How do you think about money?

How do you think about money? What's your money script?

Financial Psychologist, Brad Klontz, wrote a fascinating paper about Financial Behaviors. He identified 4 types of Money Scripts that people follow throughout their life. A money script is the way we think about money, handle money and the story we tell ourselves about money.

These Money Scripts are shaped early in our lives by our parents and role models. We continue to develop our Money Script as we grow older and live independently, earning our own money and deciding how to manage it.

Three of the Money Scripts are associated with poor financial health:

(1) Money Avoidance - Money avoiders believe that money is bad, rich people are greedy, and that they don’t deserve money.

(2) Money Worship - Money worshipers are convinced that more money will solve all of their problems, there will never be enough money, and that money brings power and happiness.

(3) Money Status - Money status scripts equate self-worth to net worth and put a premium on buying the newest and best things.

All three of these money script profiles are associated with poorer financial health, including lower net worth and lower income.

In contrast, the fourth type, Money Vigilance, includes themes of frugality, the importance of saving, being discreet about how much money one has or makes, and nervousness about making sure money is saved in case of an emergency.

Most of my life, I’ve been on the the Money Vigilance script, but there are times when being vigilant gets exhausting and the anxiety gets the better of me. In this case, I may rebel and spend a little too much on a vacation, clothes or dining out. Following a bout of excess, I feel guilty and become hyper-vigilant about my budget in an effort to make amends for my foolishness.

It’s like going on a cleanse and then having nachos and an ice cream sundae all in one sitting then fasting again the next day.

This isn’t a great way to be. My goal is to feel relaxed, informed and disciplined about my budget and investments. Constantly striving for the Middle Way (such as the Buddha).

Awareness of our Money Scripts is the first step in recognizing the emotional pull money has on us. Once we identify our Money Script, we can begin to correct our behavior and set the course ahead with confidence, employing vigilance and self-discipline.

A financial plan is the best way to begin this exercise, working with a sound financial advisor to reinvent your Money Script.


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