A few weeks ago, I had the privilege of working with a young mother who had overcome countless obstacles to become the first college graduate in her entire family. During our discussion, it was revealed that she was trying to overcome a seemingly insurmountable pile of debt created by student loans. Her primary financial goal was to create a plan to stop living paycheck to paycheck and to start taking control of her financial future.
Like with most Americans, her parents were the ones who taught her those critical early lessons about managing her money. Unfortunately, the lessons learned were more or less a demonstration of what not to do financially as her family often struggled to make ends meet. She was used to creditors calling about past due accounts and her family rarely had any money in savings. Budgeting was viewed as a waste of time because “they didn’t have any money to budget.” In short, she saw money in a negative light rather than as being merely a tool that is neither good nor bad.
The conversation with this working mother wasn’t a finger pointing blame session dwelling on the poor financial decisions of her past that were modeled throughout her childhood and into adulthood. This particular financial planning discussion was centered on one thing – her strong commitment and desire to completely change her family tree and provide her daughter with a life of opportunity and less financial stress. She had the keen insight to recognize that many of her current financial behaviors such as late payments to creditors, high interest debt, and excessive spending had simply become a way of life because that’s just how it always was in her family while she was growing up. The good news is that something inside her eventually sparked a desire to stop just trying to get by and she was ready and empowered to seek meaningful change in her financial life.
Have you ever stopped to take inventory of how you arrived at your current financial state of affairs? I don’t mean simply thinking about how you ended up in your career, what your net worth is or how much money you make. I’m referring to your early lessons about money that you picked up either through observation or activities during childhood and adolescence.
These life experiences are often passed on from our parents or extended family and may represent overall cultural events. Money beliefs can be extremely stubborn and are difficult to change since they can become a part of our ongoing “money script” or life story that follows our financial behaviors. No matter where you are on the journey to reach your financial life goals, it’s always helpful to be aware of your past experiences with money whether they were positive or negative.
Money beliefs play a major role in guiding your current and future financial behaviors. These beliefs help explain key differences between savers, spenders, and people who try to avoid money matters completely. According to research performed by Dr. Brad Klontz and Dr. Sonya Britt, professors at Kansas State University, three out of four primary money beliefs (money avoidance, money status, and money worship) are linked to destructive financial behaviors. The other money belief, money vigilance, was not linked to problematic financial behaviors.
Generally speaking money avoiders tend to view money as negative, think the wealthy are greedy, and that they don’t deserve money.
Money worshipers believe that having more money will solve all of their problems, money leads to power and life satisfaction, and money is a scarce resource and there will never be enough of it.
People with money status belief systems tend to define their self-worth by net worth and place a great deal of emphasis on buying the hottest new items with leading brand names and quality.
Money vigilance is typically associated with themes of frugality and people with these money beliefs tend to focus on importance of saving, use discretion when discussing financial matters and express anxiety about saving for emergencies.
Are your money beliefs helping support your financial behaviors or are they creating roadblocks for your financial life plan? If you are having trouble following a budget, eliminating debt, or saving, your money scripts may be holding you back. Here is a link to a condensed version of the Klontz Money Script Inventory (KMSI) if you want to complete your own self-assessment to examine your own money beliefs.
The good news is that you have the opportunity to rewrite these money scripts. In the case of the employee struggling with money avoidance issues, she is now on track to find the balance between living in the moment and planning for the future. She is also taking steps to help shape her daughter’s developing belief system about money and will hopefully be able to save for college so she can avoid such a huge student loan burden when she becomes a second generation college graduate.