Have you ever had buyer’s remorse the day after a cheer-me-up shopping trip because you couldn’t really afford it? Have you ever let fear of failure keep you from investing, or even making a budget? If you have, you know first hand what a large part our emotions play in our financial lives. Psychologists refer to these emotions and beliefs we hold about money as “money scripts.”1
Emotional Money Habits Are Developed In Childhood
Though we might like to make only rational and well thought out decisions in regard to our finances, we just can’t seem to do it. We all carry around emotional and psychological baggage relating to money, our money scripts, and usually, it’s our parents that we can thank for it.
Watching our parents relate to and deal with money as we grow up, our brains are unconsciously trained to respond in the same ways. If your parents were confident and wise investors, you will likely face investing with confidence. If your parents scrimped and saved and constantly fought over expenditures, you may have strong feelings of guilt when making large purchases.
The seeds of money scripts are planted in childhood and grow to drive adult financial behavior. For this reason, it is incredibly important to talk to your kids about money and model healthy financial behaviors. It is also absolutely vital for you to take the time to explore and understand your money scripts and how they influence your financial behavior.
Money Scripts With A Negative Impact
While some money scripts are beneficial to financial health, some, like money avoidance, money status, and money worship, can be detrimental. Unhealthy emotions and belief patterns can lead to all kinds of financial problems, such as financial infidelity, compulsive buying, financial enabling, pathological gambling, compulsive hoarding and financial dependence. Certain money scripts have been tied to lower levels of net worth, lower income, and higher amounts of revolving credit.
Those may sound extreme, but have you ever let panic during down markets or overconfidence when they rally veer you from your long-term investing plan? Have you ever been unable to make a decision because you were paralyzed with worry, anxious about the future? Have you ever put off something you know is important out of embarrassment or discomfort? Have you ever wreaked havoc on your budget for the momentary high of a great shopping trip?
Money Scripts Can Be Changed
Everyone is susceptible to emotions that sabotage their finances. The good news is that though our money scripts are ingrained from childhood, they are not permanent. With a focused and concerted effort, they can be changed.
The first step is identifying them. One way to do so is to picture your emotional responses to common financial situations. How do the following things make you feel?
- Earning money
- Buying things
- Saving for the future
- Budgeting and tracking expenses
- Making financial decisions
- Volatile markets
- Healthy markets
- Meeting with a financial professional
- Thinking about your financial future
Anything that elicits strong emotions warrants further reflection. Obviously negative emotions are not the only ones that can harm your financial life. Some positive emotions like optimism and self-confidence can bring about negative results if left unchecked.
How To Manage Emotional Money Decisions
Learning to check your emotions is the key to changing your money scripts and developing healthier money habits. As women, we know that we will never be able to completely master our emotions, so it also helps to prepare for them. You can build things into your life that help keep you financially on track in spite of your emotions. Taking advantage of automatic saving and investing through your bank or employer’s retirement plan is a good first step. You can also schedule regular family budget meetings and enlist a friend or loved one for accountability and positive reinforcement. You can learn to recognize emotional triggers and mandate a “cooling off” period for yourself before making any decisions.
Finally, you need to be willing to forgive yourself when you make mistakes. We all make mistakes; you don’t need to try to be superwoman. Don’t let guilt or disappointment in yourself keep you down and keep you from moving ahead with your life and your finances.
If you would like to sit down with someone to explore how your emotions have been affecting your financial patterns, Engaging Women In Wealth is here to help. We are women, so we understand the ups and downs of a woman’s emotions and the times when it seems that rationality has simply vanished into thin air. We will not only help you recognize your money scripts but strategize with you ways to minimize the negative effects of emotions and proactive steps towards developing healthier behaviors. Call us today at 858.756.0004 or email [email protected] and together we can start unraveling your emotions about money and get you on track to a brighter financial future.
About Deb Sims
Deborah Sims is the Principal of Estate Management Group, a wealth management and financial services firm offering comprehensive and customized strategies to help her clients manage their assets and feel confident in their future. Her mission is to serve as her clients’ most trusted wealth advisor through professional knowledge, integrity, and personalized wealth management services. Based in San Diego, California, Deb’s team has offices in Rancho Santa Fe, Old Town, and Del Mar. She invites you to contact her team today to learn more about how they can help you.