From a young age, how adults handle money and economic situations shapes our attitudes toward money. These beliefs become deeply ingrained as we age and can significantly impact our lives. As adults, we might stick to these childhood beliefs, act against them, or fall somewhere in between. These beliefs give rise to what are known as money scripts, which greatly influence our financial behaviors. The first step in addressing harmful money habits is recognizing the issues associated with these beliefs about money.
Here are the most common “Money Scripts,” along with the internal/external conversations we have regarding them, the character traits they cause, and their real-life effect on our lives.
1) Money Avoidance
“Rich people get rich by exploiting others.”
“Ethical people don’t prioritize money.”
“I don’t deserve a lot of money.”
Traits: Attempt to avoid thinking about money. Don’t believe they deserve it.
Effects: Rarely review financial statements, unlikely to stick to a budget, and may experience denial or enabling about finances.
2) Money Worship
“If I had more money, things would improve.”
“Power comes from money.”
“Being poor makes it difficult to be happy.”
Traits: Purchase “things” to achieve happiness.
Effects: Frequently have lower net worth and higher credit card debt.
3) Money Status
“I will purchase items only if they are brand new.”
“Your value as a person is equivalent to your financial worth.”
“A person’s level of success is determined solely by how much money they make.”
Traits: Require money to maintain a facade of success.
Effects: Tends to overspend and is prone to experience financial reliance and gambling addiction.
4) Money Vigilance
“Saving money is essential, rather than spending it.”
“I would feel anxious if I didn’t have money stashed for an emergency.”
“Spending money on oneself is excessive.”
Traits: Vigilant and attentive when it comes to their finances and worries about their financial future.
Effects: It often results in positive financial outcomes. However, it could also result in loss aversion and/or underspending.
As you can easily understand, money is a very emotional subject. Our choices are often determined by the list above. Stay tuned for more Behavioral Finance information and tips to help rewire our brains.
Bottom line: the #1 key to financial success is developing and sticking to a financial plan. Realize your plan is flexible and should be revised with significant life events (job changes, marital status, dependents, etc.). We don’t plan to fail, but too often, we fail to plan. Don’t make that mistake. Plan well. Live in abundance.
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