Disclaimer: Before we roll up our sleeves and dive head-first into the complexities of money and our relationships with it, let’s take a moment to address a very important caveat: I am just some random guy on the internet and not a clinical psychologist. Take all this information as a just what it is – information. Even so, it’s all backed by scholarly research, studies, and some anecdotal experience. I will link everything I cite for your own deeper exploration.
So go deep into yourself as we unpeel this onion and as explore these topics. Consider even keep a journal as we touch on some topics to share with a therapist.
Undoubtedly, this will be the first time many people have even heard about a “Money Mindset” and all the deep-seated psychology around how we view our finances.
Introduction
Alright people now that the disclaimer is over let’s talk about money. Not just the pieces of paper and metal in your pocket, but your personal relationship with it. Yeah, that’s right. You and your money have a relationship, and just like that crazy ex you want to forget, it’s complicated.
This post is a cliff-notes version look at our fears and misconceptions around money. It’s an attempt to unclog your brain from the junk that’s keeping you broke or, worst, turning you into a sleep deprived workaholic who thinks owning a yacht is the pinnacle of success.
Get ready, because I’m about to take you on a wild ride through my own personal financial disaster zone. Yeah, I’m talking about those cringe-worthy, face-palm inducing mistakes that I would rather forget but will pick the scabs at for the greater good of you.
So, getting right into it.
My Financial Face Palms
I’ve made some major miscalculations in my time. Take the many times in college where I rationalized spending my rent money on beer – being more than willing to suck up a $35 check bounce fee from my landlord.
Please copy this strategy if you like living with a healthy dose of stress and anxiety in your life.
Or when I thought that maxing out my credit cards on cocktails, home furnishings, and new clothes following a divorce was a smart move because, “hey, I’ve got to practice some self – care, right?”
These blunders weren’t just painful; they were formative. They forced me to examine my misguided beliefs about money, confront my fears, and, ultimately, get my shit together. And that’s what I’m here to help you do.
Now, onto the fun part – exposing and annihilating common financial fears and misconceptions. And I’m not just talking about the basic stuff like “money can’t buy happiness” or “rich people are evil”.
I’m talking about the deep-seated, subconscious bullshit that we’ve been spoon-fed since birth, the stuff that keeps us broke, miserable, and stuck in a never-ending cycle of financial self-sabotage.
This part of your financial literacy journey is about confronting fears and creating a healthier, more empowering money mindset. It’s not for those who prefer to live in blissful ignorance. But if you’re willing to roll up your sleeves, get dirty, and face some uncomfortable truths, you’re in the right place.
The Stupidity of Money Mindsets
Let’s start with this concept of a “money mindset.” It sounds like some hocus-pocus, doesn’t it? Well, let me hit you with a truth bomb: your money mindset is not some mystical force out of a self-help book. It’s the unique combination of your beliefs, values, and attitudes about money.
It’s how you think about money, how you use it, and how you feel about it. And let’s not mince words here – most of us have f*cked-up money mindsets that royally screw up our lives.
Now, don’t get me wrong. It’s not all your fault. We’ve been fed a steady diet of societal norms, childhood trauma, and shitty advice that shape our views about money.
Maybe your parents fought about money all the time, leading you to associate it with conflict and stress.
Perhaps you grew up poor, and now you equate wealth with greed and corruption.
Or maybe you’ve been brainwashed by the social media posting “YOLO” mentality, leading you to believe that you should spend money like there’s no tomorrow because, well, you only live once.
These influences shape our money mindset, and unless we actively challenge and change them, they’ll continue to sabotage our financial success. It’s like we’re trying to navigate through a financial minefield with a blindfold on. And then we wonder why we keep blowing shit up.
Now, how do you know if your money mindset is in need of recalibration? Here are some telltale symptoms:
Overindulgence
You’re the person who must have the latest iPhone, the biggest TV, the flashiest car. You spend money like a drunken sailor on shore leave, not because you need these things, but because they make you feel good.
At least for a moment.
Then the high wears off, and you’re left with nothing but an empty wallet and a mountain of credit card debt.
Financial Phobia
You’re so terrified of money that you avoid dealing with it at all costs. You don’t check your bank balance, you ignore your bills, and you definitely don’t have a budget. Money is like the monster under your bed – out of sight, out of mind.
Chronic Avoidance of Financial Reality
You’re living in a financial fantasy land. You think that you can ignore your mounting debt, live beyond your means, and somehow everything will magically work out. Spoiler alert: it won’t.
Scarcity Mindset
You’re so afraid you will run out of money that you live in a constant state of anxiety and stress about your life. You’d do anything to keep that soul sucking job with an abusive manager. You can’t bring yourself to invest because you might need that money today. This mindset can make you less generous towards others and develop a tendency to focus only on your own needs.
Recognize any of these symptoms in yourself? Don’t worry. We’re going to tear down these warped money mindsets and replace them with healthier, more empowering ones. It won’t be easy, and it won’t be quick, but it’ll be worth it.
Money Scripts and Money Fears
First, we will delve into some deep and often uncomfortable territory. We will be discussing how our childhood, societal norms, and personal experiences shape our financial perceptions and decisions. Before doing so, however, it’s crucial to understand that these interpretations are generalized. They don’t account for every individual’s unique circumstance, experiences, or beliefs.
Furthermore, while we’re looking at the influence of past experiences, this in no way serves to blame parents or caregivers for our current financial behaviors. People do the best they can with what they have, and that includes the beliefs and behaviors they pass on to us. Just as we inherited their skin color or sense of humor, we also inherited their beliefs about money.
However, acknowledging these inherited beliefs is the first step towards understanding and eventually changing a poor money mindset, while also passing along better examples for our kids to form their own belief system from.
So, as we navigate through the tricky terrain of money mindsets, remember this isn’t about pointing fingers or assigning blame. It’s about understanding, confronting, and ultimately reshaping our financial beliefs for a healthier, more empowered relationship with money.
Think of this as a writing prompt for your own messed up beliefs. Jot things down as you think of them and try to reframe your experience in a way that serves your future.
Let’s get started.
Unraveling the Four Money Scripts
The concepts we’re about to explore below are based on the pioneering work of Dr. Brad Klontz. His Money Script Inventory-Revised (KMSI-R) provides a framework to thinking about how our subconscious influences our money mindset. These four money scripts are the unconscious beliefs about money that we learn early in life. These are largely shaped by our upbringing, societal norms, and personal experiences. They form the bedrock of our financial behaviors and decisions, often without us even realizing it.
Money Avoidance
Let’s get the ball rolling with the notion of money avoidance. This isn’t just about fearing an empty wallet. It’s about the storm of negative emotions that accompany this fear – failure, embarrassment, the fear of being socially sidelined. Discussing finances is also a no-go area with these folks.
Now, let’s be clear, most of us have had a brush with money avoidance at one point or another. Money avoiders tend to gloss over their bank statements faster than a cat chases a laser pointer. They live in a bubble of financial denial and couldn’t stick to a budget if their lives depended on it.
They also often express it with language like, “Money isn’t everything,” or “I don’t really deserve a lot of money,” or even, “You can only get rich by taking advantage of others.”
Money Status
Next, we have the money status mindset. These individuals equate their net worth with their self-worth, and often derive their sense of achievement from their financial standing. These folks need to keep up the appearance of being successful at all costs.
Societal pressure can often exacerbate this, pushing us into a silent, damaging competition where we attempt to outdo each other’s bank balance. This skewed belief can lead to overspending, spiraling debt, and an unhealthy fixation on maintaining an image of affluence. They are prone to suffer from gambling disorders, being financially dependent on others, and/or financial infidelity from their spouse.
These folks often tell themselves scripts such as “I will not buy something unless its new” or “People’s success is equal to their salary”.
Money Vigilance
On to our overly cautious friends – the money vigilant. These individuals treat their money as if it’s a scarce resource on an episode of “Naked and Afraid”. They save meticulously and steer clear of investments. While they often have good financial outcomes, they still harbor anxiety about their financial future.
While it’s commendable to be prudent with finances, this level of caution might be a tad excessive.
These worry wort’s often say things like “Money should be saved, not spent”, “I can’t be relaxed unless I have emergency savings”, or “It’s just too extravagant to buy big purchases for myself”.
Money Worship
Lastly, we have the money worshippers. These folks believe that more money equates to more happiness, and this is the solution to all problems. They tend to try and purchase their joy through the small mountain of Amazon boxes on the porch awaiting their return home. However, their endless chase for money and wealth often results in workaholism, neglect of personal health and relationships, and a mountain of debt.
Yes, money can provide comfort and security, but if you’re sacrificing everything else in life for it, you’re not winning; you’re just being controlled by it.
These types often say things like “Things would be better if I had more money”, “Money is power”, and “It’s hard to be poor and be happy”.
So, there we have it. The four common money scripts that most of us adhere to, often without realizing it. But don’t fret, we’ll be addressing each of these in the coming sections.
Origins of Money Scripts
Money Avoidance
Money avoidance has deep roots that often lead back to our formative years. Maybe your family struggled financially, and you learned to associate money with stress and hardship. Or perhaps you were taught that being overly concerned about money is morally wrong.
Regardless, these early experiences can lead to money avoidance. It’s the “keep your distance” mantra playing out in your financial life.
Money Status
People with the money status mindset often grow up in environments where financial success is equated with personal worth. They’re the ones who were taught to keep up appearances, to match or surpass their peers’ spending. They may have grown up in lower social-economic household who gave higher social standing to people with money.
Society further fuels this with the message that personal achievement is marked by material possessions. The result? Overspending, spiraling debt, and an unhealthy obsession with appearing affluent. But remember, your self-worth isn’t defined by your net worth.
Money Vigilance
The seeds of money vigilance are usually sown by parents who themselves are overly cautious about money. Maybe you watched your parent’s pinch pennies and hoard their hard-earned money, or perhaps you were taught to view money as a scarce resource that could run out at any moment.
As a result, you learned to be excessively careful with money, to the point of avoiding investments and financial discussions altogether. While being prudent is commendable, overdoing it can limit financial opportunities and increase stress.
Money Worship
The belief that more money equals more happiness typically comes from growing up in an environment where financial success was idolized. Perhaps you saw how money brought respect and power or watched family members constantly striving for more.
This endless chase for wealth can lead to workaholism, personal health neglect, broken relationships, and even indebtedness. Yes, money can offer comfort and security, but if you’re sacrificing everything else in your life for it, then it’s not really serving you; it’s controlling you.
So, there you have it. The four common money scripts and their psychological origins. But don’t worry, we’re not just going to leave it there.
You can sign up for my newsletter below and I’ll send you a free Money Script (KMSI-R) assessment to determine your own money script. Zero spam, just financial insights direct from me.
In the coming sections we will delve deeper into how to address and rewrite these scripts. First, though, let’s learn about the actual fears we experience around money.
Facing Financial Fears
Life is fraught with fears – spiders, heights, clowns, that moment when you can’t feel your phone in your pocket. But there’s a particular brand of terror that trumps all: financial fears. Throw in some spicy misconceptions for good measure, and you’ve got yourself a hot mess. Financial fears and money scripts are closely intertwined, each one influencing and shaping the other.
Let’s break it down a bit further:
Financial Fears
Financial fears are specific worries or anxieties we have about money. They could be fears about not having enough money, losing what we have, or not being able to earn more.
Fears vs Scripts
Money scripts and financial fears are intrinsically linked because our unconscious beliefs about money (money scripts) often give rise to our specific anxieties and fears about money (financial fears). For example, if you grew up with a money vigilant script that equates wealth with security, you might develop a financial fear of losing your money and, by extension, your security.
Similarly, if your money script is about money avoidance, perhaps because you were taught that money is the root of all evil, you might develop financial fears about having too much money or about the perceived moral implications of wealth.
In a nutshell, money scripts are the underlying beliefs that drive our relationship with money, and financial fears are the specific, fear-based manifestations of those beliefs. In a medical analogy, your money scripts are the virus causing the infection. The financial fears are the symptoms, just as a cough is to the common cold.
Understanding this relationship is key to overcoming financial fears. By identifying and challenging our money scripts, we can address the root cause of our fears, rather than just dealing with the symptoms. That’s why a deep dive into money scripts is a crucial part of overcoming financial fears and fostering a healthier money mindset.
But first, let’s unpack some of the most common financial fears and misconceptions lurking in the shadows of our minds.
Fear of Poverty
Ah, the mother of all financial fears – going broke, destitute, eating canned beans by candlelight. This fear is not just about having no money; it’s the fear of what poverty represents – failure, shame, and social rejection.
Fear of Losing Money
Then there’s the fear of losing money. Of losing what we’ve worked so hard to earn. The stock market crashes, your real estate investment goes belly up, the business venture fails. This fear can be paralyzing, keeping us in our safe but stagnant financial comfort zone.
Fear of Debt
Many people are afraid of accruing debt. While this can promote healthy financial habits like living within one’s means, it can also lead to extreme frugality and missed opportunities for financial growth.
Fear of Financial Insecurity
Some people fear an uncertain financial future. They worry about things like job loss, unexpected medical expenses, or not having enough money saved for retirement. Some worry is perfectly normal for everyone, but excessive worry can keep you frozen out of fear.
Fear of Financial Success
This one sounds counterintuitive, doesn’t it? But hear me out. The fear of financial success is real. It’s the fear of the changes that come with success – higher expectations, more responsibility, changes in social circles. It’s the fear of becoming one of “those people” we love to hate.
Fear of Financial Dependence
Many people dread the thought of having to rely on others for financial support. This fear can push them to strive for financial independence but also stress them out if they’re not there yet.
Fear of Outliving Money
Especially pertinent among retirees, this fear involves the worry that one’s savings will be exhausted before the end of their life, leaving them in a financially vulnerable state.
Recognizing and understanding these fears is the first step to overcoming them and achieving a healthy relationship with money.
Popular Money Misconceptions
Misconceptions are not harmless; they’re like financial termites, slowly and quietly eating away at the foundation of your financial health. They can lead to self-sabotage, prevent us from seizing opportunities, or keep us trapped in unhealthy financial behaviors.
Misconceptions basically shape how we view money and wealth. If you believe money is evil, you might subconsciously avoid financial success. Believing that rich people are greedy may make you resist building wealth to avoid becoming “one of them”. If you believe you must work hard to earn money, you might overwork yourself and miss out on the power of investing and passive income.
Common Money Misconceptions
“Money is the root of all evil“
This misconception comes from a misunderstanding of a biblical verse. The actual phrase is “the love of money is the root of all kinds of evil.” Let’s get this straight – money is not evil; it’s neutral. It’s a tool, like a hammer. You can use it to build a house or whack someone over the head. The “evil” lies in how you choose to use or misuse it.
“Money can’t buy happiness“
While money can’t buy happiness in the absolute sense, it can certainly provide security, reduce stress, and enable experiences that contribute to our overall well-being.
“Rich people are greedy“
Stereotypes, anyone? While there are definitely some Scrooge McDucks out there, being wealthy doesn’t automatically make you a greedy, heartless person. Wealth can enable you to make a positive impact, whether it’s creating jobs, donating to causes you care about, or just paying your bills on time.
“It’s too late to start saving for retirement“
It’s never too late to start saving and investing. While it’s beneficial to start early, starting late is far better than not starting at all.
“Only high income earns you wealth“
A high income can certainly make it easier to accumulate wealth, but it’s not the sole determinant. Good money management habits, like budgeting, saving, and investing, are key to wealth accumulation.
“Investing is only for the rich“
Investing is for everyone, regardless of income. Thanks to technological advancements, it’s easier than ever to start investing with small amounts of money.
“I don’t earn enough to save“
Regardless of how much you earn, it’s always possible to save. It all starts with a budget and the discipline to stick to it. Even small amounts saved consistently can add up over time.
“More money, more problems“
I’m sorry to all you 90’s kids, but The Notorious BIG got this one wrong. It’s not the money that creates problems; it’s how you manage it. With more money comes more responsibility, but with the right mindset and financial habits, it doesn’t necessarily mean more problems.
“You have to work hard to earn money“
Ah, the Protestant work ethic. While hard work is important, it’s not the sole determinant of your financial success. Smart work, financial literacy, and leveraging assets like your time, skills, and investments also play major roles.
These misconceptions can heavily influence our money scripts and can lead to financial fears.
Recognizing these fears and misconceptions is half the battle. The other half is debunking them, unlearning the destructive beliefs, and replacing them with healthier, more productive ones. And that, my friend, is what we’re here for.
It’s time to wage war against these financial villains and reclaim control over our financial destiny.
Staring Down Your Financial Demons
Understanding the importance of facing your financial fears and misconceptions is the first step towards fiscal bravery. By not dealing with these fears and believing misconceptions, we let them control us. They dictate our decisions, influence our actions, and keep us from living the lives we want to live.
But when we face these fears, we’re taking back control. We’re saying, “This is my life, my money, and I’ll be damned if I let fear screw it up.”
There’s no magic potion or secret mantra to overcome financial fears. It’s a process that requires effort, patience, and, above all, knowledge.
Here’s how to tackle it:
1. Educate Yourself
Knowledge is power, and this couldn’t be truer when it comes to finance. The more you understand about money, investing, savings, taxes, and the like, the less scary they become. Read books, take online courses, watch finance gurus on YouTube, listen to podcasts. Arm yourself with financial knowledge.
2. Make a Ritual
Especially helpful for money avoiders, make a weekly ritual out of checking in on your finances. Review your previous week’s spending, bank statements, credit card statements, retirement, and investment accounts.
You don’t have to take any action following the ritual. Just the act of making yourself look at your finances is powerful in any fighting fears of money. This makes the information less threatening and increases your understanding of your situation.
Level 2 is when you can begin to talk objectively with your spouse about it during these reviews. Before you know it you’ll have the ability to actually open your credit card statement without feeling like you’re playing peek a boo with Annabelle from the Conjuring.
3. Create a list
Make a list of all the reasons and ways that having disposable income can be good for your life, your family’s life, and for your community around you. Include philanthropic pursuits to this list and keep the list near where you pay bills. Maybe as a note it on your computer desktop. Replace bad thoughts of having money with positive vibes of its potential beneficial uses.
4. Create a budget
This should be obvious by the end of this blog series, but creating a budget and sticking to it can address almost every money mindset you have. If you’re living in vigilance, a budget can be a great place to budget in “fun money” that you use to reward yourself for other financial goals reached.
The money worshiper can budget in areas to donate, as appropriate. The avoider can use the budget as a framework to guide their weekly ritual.
5. Take Calculated Risks
One of the best ways to overcome fear is to face it head-on. Start with small, calculated risks like investing a small sum in a low-risk fund or trying out a side hustle. As you gain more confidence and understanding, you can start taking on bigger, more rewarding risks.
This is a great way to increase your education and literacy around finance as well. Think of it like golfing against your buddies for a $1 a hole. When money is on the line you are much more inclined to watch 10 hrs. of YouTube videos about how to best to grip your driver.
6. Seek Professional Advice
There’s no shame in asking for help. Financial advisors, and accountants can provide invaluable insights and guide you on your financial journey. Sure, they cost money, but consider it an investment in your financial health.
Financial Fears: A Personal Tale
Now, let me tell you a story – my own. I remember my first dip into the stock market. I was scared shitless. The idea of losing my hard-earned cash to a graph line on a computer screen felt like walking off a cliff blindfolded.
But I knew I had to confront this fear if I wanted to grow my wealth. So, I educated myself, read every investment book I could get my hands on, and took a leap of faith. I invested a small sum into a low-risk S&P 500 ETF on an app.
Seeing that first positive return was like winning a tiny victory against my financial fears. Before the first month had passed, I could not only understand what “Beta” and “Alpha” meant, but could actually correlate this newfound knowledge.
The best part of this experiment, I did it with my 6 yr. old son. Years later, he still asks to see the current balance from our first investment together. That couple hundred-dollar investment has sparked invaluable conversations between us around money. The educational return on investment will be immeasurable by the time he is my age – even if the ETF eventually flops.
Sense then, there have been times when I lost money. But each loss, each failure, taught me something new about the market, about risk, about resilience. And with each lesson, my fear diminished, replaced by understanding and confidence.
Confronting and overcoming your financial fears is not a quick or easy journey. It’s an ongoing process, a financial pilgrimage, if you will. But trust me, every step, every stumble, every victory, is worth it. Because on the other side of fear lies freedom – financial freedom. And isn’t that a goal worth striving for?
Resources to Rewire Your Money Mind
Fortunately, we live in an age where information is readily available, and there are countless resources to help us debunk financial misconceptions and foster a healthier outlook on money.
Here are a few I recommend:
1. Books: “The Psychology of Money” by Morgan Housel, “Rich Dad Poor Dad” by Robert Kiyosaki, and “Think and Grow Rich” by Napoleon Hill.
2. Podcasts: “The Money Lab” by Matt Giovanisci, “Financial Independence Podcast” by Mad Fientist, and “ChooseFI” by Jonathan Mendonsa and Brad Barrett.
3. Blogs: Mr. Money Mustache, Investitopia, Financial Samurai, and, of course, yours truly, The Money Chief.
Remember, it’s not just about debunking the misconceptions, but it’s about replacing them with healthier money beliefs. As you read, listen, and learn, pay attention to the recurring themes of financial freedom, control over time, and using money as a tool for positive change. These are the building blocks of a healthier money mindset.
Conclusion: The Journey to a Positive Money Mindset
We’ve been on quite a journey, haven’t we? We’ve talked about my own financial blunders, explored the common fears and misconceptions about money, and discussed how they can mess up our financial and overall life quality. We dived deep into strategies for facing those fears, debunking the misconceptions, and outlined the steps to cultivate a positive money mindset.
Remember, this isn’t a one-time thing. Working on your money mindset isn’t something you do once and forget about. It’s a continual process. As you grow and change, your financial goals and circumstances will evolve too. And with that, your money mindset needs to adapt and grow.
Share your experiences with us. Tell us what steps you’re taking, what obstacles you’ve encountered, and what victories you’ve achieved. Because remember, we’re all in this together, figuring out this money thing as we go along.
Here’s to fostering a healthier, more empowering relationship with our finances!