What’s Your Money Story? The Psychology Behind Your Financial Habits
Have you ever heard someone say that finances are just about numbers? Nothing could be further from the truth.
Money and finances are deeply psychological.
Our thoughts, beliefs and emotions regarding money shape the way we earn, save, spend and invest our money.
Whether it’s fear of not having enough, guilt over making purchases, or impulse spending, our financial behaviors go far beyond rational math. In fact, they are rooted in mindset and past experiences.
Understanding this connection is an important part of creating lasting change to your finances and building a healthier relationship with your money.
What are money scripts?
Money scripts are deeply ingrained beliefs about money which are often formed during childhood.
Although they typically stem from childhood experiences, they influence our financial behaviors as adults. Money scripts can cause us to behave in ways that seem irrational with our spending, saving, or even talking about money, but just like everything in psychology, it becomes rational once you understand the root cause.
Because money scripts are rooted in childhood experience, they often operate subconsciously, driving our financial decisions without us even realizing.
Origins of Money scripts
Money scripts likely come from one of three places: family influence, traumatic events or cultural and social factors.
Family influence
The way that your parents or caretakers acted with money will inevitably affect your own attitudes.
Did you know that most of our beliefs about money are engrained by the age of 7?
As a young child, you quickly picked up how your parents acted around money. In adulthood, this likely went one of two ways: you now mimic your parents’ behavior or you try to do the opposite.
For example, if you grew up in a home where money was tight and your parents were constantly penny pinching, you may now be a frugal adult that prefers saving money to spending it.
OR
You may feel like your childhood was too restricted, and now that you are an adult and have the freedom to make your own choices, you decide to treat yourself to the things you never had as a child, to the detriment of your own savings.
Take a moment to think back on your own childhood: what do you remember?
Were your parents always stressed about money? Did you frequently hear phrases like, “We don’t have money for that?” Did your parents ever fight about money?
Traumatic financial events
Traumatic financial events can also affect your current money behaviors. If your family went through a major financial event like bankruptcy, eviction, having cars repossessed, electricity shut off for non-payment, or a sudden loss of wealth, this can dramatically shape lifelong beliefs about money.
In adulthood, you may develop a scarcity mindset, seeing money as a finite resource and choose to save it over spending it. You learned in childhood that stability can be taken from you, and therefore you fight to maintain control of your money.
You may also develop trust and control issues with your finances. Perhaps you don’t trust banks because they took away your mom’s car. You may be reluctant to invest because you saw your parents “lose it all” in the 2008 stock market crash. In adulthood, you could have difficulty sharing financial responsibilities with a partner. Being involved in all of the financial decisions for your household helps you retain a feeling of control with your money.
Cultural or social factors
Finally, the messages we learn during childhood about money are strongly tied to the cultural and social factors that we are exposed to.
For example, if you grew up in a poor or working-class family you may believe that wealth is unattainable for “someone like you”. As an adult, you may choose a lower-paying, but steady job over a riskier profession as an entrepreneur or working at start-ups where there is greater potential for higher earning because you do not truly believe you are capable of creating wealth.
Similarly, if you are a child of immigrant parents, there is often an intense pressure to succeed. You may believe that “sacrifices must be made” in order for you to reach success and provide for your family. This can lead to you sacrificing your own needs and wants for the good of others. You may give up a passion-career for something steady and high-paying that will help you provide for others in your life.
Finally, I’d be a poor feminist if I didn’t mention the huge gender gap between men and women’s financial education. As women, we are intrinsically (perhaps even extrinsically) taught that we cannot trust our own instincts with money, that men are better with money, that asking for a higher salary is greedy, and that spending any money on ourselves is selfish. These false cultural narratives leak into our own subconscious, causing us to suddenly feel guilty for having dinner with a friend because we still have $100k of student loan debt.
Common money scripts
The insidious side of money scripts is that they work on a subconscious level, affecting our daily lives without us even realizing it.
Do any of these money scripts sound familiar?
Money script: “Rich people are greedy”
Reasoning: This is one of the most common money scripts. We use it to justify not seeking wealth. If all rich people are greedy, then if I get rich it means I am a bad person.
Truth: Money is not inherently good or bad. Its power comes from those who control it. If YOU become rich, you can use your wealth generously to create opportunities for those who have less than you.
Money script: “Saving is a virtue”
Reasoning: Society often glorifies frugality and saving as being “responsible” and spending as “irresponsible”. What’s more, it attaches a moral value on saving, showcasing savers as virtuous and spenders as greedy.
Truth: While saving is important, rigidly saving to the detriment of spending can lead to missed opportunities. Whether it’s dinner at a restaurant for your friend’s birthday or a course that would help you build your business, spending money on things you value is an important part of life.
Money script: “I don’t want to seem greedy”
Reasoning: You likely received this money script subconsciously from someone trying to keep you in your place and dreaming small. As women, we’re constantly bludgeoned with cultural messages about being grateful and humble so we don’t seem like an “angry women” or a b*tch.
Truth: You know who never worries about seeming greedy? White men. They know their worth and ask for it and they don’t care about looking ungrateful in the process. It’s not ungracious to ask for your worth. You deserve to go after your dreams.
As the saying goes:
Carry yourself with the confidence of a mediocre white man.
Money script: “I’m just bad with money”
Reasoning: When you made a mistake, others may have told you you were bad with money. Now, you use it as an excuse to avoid money. If you’re “bad” at it, then you can’t be held responsible for any decisions you make with money and you never have to put the time and effort into figuring it out.
Truth: You’re not bad with money. No one ever taught you!! You were probably pretty bad at riding a bike too, until someone held the handle bars for you while you pedaled and helped you feel confident riding on your own. Start reading books, finance blogs (like this one 🙂), listen to podcasts and soak up all of the knowledge you can about money. You’ll shock yourself on the day you casually drop “asset allocation” into a conversation like a pro. 😉
These money scripts go far beyond our finances. They are emotional and psychological barriers that shape how we manage our money, often without us even realizing it.
Recognizing your money scripts is the first step to rewriting them and creating a healthier relationship with money.
Action Steps:
1. Identify your money scripts
Think about the messages you received directly or indirectly as a child. How did your parents talk about money? How did they act with money?
Are there any particular emotions you feel when you think about money? Does it make you excited, guilty, anxious, stressed? Why do you think you feel that way?
2. Decide what the problem is
Do you truly want to change your habits with money? Be honest with yourself.
Think about how your money scripts have hurt you financially or in other aspects of your life.
For example, does thinking “I’ll never be rich” cause you to not seek out a higher paying job, leading you to struggle to pay your monthly expenses? What is the *real* problem that your money scripts are creating in your life?
3. Reframe. Reframe. Reframe.
Even if it sounds silly, practice reframing your negative money scripts out loud. If your money script is “I’m just bad with money”, try reframing to “I’m going to learn as much as I can to become better with my money. It’s ok if I make mistakes.”
If your money script is “Saving is a virtue” try “Spending money on things that bring my life joy is equally as important as saving”.
Remember, everything in life needs balance, including your finances.
Your life may not be perfect, but it is imperfectly yours. The only way to live it is your way.
Katherine, founder of Imperfect Budget
Imperfect Budget is an educational platform built to help women align financial goals and free themselves from limiting money mindsets.
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