Most people I know like to think about finances as a mathematical equation. When the numbers are up, finances are good. When the numbers are down, they’re not. And yet, in the real world, how we think about money runs much deeper than the math. In fact, what often determines financial success has much more to do with emotions than with the numbers themselves. As financial planners, we see this reality in action every day, with nearly every client.
In every one of these examples (and so many more!), how we act and react when it comes to money depends less on the numbers and logic, and very much on how we think and feel about money. This relationship between emotions and money is so powerful that there’s a whole field of study focused entirely on the topic. Called behavioral finance, it’s something every Certified Financial Planner™ (CFP®) studies as part of our training to become a financial planner.
Recently, I decided to dive even deeper into the subject of behavioral finance by taking a financial psychology course with Prof. Brad Klontz, the founder of the Financial Psychology Institute™. It’s been an eye-opening experience! My first big ‘ah ha’ moment came when I learned that our emotions don’t just influence our decisions; they actually have the power to override the logical side of our brains to dictate every decision we make—even when we think we’re in control. As a financial advisor, that’s a pretty frightening idea!
So what are ‘money scripts’? Put simply, they are our beliefs about money that we learned way back in our childhood. We learn them from our parents and circumstances growing up, and our parents learned from their parents. As a result, they are deeply rooted in our psyches. And (here’s the scary part) according to Dr. Klontz’s research, some ‘money scripts’ can have a seriously negative impact on financial health. What makes them especially treacherous is that they’re almost always unconscious. As a result, most people make the majority of their financial decisions based on unconscious belief systems that can be difficult to pinpoint, tough to battle, and can lead to less-than-optimal financial decisions. It’s no one’s fault; according to Dr. Klontz and many other behavioral finance researchers, it’s simply part of our human nature.
According to Dr. Klontz, the first step toward overcoming any negative impact of your own ‘money scripts’ is to be aware that they exist in the first place. If you’re uncomfortable talking about money, ask yourself why. If you’re so focused on building up wealth that you’re unable to enjoy what you’ve achieved, ask yourself why. Ask, ask, and keep asking. I’m already pondering how we can put this concept to work to deepen conversations with our clients, including having heart-to-heart discussions about ‘money scripts,‘ the power of behavioral finance, and how to navigate this tricky territory.
At Market Street Wealth Management Advisors, our team of advisors is committed to helping you move beyond the math and look carefully at how you think and feel about money. We take the time to explore your personal values, understand your short- and long-term goals, and create a strategy that works for you. Our most important role: to help you make healthier, intentional decisions based on your own goals and values and to achieve your own definition of financial success—no matter what ‘money scripts’ are impacting your decisions.
 “Money Beliefs and Financial Behaviors: Development of the Klontz Money Script Inventory, Journal of Financial Therapy, 2011
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