We know that money makes the world go round, but have you ever stopped to think about why and how you handle your money the way you do? Are you a big spender or do you save every extra dollar? Do you willingly follow a budget or do you avoid investing because you’re afraid to fail? Many of your financial actions are most likely affected by the role emotions play in our financial lives. Psychologists refer to these emotions and beliefs we hold about money as “money scripts.” (1)
The Roots Of Your Money Habits
Have you ever felt that no matter how hard you try to make only rational and well-thought-out financial decisions, you just can’t seem to do it? This is most likely due to the emotional and psychological baggage we all carry around relating to our money, otherwise known as our money scripts. Before you beat yourself up about this, understand that these scripts start forming at a very young age.
Even if we aren’t aware of it, we spend our childhood watching our parents relate to and deal with money, and over time, our brains are unconsciously trained to respond in similar ways. If your parents were confident and wise investors, you will likely face investing with confidence. If your parents scrimped and saved and constantly fought over expenses, you may have strong feelings of guilt when making large purchases.
The seeds of money scripts are planted in childhood and grow to influence your financial behavior as an adult. For this reason, it is incredibly important to talk to your kids about money and model healthy financial behaviors. It is also vital for you to take the time to explore and understand your money scripts and how they influence your financial behavior.
The Negative Side Of Money Scripts
While some money scripts are beneficial to financial health, some, like money avoidance, money status, and money worship, can be detrimental. Unhealthy emotions and belief patterns can lead to all kinds of financial problems, such as financial infidelity, compulsive buying, pathological gambling, and financial dependence. Certain money scripts have been tied to lower levels of net worth, lower income, and higher amounts of revolving credit.
Those may sound extreme, but have you ever let panic during a market downturn take your focus off of your long-term investing plan? Have you ever been unable to make a decision because you were paralyzed with worry and anxiety about the future? Have you ever wreaked havoc on your budget for the momentary high of acquiring something you really wanted? All of these behaviors stem from your personal money script.
Money Scripts Can Be Changed
We often think that if we had more money, we wouldn't have any problems. But we have money problems because of how we approach money, not necessarily because we don’t have enough. This is good news! We might not be able to drastically increase our income, but we can learn to control our attitudes and perceptions. Our money scripts may be ingrained from childhood, but they are not permanent. With a focused and concerted effort, they can be changed.
The first step to overcoming your money scripts is identifying them. One way to do so is to be aware of your emotional responses to common financial situations. How do the following things make you feel?
Saving for the future
Budgeting and tracking expenses
Making financial decisions
Meeting with a financial professional
Thinking about your financial future
Anything that elicits strong emotions warrants further reflection. Negative emotions are not the only ones that can harm your financial life. Some positive emotions, like optimism and self-confidence, can bring about negative results if left unchecked.
How To Manage Emotional Money Decisions
Learning to control your emotions is the key to changing your money scripts and developing healthier money habits. You can also build habits into your life that protect you financially, such as taking advantage of automatic saving and investing through your bank or employer’s retirement plan. You can schedule regular family budget meetings and enlist a friend or loved one for accountability. You can learn how you respond to emotional triggers and mandate a “cooling off” period for yourself before making any decisions.
Finally, you need to be willing to forgive yourself when you make mistakes. Leave the past in the past and move forward with the new knowledge you have gained.
Your Financial Partner
An important resource to utilize on your journey of taking control of your finances is your financial professional. At Beacon Wealth Management, our mission is to help you make smart decisions about your money. We do this by helping you develop a true understanding of who you are as a person, establishing why money is important to you and your family, and identifying your financial challenges. We believe that knowledge is power and is the foundation for wise decision-making. If you are ready to break free of your money scripts and make sound decisions that will help you pursue your goals and avoid costly mistakes, call (304) 626-3900 or email me at email@example.com to set up a free 60-minute discovery consultation.
John is the founder and owner of Beacon Wealth Management. He specializes in helping entrepreneurs, professional practitioners, and retiree red-zoners overcome the major financial challenges facing affluent families.
As a trusted and friendly financial partner, John delivers a collaborative client experience that empowers and guides people to reach a greater purpose for their wealth and pursue their financial dreams. He understands the multifaceted set of financial worries people face as they become more successful and get within the retirement red zone.
John is well-regarded throughout the business community for his expertise. He has appeared as an expert guest on the The Brian Tracy Show and Hollywood Live with Jack Canfield, is the co-author of the book Masters of Success with Brian Tracy, is the host of the WDTV News 5 segment “Solutions 4 Financial Independence,” and has conducted hundreds of educational events on Retirement and Investment Advisory, Tax Reduction, and Wealth Transfer Planning. These include many Universities, Federal Employee Organizations, Professional Associations, and Large Energy Companies throughout the eastern United States.
With more than two decades of experience, John is credentialed as a Certified Wealth Strategist (CWS), Accredited Investment Fiduciary (AIF), Certified Estate Planner (CEP), Chartered Federal Employee Benefits Consultant (ChFEBC), Professional Plan Consultant (PPC), and Registered Financial Consultant (RFC). He is also a past multi-year member of Ed Slott’s Master Elite IRA Study Group.
A native of Weston, West Virginia, John served in the United States Air Force prior to becoming a Wealth Advisor. Today, he resides with his family in Clarksburg, West Virginia. He and his wife, Lisa, have been married since 2005 and have three amazing children. A family-oriented man, he is passionate about giving back to his community, coaching youth sports, landscaping, architectural design, and playing racquetball.