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Is Your Subconscious a Bad Financial Advisor?

Fear, shame or parsimony could be sabotaging your financial security and happiness, without you realizing it

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Money Worship

People in this category believe more money will make things better and that a windfall or increase in income alone will solve their problems, according to the Klontz Money Script Inventory. This feeling can be associated with compulsive hoarding, unreasonable risk-taking, pathological gambling, workaholism, overspending and compulsive buying disorder. The feeling that money can solve your problems persists despite studies that have shown that once household incomes are above about $75,000 a year, there is no significant correlation between happiness and money. In fact, research also shows that, after initial excitement from a financial windfall, there is no lasting positive impact on mood. Money worshipers tend to be young, Caucasian and single, with a tendency not to pay credit-card debt fully each month.

 

MONEY VIGILANCE: People in this category think money is a source of shame and secrecy, whether there's a lot of money or a little. Illustrations by Andrew J. Catanzariti

Money Status

People in this category equate money to self-worth and net worth, according to the Klontz Money Script Inventory. Those who believe money is status see a clear distinction between socioeconomic classes. Being overly concerned with financial success has been associated with lower ratings of well-being, lower levels of vitality and happiness, and higher levels of anxiety, physical symptoms and unhappiness. Often those who said they were raised in poor families were more likely to follow money-status beliefs, which may put them “at risk for disordered money behaviors such as overspending or excessive risk-taking, with the goal of rapid wealth attainment in an attempt to raise one’s perceived social status,” says Brad Klontz.

 

Money Vigilance

For people in this category, money is a source of shame and secrecy, whether there’s a lot of money or a little, according to the Klontz Money Script Inventory.Spouses may hide spending from each other, and may develop financial behaviors that undermine their future security. Money vigilance is linked to watchfulness and concern about money and the sense that one must be heedful of impending danger. This may encourage saving, but excessive wariness can prevent enjoying the benefits and security that money offers. Members of this group were likely to be non-Caucasian, have lower incomes and avoid credit.

 

Personal Experience Led to Psychological Insight

By Beverly Creamer

 

Brad Klontz’ research on the psychology of money evolved from a disastrous personal experience: a huge loss in the stock market.

“I was fresh out of grad school and I had over $100,000 in debts from student loans and I was kind of desperate to get out from under it,” he remembers. “Basically, I came from a family that was not that well off financially and I think that inspired me to do things differently than my family did. They didn’t invest in the stock market at all, so when I got out of grad school, all my friends were making tons of money in stocks and I thought, ‘I’m going to do that.’ I sold everything I had and put it in the stock market and lost half my money when the tech bubble burst. Why would a normally intelligent person do something so stupid? I couldn’t find any answers in looking around in psychology, so the pain of that experience led to my research.”

His search for answers began with intensive interviews with family members about their histories with money.

“That was a profound awakening,” he says. “I realized it was predictable that I would do something so stupid based on my multigenerational family history. So the basic theory I’ve developed with my father is that people have experiences early in life that lead to money scripts, which are typically unconscious beliefs about money and drive all of our financial behaviors. The belief that really came up for me was there will never be enough money. I found my grandfather’s family lost all of their money when the banks collapsed in the Great Depression. He died at 94, and as a kid saw all of the family money wiped out. Afterwards he never put a dollar in a bank. It was in a box in the attic.

“The more powerful the experience, the more rigidly we hang onto those beliefs. That’s why financial therapy is so important. My mother came along and she jumped on that bandwagon and would only put money in CDs, so missed out on all the growth in the stock market. Then the next generation is going to do either the same thing or the exact opposite, saying to themselves, I don’t want to be like them, I don’t want to be poor, so I’ll invest in the stock market. So when I looked at that it’s no wonder I would do something like that. But it got me interested in the study of money beliefs.”

 

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