compulsive hoarders, pathological gamblers and workaholics.
‘Money status’ beliefs include ‘your self-worth equals your net worth’ and ‘money is what gives life meaning.’ According to Klontz, when individuals equate acquiring material things with their value as human beings they tend to overspend and get heavily into debt.
They may take excessive risks to acquire that status or slip into despair and panic when they fail to do so.
Then, there’s ‘money vigilance.’ People in this category pay their bills at the end of each month and don’t live beyond their means. They tend to be extremely wary, however.
Emotions Underpin Most Financial Decisions
Spouses may hide spending from each other and be too conservative when it comes to investing. But at least they don’t tend to lose their house or their self-worth.
What does this mean for you? First off, you need to remember that emotions – not logic – drive most of our financial decisions. The good news is that you have the opportunity to rewrite these money scripts.
Recognizing the key events in our lives is the first step in stripping them of their power, and overcoming our money disorders, Klontz maintains. Only then we can learn to spot them when they’re creeping into our minds, and revise them into healthier, more productive behaviours.