Emotions and money: How ‘money scripts’ can thwart your finances

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.

Examples Of Money Scripts

  • Judy was raised during the Great Depression. Watching her parents scrimp and save and worry about money, she learned to be overly vigilant about her finances. She retired a decade ago, and though she has a sizable nest egg, she has barely dipped into her savings, frugally living off her pension, her Social Security, and not even spending her Required Minimum Distributions (RMDs) from her IRA. At 76 years old, she frets constantly about money.
  • Brad grew up in a family that always wanted for more. Once his successful career was in full swing, he found himself spending on the things he’d always dreamed of, and with every purchase (including a flashy car that costs nearly as much as his mortgage payment) he felt his status grow… and grow. His net worth has become his sense of self worth, and so he continues to rob from his future by overspending today to inflate the appearance of his net worth.
  • When George was growing up, his father believed that people with wealth had achieved their riches through greed and connivery. As an adult, having more money than he needs makes George feel uncomfortable—and even a bit guilty. Somehow he always finds a way to maintain his family’s financial status quo.
  • Delia’s mother took great pride in always being the best dressed, having the best parties, and maintaining the most beautiful home in the neighborhood. Her father’s favorite saying was, “There are very few things in life money can’t solve.” Today, Delia works more than she needs to, and she pushes her husband to do the same. At 50, she has more money than she will ever need, but she can’t seem to slow down and enjoy life.

Behavioral Finance

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!

What Are Money Scripts?

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.[1] 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.

Discover Your Money Scripts

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.

[1] “Money Beliefs and Financial Behaviors: Development of the Klontz Money Script Inventory, Journal of Financial Therapy, 2011


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