What’s your attitude to money?
and how has your life story shaped it?
This Insight is for anyone striving to achieve more of their financial life goals- but feels their attitude to money might be holding them back.
Here, we’ll share a powerful exercise for learning how our unique life stories can affect our attitude to money.
And we’ll explore how we can change any attitudes that are not serving us well.
10 to 20-minute read, depending on your speed
What’s coming up
Insert when sections known
Important note
We’re exploring psychology questions here, so you’ll be pleased to know this Insight has been checked for accuracy and balance by a Doctor of Psychology with 20 years of clinical experience.
That said, this is not designed as a health guide. So, if you’re struggling with financial worries, this general guidance from the NHS may help, and if you’re struggling with depression, anxiety, or any other mental health challenge, please talk to your doctor, who will direct you to an appropriate support service.
Otherwise, let’s explore why our attitudes to money matter so much.
Why do our attitudes matter so much?
Ultimately, aside from luck (which does contribute significantly to some endeavours) we’re with Da Vinci in being impressed with the urgency of doing things!
Dealing with our personal challenges and helping others deal with theirs is good for us.
As the author and presidential adviser, Booker T Washington said:
If you want to lift yourself up, lift up someone else.
And, our attitudes are a big factor in what we choose to do and how well we attend to those tasks – including the (sometimes) complex work around our personal finances.
That said, our actions are influenced by a huge number of factors, including:
- Our unique set of personality traits (Openness to experience, conscientiousness, extroversion, agreeableness and emotionality)
- Our particular set of interests and motivations.
- Our values and what we value.
- Our behavioural biases (or thinking errors) – which affect all of us throughout life.
- Our emotional styles (like resilience, outlook, social intuition, self-awareness, sensitivity to context and attention.
- Our financial, physical and Psychological well-being.
- The expectations of our friends, family and other social groups.
- The pressure we’re currently under to get things done – at work or at home.
- The amount of quiet, quality time we set aside to think about and solve tricky problems.
- The physical environment we work in, which for thinking work means comfortable, quiet, and free of distractions.
Our mood, which can change from moment to moment, also affects our actions.
And according to Professor Steve Peters, when our emotional mind (or ‘Chimp’) is excited, our rational thinking mind tends to go offline – which can lead to impulsive and expensive decisions. So it helps if we build our emotional agility and resilience and tame our inner chimps!
Then, there are our habits and routines – the things we do without much conscious thought. And it may surprise you to learn that our habits are thought to account for nearly half of everything we do from day to day.
So, there are many drivers of our actions, and we’ll dive deeper into these other topics – in the future.
What about our confidence, skills and abilities?
Yes, for many people, feeling ‘capable’ is vital for engagement in any complex task including the challenges around our finances
- Some knowledge about or access to a sound process – for tackling our challenge.
- Other resources we need – which may include a trustworthy coach, guide or adviser to lead us on that process.
well Yes, well That depends on your situation – and the degree to which you already have the support of a trustworthy financial planner.
Indeed, we’ve known this since the 1970s (from Psychologist Albert Bandura’s ideas on Self-Efficacy) which showed that we engage more in activities where we feel have some ability.
We don’t accept invitations to play competitive golf if we’ve never had any lessons – and don’t know one end of a golf racquet from the other 😉
Well, the same applies to personal finance.
We all have financial goals, but achieving them efficiently (without wasting money or taking enormous risks) is hard without a sound plan.
And if we don’t know how to plan – we’re unlikely to engage in the process or even talk about money matters.
That said, there are many reasons we don’t talk about money.
Bandura and other Psychologists found that when we don’t feel skilled enough, we focus more on our failings, lose confidence, and avoid those complex tasks.
On the other hand, as we become more capable, we:
- Develop more interest in those activities and commit more strongly to them.
- Recover quickly from setbacks, and re-frame our problems as tasks to be mastered.
So, we can boost our engagement in our personal finances by developing some capability and confidence around the core processes.
And this boosts our chances of success with our finances by reducing the need for that slippery thing called ‘motivation’ or ‘willpower’ – as Social Scientist and author of ‘Tiny Habits’ Dr B.J. Fogg illustrates here
This is not to say we suggest people advise themselves on complex money matters (especially around life and health insurances or long term saving investing and pensions) though we accept that some will choose that route.
This is about whether we engage at all with our finances.
And one critical reason to learn the basics of personal finance is, of course, to protect ourselves from flaky advice whether offered (with good intentions) by friends or family members or (with bad intentions) from scammers or other bad agents.
Building your knowledge and skills will also help you to find good advice – at a fair price – when you need it.
And we have an Insight on that question here.
Reason 3: We feel out of control when talking about money
Few of us are comfortable talking about subjects we don’t understand.
Or, rather, we feel uncomfortable (and lose our confidence) once we realise we don’t understand something.
As Dunning and Kruger discovered, it can take a long time for us to learn (sometimes the hard way) that a little knowledge can be dangerous.
Clearly, it makes sense to learn enough to get past the peak of Mount Stupid and the Valley of (knowledge) despair.
However, to achieve that, we need to know what we don’t know about money and what we need to learn about.
And that’s what we’re here to help you with.
In future Insights, we may investigate the Dunning-Kruger effect and other behavioural biases more deeply because they can lead to big mistakes in all areas of life.
So stay tuned if you’d like to see those.
For now, be aware that the feeling of ‘not knowing what we’re doing’ can prevent us from discussing or taking action on vital money matters.
Fear is a natural emotion that seeks to protect us from harm – financial or otherwise.
Fear (for most of us) stops us from jumping into a car and trying to drive on the road before we’ve had any lessons. But sadly, it doesn’t always stop us from investing our hard-earned money into things we don’t understand!
The challenge is that so many people tell us to ‘ignore our fears’ and jump into their hot money-making scheme, and our natural behaviours make us susceptible to these calls.
- Our brains like to save energy (avoid overwork), so we look for quick and simple answers to complex questions.
- We’re often too quick to trust in others who don’t deserve that trust.
- We too readily accept instructions from those we believe are ‘authority figures’, as discovered by Stanley Milgram in some ‘shocking experiments’,
And those are just some of the reasons we make big money mistakes.
Just be aware – there are many psychological forces and behavioural biases that can lead us to make bad decisions.
So we hope to come back to these topics in future.
For now, we’ll focus on how poor knowledge and skills can seriously hold us back.
We’ve known since the 1970s (from Psychologist Albert Bandura’s ideas on Self-Efficacy) that we’re more inclined to engage in activities we feel capable of.
We can all identify goals (things we want to achieve or change), but we also know that converting ideas into action is challenging.
Bandura and others have found that as we become more capable in complex tasks, we:
- Develop more interest in those activities and commit more strongly to them.
- Recover quickly from setbacks and re-frame our problems as tasks to be mastered.
On the other hand, when we feel unable to perform a task, we focus more on our failings, lose confidence, and avoid that task.
To learn more about the drivers of behaviour change, look at this brilliant model which illustrates how our capability is critical for our success.
The model was developed by Social Scientist and author of ‘Tiny Habits’ Dr B.J. Fogg.
In short, to make better financial decisions, we need knowledge of the financial planning process and the financial products we put our money into.
Ideally, you’ll acquire this basic knowledge before investing, but it’s never too late to learn from trustworthy professionals.
The key is to avoid a path where all your lessons come from heavy losses in unsuitable investments.
Of course, you don’t need as much knowledge about personal finance if you have a good adviser, but we’d encourage you to learn the basic concepts, so you know you’ve hired the right one!
And this leads nicely to the next reason we tend to avoid discussing money – with advisers.
Shall we dive deeper into our attitudes to money?
Of course, taking action and advice where required – on our health or our wealth is quite a different matter.
And if we hold onto flawed beliefs about the benefits of taking action, all the theory in the world is unlikely to change the outcome.
What is an ‘attitude to money’?
The first thing to note here is that Psychologists describe having an attitude toward something (an object, person, group, event or issue) very differently to how you or I might think of it.
Your attitude to money, for example, is your learned tendency to assess and react to it, in a certain way.
This attitude is the mix of your thoughts and beliefs; your feelings about and your behaviour towards financial matters.
The academics call these elements your Cognitive, Affective and Behavioural (CAB) components of attitude.
It’s also worth noting that while we might be aware of some of our attitudes, others sit in our subconscious minds, so we’re simply not aware of them.
Thankfully, as attitudes are learned (from experiences, teaching, media and advertising exposure, or by following social norms) we can unlearn them too if we need to.
It might just take a bit of time and effort, and some attitudes can take longer to change than others.
Examples of blocking attitudes to money
When it comes to money, as with most other questions, different people have different attitudes towards it… and different attitudes to those who advise on money too.
Here are just ten of the most common beliefs (and associated feelings) people have told me about why they struggle to engage with their (longer-term) money challenges.
I don’t know enough about pensions, investments, or any of that money malarkey, to know how to approach this. And I feel too embarrassed to talk about it to others.
I feel quite anxious about my uncertain financial future, so I tend to avoid talking about it.
I’m afraid of repeating a mistake that I (or a friend or family member) made in losing a lot of money on investments (or property) in the past. So, I steer clear of anything investment related.
I don’t earn enough to save for a pension. I’ve looked into how much you need to save, and those numbers are completely out of reach for me.
To be honest, Financial Planning bores me and I’ve got better things to do with my life.
I’ve tried to sort this stuff out, but I feel baffled and defeated by all the complexity and jargon, so I’ve now given up.
I don’t trust financial advisers to work in *my* best interests.
I know most regulated advisers are honest enough. But generally, I’ve not found them to be very bright or technically competent for my needs. So, I don’t take advice.
I’ve looked into this – and I can’t afford the price for good financial advice.
My partner is the real problem. He/She won’t work with me to develop a financial plan or do what’s necessary to make it happen.
Do any, or all, of those (action-blocking) attitudes chime with you?
I’d be surprised if some of them don’t, as I’ve been recording these thoughts for over 30 years now – both from Inside, and now, as a writer, outside the Financial Services Industry.
And, Covid Lockdown aside, they haven’t changed in all that time.
By the way, I’m also writing a series of Insights to help people deal with all 10 of these action-blocking issues.
Sign up to my newsletter, if you’d like to see those.
Money Avoidance – and other Money Scripts
Of course, that list of ten attitudes above only relates to mental blocks around longer-term financial planning: Pension planning and investing, and all that jazz.
Widen the question to what people believe about ‘Money in general’ and you’ll find an enormous array of beliefs that people hold about money.
Psychologist, Brad Klontz has done some interesting work to identify these ‘Money Scripts’ and group them into categories. For example, if you find yourself agreeing with the scripts listed below (from Brad’s Money Behaviours Inventory test) then it might suggest that your attitude to money is what Brad calls ‘Money Avoidance’.
Take a look and see how many of these statements you agree with.
- I do not deserve a lot of money when others have less than me.
- Rich people are greedy.
- It is not okay to have more than you need.
- People get rich by taking advantage of others.
- I do not deserve money.
- Good people should not care about money.
- It is hard to be rich and be a good person.
- Most rich people do not deserve their money.
- There is virtue in living with less money.
- The less money you have, the better life is.
- Money corrupts people.
- Being rich means, you no longer fit in with old friends and family.
- The rich take their money for granted.
- You cannot be rich and trust what people want from you.
- It is hard to accept financial gifts from others.
What fascinates me about Brad’s research is how ‘Money Avoidance’ is often ‘associated with people who are wealthier, wiser, and more highly educated.’
That certainly confirms my experience.
You can assess yourself against those four categories too.
NB. This is not a recommendation of the associated wealth adviser firm. I make no recommendations to any such business. My work is about education, pure and simple. So, be sure to conduct your own due diligence if you need any form of investment advice service.
Also, be aware that your results in the Money Behaviours Inventory Test, might not show you as fitting neatly into any one of those four categories.
You will find, with most types of strengths or behavioural trait assessment (and here’s another good one) that you have a mix of the traits.
As Brad himself notes,
“it’s not uncommon to have money scripts that seem at first glance to contradict each other, such as endorsing the belief that: money corrupts people while also believing that things would get better if only I had more money”
Again, I’ve noticed that contradiction a lot!
Two simple truths about money
In this insight, we’re exploring attitudes that can block our financial progress, but let’s not forget the simple truths that we could choose to believe about money.
Here are two off the top of my head:
1. Money is just a store of value, a measure for valuing things and a means of exchange (which is far more efficient than barter!) Money is neither good nor bad.
2. Money gives you more freedom to choose what you can have, do or become, whether that’s:
- More comfort at home.
- More trips away to see the world.
- A more relaxed and peaceful life.
- A more fun-filled and exciting life.
- More time for learning, for you or your loved ones to become more of who you want to be.
- More time to do more purposeful and creative works to help, inspire or leave a legacy to, others.
Money also enables you to help others to have, do or become these things too.
How can you change your attitudes?
Okay, getting back to our (potentially blocking) attitudes to money, the critical question is surely this:
What can you do to change them?
To answer that, let’s see what the Psychologists say influences the strength of your attitudes. The main factors are:
- The gain you expect (or loss you expect to avoid) from holding to your attitude. In short, your incentive.
- Whether this attitude is repeatedly expressed by those who influence you – we have inbuilt tendencies to follow authority and conform to the attitudes of others, so these are very powerful forces for some.
- The experiences that you (or those you care about or have read about) have had in life.
- Your expertise* on the subject.
* It’s also worth noting, as this image shows, that our confidence in our attitudes can be high at both extremes of expertise.
So be sure to watch out for that trap!
Psychologists have also explored how attitudes are changed, and this is a subject we’ll look at in more detail in the future.
Why? Well, because persuading people to change their minds (for the better) is at the core of good sales and marketing… and those skills are essential to earning more money, right?
The key point to note, from the Psychologists, for now, is this.
To bring about a permanent change in attitude (in yourself, or someone else) your messages need to be thought-provoking and logical.
This is not to deny the fact that our attentions are grabbed by more emotionally loaded messages, they are.
It’s just to say that decisions about significant and long term personal change, often require an ‘appeal to logic’
The trouble is that ‘appealing to logic’ is not always the same as being logical… or even correct, and it’s this challenge (finding the truth) that’s one of the greatest we face in life.
Many of the stories we tell ourselves, and the messages we get from others (esp. in adverts) sound perfectly logical, even when they’re not.
What’s clear is that:
We need enough knowledge on the subjects that worry us (about health, wealth and relationships) to know which messages we can trust
Understanding that, in relation to money, is why I wrote the book, ‘Who can you trust about money?’ – which explores the various ways in which others mislead us about money, and how we mislead ourselves.
So, the second half of that book is all about behavioural science that everyone’s talking about now; the enemies we carry inside our own heads if you like.
Indeed, protecting ourselves from misleading ideas is now a large part of my life’s work – and what this site is about.
The catch-22 is that you might not want to learn these ideas if money is a subject you prefer to avoid.
How did you learn your money attitudes?
If you struggle with your attitudes to money – you might like to approach this from different angle, which is what we’ll try now.
This life-story mapping exercise will help you explore when and how you acquired your money attitudes over time.
It’s a powerful remembering exercise and is best done alone. Of course, what you discover is for your benefit, and you can keep the findings to yourself, but they could be helpful when discussing your money attitudes with a partner or financial adviser.
Just be aware that the exercise can trigger both positive and negative feelings, like joy or sadness – and both at the same time! So, if you don’t feel up to exploring your memories now, set this aside for later.
When you’re ready to explore your money-life story, set aside an hour or so of your time, find somewhere quiet, and turn off your phone – we can’t think clearly with distractions.
All you will need is a pad of paper, a pencil and an eraser to adjust your map as you create it.
Instructions
Grab a piece of A4 paper and, on the left half (in landscape orientation), list some events in your life (starting from your earliest childhood memories until today) in which money played a key part – directly or indirectly.
• You may have as few as five or as many as 20 of these events; everyone’s experiences are unique.
• Just start writing, and the events will come to you. Focus on the memorable money-related events that made you feel high or low.
An early example would be your first pocket money; a later one – your first pay cheque.
2. To the right of each event:
• Estimate your age at the time.
• Give a score to each event (between minus five and five) to reflect how ‘low’ or ‘high’ you remember feeling about the event – at the time.
• Place a tick beside each ‘low’ that you feel has given (or could offer) you a valuable life lesson.
• Write a word or two to describe how you recall feeling during each event.
If you’re stuck for ’emotion’ words, this basic list may help: Happy, Ecstatic, Sad, Fearful, Regretful, Excited, Angry, and Surprised.
And there are many more words here if you need any.
• Write the belief about money or your relationship with money or about financial advisers) which you think you formed from each event.
• Write how you feel your behaviour changed immediately after the event.
• And write down how that same event affects you today – if that’s different.
Now, sketch a simple timeline like the example below on a fresh piece of paper.
The vertical scale is for your (positive or negative) event scores.
Plot your events on your timeline.
Describe each event with a few words in a box and position each box horizontally to show (roughly) when it happened and vertically to show the score you gave it.
Here’s an example:
Then reflect on your notes and develop them as more thoughts come.
Finally, store your notes so you can retrieve them in the coming weeks and months as more Insights come to mind – which they almost certainly will.
Your attitude to money matters, and your experiences with them, will change over time.
What can you learn from your money-life story?
Everyone’s life story map is different, but most (like the example above) show an emotional ‘roller coaster’ of money-related life events.
Just be aware that we don’t always form sound beliefs from our life experiences.
And some of our biggest financial successes (and highest times) might have led us to believe we’re ‘super-smart’ with money – when the truth might be that chance played a significant part in that success.
On the other hand, our most challenging times and biggest mistakes may lead us to conclude that we’re hopeless with money -yet that may not be true either.
Some of our most valuable life lessons come from our mistakes.
And an optimist might agree with John Maxwell’s idea that,
‘Sometimes you win, sometimes you learn.’
But this is only true sometimes for some who look carefully at their failure – and seek outside expert views on it.
If we don’t analyse it we risk repeating that mistake many times over – if indeed we get the chance.
And with many money challenges (like ensuring we have enough life insurance and saving for our later years), we may not get a chance to learn from our mistakes.
Also, when it comes to investing, we need to remember the advice from most legendary investors – and aim to avoid a permanent loss of capital.
If you have (permanently) lost money on investments in the past, you’ll not want to repeat that mistake on the same or different investments in the future. So, take solid financial advice – and ensure you avoid those risks.
What stops you from tackling your money challenges?
If you already manage your money well, have a sound financial plan and have set up any necessary insurance (on your life and health), you may not need to change your attitude to money.
Otherwise, start with this list of money challenges that we all face, decide which area(s) you need to address and write down what you think are the obstacles to tackling those challenges.
Just be aware that you’re not alone if you struggle to engage with longer-term financial plans.
Many beliefs can block us from dealing with these challenges, and it’s common to feel any of these emotions around money:
- Anxious and fearful – about our current financial situation and uncertain future.
- Baffled or bored – by all the numbers, charts and jargon around personal finance.
- Embarrassed or foolish – about our lack of knowledge on money and investments.
- Fearful – of repeating mistakes with money that we’ve made in the past
Thankfully, financial advisers understand these challenges and can support you through your financial review and planning process – so you come away feeling:
- Calm and confident – clearly understanding your current situation and the work to be done to get your plan on track.
- Fascinated – by the plain English Insights around money that your adviser will give you.
- Motivated – by your plan, which connects your money to what matters in your life – your goals for yourself and your loved ones.
- Unafraid and equipped – knowing that many people repeat basic mistakes with their money – until they engage with a professional adviser.
How could you change your money attitudes?
We hope these exercises helped you consider your attitudes to various money matters.
If you feel some of your beliefs need to change, the question is what to do next.
The challenge is that we hold on to beliefs formed from life experiences, the advice of family and friends, or others we trust.
Changing our attitudes can feel risky, and we may avoid doing so until the need feels overwhelming., and that time, as we’ve said on some money matters, may be too late.
So, reviewing your finances with a professional adviser makes sense if you’ve never or not recently done so.
Most advisers offer initial discussions before you commit to working together, so you can:
1. Get to know each other.
2. Ask the adviser to sense-check your attitudes toward money.
3. Discover how they could help you design (or refine) your financial life plan.
Changing your attitude to money may take some time, but there’s no need to beat yourself up for the occasional step back on that journey – and to paraphrase Robert Brault:
“… taking one step back after two steps forward is not a disaster.
it’s a cha-cha”
How can you use your money-life story?
Well, that’s different for everyone, because those events (and your circumstances and your personal goals today) are all unique to you.
So, take some time to reflect on those events/periods of time that you’ve plotted on your money-life timeline.
Reflect on how they made you feel at the time; how you feel about them now and on the beliefs and behaviours, you believe that you formed as a result.
Some of your biggest successes (and highest times) might have taught you the wrong things about money, and may be holding you back today.
The classic example here is ‘survivor bias’ – where we only see the winners in games of chance, and this is an enormous trap for the unwary when it comes to investing and business.
The bottom line
Most of us have beliefs (whether on wealth, health or relationships) that are simply not grounded in reality.
Too many confuse luck for good judgement and fall prey to the grossly misleading overconfident people on a stage who sell nothing but snake oil systems.
That’s why I run this site – to bring you the facts you need about money.
To my mind, everyone in the world could make better decisions around money, if only they knew how to plan their money and choose suitable places to put it.
If you’d like to learn those things, from someone who won’t try to sell you any financial products, just follow along
Then I can keep you posted with new Insights as I write them, including that series on how to overcome all 10 of those money blocking attitudes, we looked at above.
There’s really nothing, not to like.
Thanks for dropping in
Paul
For more ideas to achieve more in your life and make more of your money, sign up to my newsletter
As a thank you, I’ll send you my ‘5 Steps for planning your Financial Freedom’ and the first chapter of my book, ‘Who misleads you about money?’
Also, for more frequent ideas – and more interaction – you can join my Facebook group here
Share your comments here
You can comment as a guest (just tick that box) or log in with your social media or DISQUS account.
Discuss this article