Financial Literacy: Our Disordered Relationship with Money (Part 2)

Oct 08, 2017 News

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Dr. Terence Smith, Deputy Governor, Bank of Guyana

Our unconscious beliefs about money
In last week’s article, we discussed how money influences every financial decision we make and the

reasons for any dysfunctional relationship we have with it. In fact, the financial literacy literature in general, as well as researchers Drs. Brad Klontz and Sonya Britt have indicated that psychological traits from childhood, though not our fault might interfere with our financial planning process, even as we become adults.
In today’s article, which is Part 2 we will continue to discuss our disordered relationship with money and examine tips for countering the money scripts or our dysfunctional relationship with money.
Please be reminded that if we look deep into our pasts, and ourselves we can learn to recognize our negative and self-defeating patterns of thinking about money, and replace them with better, healthier ones. Specifically, Dr. Klontz’s research team has identified four main “money scripts” that typically operate outside of conscious awareness and are often developed in childhood, and drive our financial behaviours. These money scripts have been found to be associated with financial outcomes, financial behaviours, and other aspects of financial health.
Money scripts and the tips for counteracting the dysfunction
Money scripts patterns can predict disordered behaviours, such as financial infidelity, compulsive buying, pathological gambling, compulsive hoarding, financial dependence, and financial enabling. Discussed below are the money scripts from Part 1 together with the additional tips that can assist us in challenging and changing these beliefs:
1. Money script #1 – Money avoidance: Money avoiders believe that money is bad or that they do not deserve money. They may believe that wealthy people are greedy or corrupt, and that there is virtue with living with less money. According to Dr. Klontz, “people with money avoider scripts may be worried about abusing credit cards or over-drafting their checking account; they may self-sabotage their financial success and may avoid spending money on even reasonable or necessary purchases or give money away in an effort to have as little as possible in their control.” In this study, Dr. Klontz found that money avoiders have lower levels of income and net worth.
Action tips for Money Avoiders: Money avoidance can have a negative impact on our financial health. A key strategy for corrective action is to get into the budgeting habit. Budgeting allows us to create a spending plan for our money; it ensures that we will always have enough money for the things we want. Monitor spending on a monthly basis and change the budget as life changes, this will allow for taking control of personal finances. Another suggestion is to generate a list regarding how money can be good for you and/or beneficial for the world.
2. Money script #2 – Money worship: Money worshipers believe that the key to happiness and the solution to their problems are to have more money. At the same time, they believe that one can never have enough money, and find that the pursuit of money never quite satisfies them. Dr. Klontz hypothesized that, “Money-worshiping money scripts may be associated with money disorders including compulsive hoarding, unreasonable risk-taking, pathological gambling, workaholism, overspending, and compulsive buying disorder.”
Action tips for Money Worshippers: In general, we live in societies that worship money. Money worshippers are prone to buying things in an attempt to buy happiness. Buying new things give a thrill and are exciting, but in many cases shortly thereafter the thrill goes away. A great way to counteract this behaviour is to practice questioning your intentions before making purchases, escape buyer’s remorse. Also, always keep your priorities in mind and spend time with friends and family it helps to maintain a healthy work life balance. In addition, giving to others should be budgeted and tracked.
3. Money script #3 – Money status: Money Status seekers tend to link their self-worth with their net worth. Status lovers believe that owning the newest and best things confer status. This money script can lock individuals into the competitive stance of acquiring more than those around them acquire. Dr. Klontz’s study indicated that, “Individuals who believe that money is a status symbol were likely to be young, single, less educated, and less wealthy.”
Action tips for Money Status Seekers: Money Status Seekers focus on financial status and social standing. We all want to be successful but we must also monitor financial outcomes, especially the detrimental ones. The research literature suggests that, “Slow down before making a purchase, slow your thought process and ask yourself the following questions: 1) Why am I buying this item? 2) How will I feel about this purchase next? 3) How will I pay for this item? When you have answered these questions then look for flaws in your reasoning for buying a particular item. Determine that you are spending in keeping with your budget plans; strive to be emotionally and financially healthy.
4. Money script #4 – Money vigilance: Those with this script are secretive about their finances, whether they have a lot or little. Money vigilance beliefs, including themes of frugality, anxiety, and discreetness about money, appear to be protective factors against poor financial health and destructive financial behaviours. Dr. Klontz suggests that, “While they encourage savings and frugality, excessive wariness or anxiety could keep someone from enjoying the benefits and sense of security that money can provide.”
5. Action tips for the Money Vigilant: Having financial comfort and security are critically important to money vigilant individuals, but excessive worries about money can keep up at night and bad for your health. Financial therapists recommend that we take a long vacation or buy yourself a new toy. More importantly, create space in your budget to enjoy your hard work and enjoy deeper connections with family and friends you love most. Further, therapists have suggested that, “what’s the point of a lifetime spent in frugality, deprivation and saving if you never allow yourself or your family to enjoy it.
Concluding remarks
In this article, our money scripts that represent our disordered relationships with money and the tips to assist with corrective actions were presented. The research literature indicates that humans are irrational creatures in all areas of our lives and, “the same biases, fears, and unexamined assumptions that drive us to less-than-optimal decisions in our personal lives can wreck havoc on our budgets.” The way to deal with these issues is to examine them and be prepared to counteract them. However, without understanding the particular scripts that inform our money choices, we will never be able to pinpoint the beliefs that are holding us back from financial prosperity.

Next week we will examine some economic reasons why we struggle with money. Please continue to send your comments or questions to [email protected]

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