By Jennifer Frahm
Money is simple.
Spend less than you earn. Save 10% of your income. Invest.
But money is also complicated.
Both the math and the emotion wrapped around it.
Have you ever felt like you were stuck in a destructive pattern that keeps you from achieving your money goals? How can you explain knowing what you should do, but not actually doing it?
The culprit: emotions about money.
Our emotions often get in the way of making good decisions. In fact, money decisions are based 90% in emotion, and only 10% in logical reasoning, as shown by Nobel Prize winning economist Daniel Kahneman.
Knowing your “money script” can help you to understand how you think about money. Dr Brad Klontz is a financial psychologist who coined the term money scripts as being core beliefs about money that come from our families, our experiences, and our temperament. These money scripts are often developed in childhood, and can impact your level of income, your net worth, financial behaviors and even your credit card debt.
The four money scripts are:
| MONEY WORSHIP Money is the key to happiness and will solve all problems. It gives you an internal sense of security. You may have some workaholic tendencies. | MONEY STATUS Financial status = self worth. Sometimes you overspend to elevate other people’s perception of your wealth. This is an external focus. |
| MONEY AVOIDANCE You avoid thinking about money and may feel overwhelmed by it. You may have a hard time with budgeting and planning. | MONEY VIGILANCE You tend to be frugal with your money. You know where you are financially, but you may feel guilty spending on items that aren’t necessities. |
People usually have a primary and secondary money script that directs their money behaviors.
The first step towards making good financial decisions is to identify your money script. Once you’ve identified your tendencies, the next step is to make a game plan with positive steps toward building your financial future.
In the Intentional Investment seminar and workshop, we start with identifying your money script. In our experience, about 55% of physicians tend to have the “money avoidance” as their primary money script. This seminar empowers young physicians with the education and confidence they need to create a plan. (A longer description of the money scripts used in the seminar is attached below.)
Sources: Journal of Financial Therapy (Volume 2. Issue 1 2011). “Money Beliefs and Financial Behaviors: Development of the Klontz Money Script Inventory” by Brad Klontz, Psy.D., Sonya L Britt, PhD, Jennifer Mentzer, BS, Ted Klontz PhD.
KNOW YOUR BACKSTORY: MONEY SCRIPTS
| MONEY WORSHIP Money worship believes that money is the answer to every problem. This script may dictate that a person can’t have enough money, and believe that it has the power to bring fulfillment. Money worshipers may chase inner happiness and peace through workaholism and/or compulsive spending. A symptom can be revolving debt. It may stem from growing up in a very frugal environment. This is a more internal script that values money for the peace and sense of safety it gives. A script of money worship can be counterbalanced with the concept that “money can’t buy happiness.” Focus on the things in life that bring deep satisfaction that have nothing to do with money. | MONEY STATUS Money status believes that money equals self-worth. Focus on self-image may lead to attempts to impress others with the accessories of status. The danger is that showing off with self-image purchases may lead to debt or lack of savings, just to keep up appearances. This script may be more likely to fall for get rich quick schemes. This is a more external-facing script that is concerned with how money projects a certain personal image. To deal with money status script, remember what is truly important in life. Focus on quality of time with people you love rather than on a new luxury item. People with the money status script often stick together. Remember we tend to emulate the 5 people closest to us. Choose accordingly if trying to minimize this script. |
| MONEY AVOIDANCE Money avoiders may have difficulty paying bills promptly, making a budget, keeping financial records. They may not know much they have, or how much they spend. People with this script may feel incompetent or overwhelmed, and torn between wanting more money in their lives or believing that money is the root of all evil. There may be hidden a belief that money is dirty or bad, rich people are greedy or unethical, and that everyone should make their own way in the world. Alternately, they may have an aristocratic attitude that dealing with the minutia of money management is below them. Most money avoiders end up feeling inadequate in dealing with money, and see it as a source of disdain, anxiety or fear. To counterbalance this, it may help to remember that money is simply a tool. If managed well, this tool can give you freedom to focus on more important things in life. It’s morally neutral until you decide how to use it. At the point you make a decision on how to use it, is when it gains meaning. | MONEY VIGILANCE Money vigilance followers tend to have the details of their financial house in order. They are frugal and focused on finances, sometimes to a fault. Being a diligent saver can be positive, but taken to the extreme, this group may harbor anxiety and guilt about actually spending money. They are financially secure but sometimes unable to enjoy what they’ve saved. Money vigilantes may have enough saved but may be hurting themselves or their relationships if the frugal tendencies become miserly. Listen to friends and family who are trying to communicate the need for change in how money is handled. |
Concepts adapted from Mind Over Money: Overcoming the Money Disorders that Threaten our Financial Health by Brad and Ted Klontz