We have all heard the phrase ‘Humans are creatures of habit’ but have you ever stopped to think about how those habits help and hinder your days?
Habits are behaviours and preferences that we develop, based on our views and belief systems, that make up a kind of script which help us to navigate the world. They shape our lives in an incredibly impactful way. You will have developed hundreds, if not thousands, of habits such as the time you get up and go to bed, your work habits, how and when you eat and your exercise regime.
Often, these behaviours develop in childhood and adolescence and are inherited from our parents and, of course, they may not always be helpful.
Financial behaviours are no different. The unwritten rules, based on your views and beliefs, which you apply to your finances are often established in your childhood and teenage years. If your parents where scrimpers and savers that might make you one, or conversely, in an act of rebellion you may have responded by developing a cavalier attitude to debt.
The term money script was coined in an academic financial study carried out in 2011 on Money Beliefs and Financial Behaviours which aimed to help people accurately identify money beliefs that can have a negative impact on financial health.
A survey was carried out asking participants whether they agreed or disagreed with a number of statements around money such as ‘People get rich taking advantage of others’ and ‘More money will make you happier’.
Researchers identified four distinct money belief patterns or scripts – money avoidance, money worship, money status and money vigilance.
Understanding which of these money scripts applies to you can enable you to analyse the unwritten rules which you apply to your finances and identify areas where those rules may need to be rewritten. This can reveal easy ways that you can make changes to improve your overall financial health. Let’s take a closer look at the four money scripts.
1. Money avoidance
Money avoiders believe that money is bad and that they don’t deserve it, often linking wealth and immorality. They see money as a force that stirs up fear, anxiety or disgust and have a tendency to self-sabotage their finances. They are afraid of debt so worry about abusing credit cards and overdrafts, which is not a bad thing, but may avoid spending money on necessary purchases and often unconsciously spend or give money away to have as little as possible in their control.
Money avoiders often avoid thinking about money which can lead to unopened and unpaid bills, difficulty creating and sticking to a budget and a failure to plan for retirement and other future expenditure. They tend to have lower levels of income and net worth and to be younger, suggesting that money habits are fluid and can change as we get older.
Helpful actions to take if you are a money avoider
- Start tracking your spending habits and working to a budget using a budgeting tool.
- Set aside a specific time every month to look at your bank and credit card statements, sort out bills and review your budget.
- Open all those discarded and unread bills and set up a filing system.
- Research the financial basics to increase your financial knowledge so you feel more comfortable talking about money.
- Seek the help of a qualified financial adviser who can help you set positive financial goals and a route to achieving them.
2. Money worship
Money worshippers believe that money is the key to happiness and a panacea for all ills. According to this group, you can never have enough money which means money worshippers are on a never-ending quest to accumulate wealth and will never be satisfied. They are consumers through and through, seeking happiness through retail therapy which can lead to overspending and debt. They often prioritise work over family and relationships and tend to give and loan money to others even if they can’t afford to. In the end the fact that money cannot buy happiness means money worshippers are often frustrated and miserable.
Helpful actions to take if you are a money worshipper
- Redefine money as a means to an end rather than the goal in itself.
- Focus on the objectives you want to achieve with your money.
- Spend time doing the things you love with the people you love.
- Remember that research shows that above a certain income level (around $75,000 in the US), there is no correlation between money and happiness.
- Set up a regular contribution to your favourite charity or charities to shift the focus from gaining money to seeing how it can bring good to other people’s lives.
- Spend more mindfully – before every purchase ask yourself ‘Will this contribute to my long-term satisfaction?’ and ‘Is this something I could live without?’ and initiate a waiting period of a week before each non-essential purchase. Often, you will simply forget about what it was you wanted to buy.
3. Money status
If you tend to link your self-worth with your net worth and to prioritise outward displays of wealth you may well be a money status seeker. Your desire to ‘keep up with the Joneses’ could lead you to overspending and your belief that the universe will tend to your financial needs so long as your behaviour is good is a dangerous one which could lead you to neglect your financial planning. Money status seekers are often those who overextend on their mortgage to buy a house they can’t really afford or justify expensive purchases as ‘self-care’. They may also be prone to gambling, relying on others financially and hiding their expenditure from their spouses.
Helpful actions to take if you are a money status seeker
- Change your internal monologue by understanding that money doesn’t define you.
- Create financial balance by tracking your spending and working out a savings plan – a financial adviser can help with this.
- Save before you spend by setting up an automatic transfer as soon as you get paid.
- Consider every purchase by asking whether you are buying something to improve your life or simply to gain status.
- Make yourself accountable to loved ones by checking in with them monthly to discuss your monthly spending.
4. Money vigilance
The money vigilant tend to have many healthy financial habits. They are likely to be hard workers, diligent savers and to live within their means. However, while being heedful of the dangers of overspending is sensible and can be a helpful motivator to plan, save and spend mindfully, the money vigilant can tip over into excessive wariness and anxiety over money. This means that they don’t enjoy their money and the peace of mind being in control can bring, suffering from needless anxiety and sleepless nights.
While this script is considered to be the most financially stable and healthy of the four, there can be a lack of balance between saving and spending and a reticence to talk about money which can lead to bad decision-making which has a detrimental effect on their future financial situation.
Helpful actions to take if you are money vigilant
- Strive for balance between spending and saving in order to live for today while saving for tomorrow.
- Team up with a financial adviser who can help you plan and reassure you that your future needs are covered and that you can afford to have a little fun.
- Set up a ‘fun fund’ to enable you to do things you enjoy guilt-free whether that be a meal in a Michelin-starred restaurant, a shopping spree, a luxury weekend away or indulging in a hobby.
Your money script isn’t set in stone and you don’t have to be defined by it for the rest of your life. Developing an understanding of how you relate to money will help you move forward and make changes that will improve your financial situation both now and in the future.
As with many things, having an objective adviser on board is extremely helpful. A professional can help you identify your money script and the bad habits which are damaging your financial health and put in place concrete steps to rectify any bad financial behaviours and set you up for a successful financial future.
Why not make an appointment with me at firstname.lastname@example.org and let me help you rewrite your money script?
I work as a Financial Planner with expat clients to meet their financial planning needs and goals, with a focus on adequately protecting expats & their families, and helping people to grow their savings over the long term. I strongly believe in building meaningful and lasting relationships with clients to ensure the best client outcomes are achieved.