Money scripts are subconscious beliefs that one has developed since childhood and play a major role in financial behaviors. When money scripts are defined, they can be used to avoid financially destructive behaviors and in turn create good financial health.
From a financial planning perspective, money scripts shine a light on potentially destructive financial behaviors and help predict areas of vulnerability to one’s future financial health. These money scripts can be developed in a number of ways. This usually happens during times of dramatic financial loss like the Great Recession, learned by way of family values, or developed while adapting to the culture one is surrounded by.
Here are a few examples of common money scripts, to paint the picture:
“Money is the root of all evil.”
“We can always make more money.”
“Avoid debt at all costs.”
“Never ask how much money someone makes.”
While there is an element of truth to each money script, they often don’t represent the whole truth. When they are stated as definitive truths, improper financial behaviors can then take place and wind up costing the individual dearly.
There are a total of four money script categories, three of which have a negative impact on financial well-being. Each script category provides a framework for understanding and a guide to improving one’s financial life.
Money Avoidance: Money avoiders have a negative relationship with money. They believe having money is a bad thing and in turn, are reckless with their spending habits. Individuals in this category fluctuate between believing money could solve all of their life’s problems and being jealous of people of wealth. This is an indicator of poor financial health and can lead to a life of compulsive spending, financial anxiety, and lower amounts of wealth.
Money Worship: Money worshipers believe that having more money will solve all of life’s problems. Simultaneously, they think that they will never be able to afford the life of their dreams. This creates a battle between working too hard to obtain more money and spending quality time with family members. Money worshipers can enter into an ongoing habit of hoarding possessions and taking on consumer debt, which results in a lower net worth over time.
Money Status: Those individuals that identify with money status see a direct connection between their net worth and self-worth. Overspending is not uncommon with money status-ers, as they feel a need to put their possessions on display. With the tendency to overspend, lie to their spouses about their spending, and gambling, it isn’t surprising that they have a lower income and lower net worth. This is a money script that correlates with the “Keeping up with the Joneses” motto.
Money Vigilance: The individuals that are considered money vigilant tend to be very aware of their financial standing, and are overly wary of their financial well-being. Common traits among the money vigilant are hard working, frugal, and believe in never accepting a financial handout. Although there is a level of financial anxiety associated with money vigilance, it can often result in a higher income and net worth. This can ultimately be a good thing, but taken too far can cause one to never truly enjoy the wealth they have amassed over the years.
So what does this all mean? Becoming aware of the money scripts that individuals face over the course of their lives allows for the opportunity to make positive changes. The first step is to identify the money scripts that one subconsciously believes, as understanding the limitations of these invisible scripts will allow for financial behavior change to take place.
However, since these money scripts have most likely been in place for one’s entire lifetime or since a tragic event, change will not come easy. It will take an intentional effort to reverse course and build positive habits into one’s life in order to rid themselves of these potentially destructive financial beliefs. A financial planner experienced in having these types of money script conversations is a vital step in getting on the path to financial well-being.