#529： The Money Scripts That Are Holding Back Your Financial Future
Episode Stats
Summary
Brad Klontz is a psychologist who specializes in money issues and is the author of the book Mind Over Money, Overcoming the Money Disorders That Threaten Our Financial Health. In this episode, we discuss what Brad calls the Big Lie in personal finance, and how the money scripts your parents and grandparents passed down to you have affected your thinking about finances.
Transcript
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Brett McKay here and welcome to another edition of the Art of Manliness podcast. If you struggle
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with getting your financial house in order, you may feel that what you need is more information
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on how things like stocks or IRAs or budgets work. However, my guest today would say that
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what you actually need most of all is a better understanding of the relationship that your
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parents and even your grandparents had with money and how the money scripts they passed
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down to you have affected your own thinking about finances. His name is Brad Klontz. He's a
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psychologist who specializes in money issues and is the author of the book Mind Over Money,
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Overcoming the Money Disorders That Threaten Our Financial Health. We begin our conversation
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discussing what Brad calls the big lie in personal finance. Brad then explains how money scripts from
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your childhood can keep you from making progress with your finances in adulthood. We dig into why
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you can feel shame over being both poor and rich, why it's hard to move ahead from the socioeconomic
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status you came from and easy to get dragged back into a financial comfort zone, and how you can
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break out of old ingrained patterns. We end our conversation with how to be more intentional
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about the money scripts you're passing down to your own kids, including why you shouldn't tell them
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we can't afford that. After the show's over, check out our show notes at aom.is slash money scripts.
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Excited to be here, Brett. Thanks so much for having me.
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So you're a psychologist, but you specialize in issues people have with money. What led you down
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to go that path with your practice or your studies?
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Yeah, I mean, a bit of an odd duck for sure. Thanks for pointing that out. I'll tell you,
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I got out of graduate school. And for those of you who've gone to college, you can totally relate
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to this, at least many of you can. I owed $100,000 in student loan debt by the time I was done with my
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doctorate degree. And I was raised, I would say, lower middle class, sort of working class
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mentality and environment. My parents were, however, were very frugal around money. And so
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there was this sense that, you know, there's not enough money. We need to save money. And whatever
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you do, don't borrow any money. Like, so debt is bad. Try to avoid it at all costs. So when I got
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out of graduate school, owing $100,000 in student loan debt, I was pretty anxious about it, especially the
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first year when I saw that I ended up paying about $8,000 in interest. I was mortified. And I was
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fairly, I would say I was fairly desperate to get out. And I was looking for ways to how can I pay
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this off as fast as possible? Well, during the same year, I saw a friend of mine make about $100,000
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in 12 months trading stocks. And the thing about this friend is, he knew nothing about the stock
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market. So in that sense, he was just like me, right? And I saw him make all this money. And I
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thought, what a brilliant strategy for me to do, I can get out of debt in a year, and then just move
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on in my life. And so I sold what I had a value at that time, which was primarily my truck. And I got
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all the money I could and I put it all in the stock market. And Brett, I had just had a fabulous three
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or four months watching that money grow. I was on track. I realized this was the solution to my debt
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problems. And then the tech bubble burst. And I saw my money just start to melt away and slide away.
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And it was agonizing. I felt ashamed. I felt like I was an idiot. I was sort of beating myself up around
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it. And then I did what I was trained to do in psychology, which was to try to look at, you know,
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what is my role in this? So how would a reasonably intelligent person do something so stupid with his
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money? And I went ahead and started to do what we do in psychology. We call it a literature search.
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I was like, okay, certainly psychology has studied this whole issue of money before. And I can read
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some articles, read some books and figure out, you know, why I did what I did. And along that journey,
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very quickly, when I started to do searches, I realized that psychology had totally ignored the
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topic of money, much to my dismay, because I was actually just looking to find the cure for myself.
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And then I sort of joke, Brett, that within a matter of about three or four months, I became the
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world's leading expert in financial psychology, mainly because psychologists had avoided the topic
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of money for over 100 years. And so I got interested in this, you know, quite a while ago,
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back in the tech bubble. And really, it came from trying to sort out my own relationship with
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money. And what I did is I actually, after that experience, I went back home, and I sat down and
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I started to interview my family members, I sat down with my mother. And I asked her questions that
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I'd never asked her before, you know, like, so what was it like for you growing up around money?
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What do you know about grandpa and grandma and what it was like for them? And I did the same thing
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with my father. And through those discussions, I was sort of blown away with stories that I had
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never heard of before, that made my experience with money, totally logical, it made total sense,
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I knew exactly why I did what I did, which was a huge help in terms of like, lowering my feelings
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of shame and my sense of failure. And really, it was that experience that led me on this journey
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to become a financial psychologist. So research is me search for you. It's true.
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Exactly. And you know, I do conduct a lot of research. But I feel like, for me, that's, that's,
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I got interested primarily to figure out why I did what I did. And since then, I'm trying to help other
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people figure out why they do what they do. So you, you published a book, authored a book,
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co authored it with your father, called Mind Over Money. We can also throughout this interview,
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please talk about that experience of writing a personal book about money with your dad. But in this book,
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you, you two highlight psychological issues that people have with money. And before we get to the
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specifics, you talk about in the beginning of the book that everyone believes, or just about everyone
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believes this big lie about personal finance. What is that big lie that most people believe?
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You know, the basics of personal finance are incredibly simple. You know, and most Americans go wrong
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in these two basic areas, saving for the future, and not spending more than you make.
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And so because it's so simple, there's an incredible amount of shame that goes along with our financial
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struggles. So the big lie about personal finance is that your financial struggles are the result of
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you being crazy, lazy, or stupid. And it's a big lie, because your financial outcomes and financial
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behaviors are actually totally predictable. If you can understand your financial psychology,
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if you can understand the money scripts that were passed down to you from your parents, your
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grandparents, your great grandparents, your culture, we get these from a bunch of different
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sources. And these belief patterns that get passed down will totally predict for you things like your
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income, your net worth, and your financial behavior. So it's not the result of you being crazy,
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lazy, or stupid. It's entirely predictable based on where you're from, and what you learned about money.
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Well, another thing you talk about in the book as well is that another, you can call it a lie,
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but a misconception people have about getting their financial house in order is that if I only had
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more information, right? So that's why personal finance books are perennial bestsellers. If I can
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get just enough information, then I'll turn it around. But that usually doesn't work out that way.
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It doesn't. And information is incredibly valuable. And so I don't want to discount that,
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especially since I'm a professor, and I, you know, educate people, and I provide information.
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So it's incredibly effective for about, and this is all research-based, for about 20% of the people.
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You, 20% of the time, you're in the action phase. We call it around change, where just tell me what to
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do, and I go do it. That's the sort of the minority of people. That's us, you know,
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the minority of times, if you will, around any given issue. So much more of it is psychological.
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A great example on this is, you know, overeating. It's like, we know that we should eat better and
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exercise more. I mean, it's pretty simple. You can, in about two minutes, Google a good diet for
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yourself or exercise program. So it's really not about giving you more information, more details
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about the negative effects of obesity on your health or the benefits of exercise. You already know
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that. And so that's typically what happens with money. Our problems with money aren't that
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complicated. It's not like, you know, I'm in financial trouble, and I have a ton of financial
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stress because I don't know the difference between a traditional IRA or a Roth IRA. Really important
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information for you to know, but giving up, giving people that information, stuff they already know,
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isn't very helpful. And so the work that I do is really focused on looking at what is that
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underlying psychology you have around your relationship with money. Because the research
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we've done has shown that your beliefs around money, your relationship with money, that is a
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very strong predictor of whether or not you become wealthy or whether or not you stay in a struggle
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with money. You've mentioned the idea of money scripts, that we develop these money scripts,
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oftentimes in childhood, basically when we were growing up. And at the time, these money scripts
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probably made sense, right? Actually, we developed that script about money because one of the
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situation we were in, the context we were in, it actually made sense. And then you talk about how
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there's certain flashpoints throughout our childhood where those money scripts really set in. So what are
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some examples of those type of financial flashpoints that sort of set money scripts for the rest of our
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life? Yeah, I'll give a personal example. So I mentioned earlier that, you know, I had made this
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mistake in the tech bubble, losing all my money. And again, out of a sense of sort of desperation to
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pay off my debt. And so I went home and I started to interview my mother. And one of the stories I
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found, which blew my mind, because I had no idea this was happening. And I was actually very close to
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my grandfather. But when my grandfather was a young man, he lost all of his money when the banks
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collapsed during the Great Depression. Now, just imagine that. Imagine going to the bank tomorrow
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and, you know, a lifetime's worth of savings is now gone. And as a matter of fact, you can't get
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anyone to talk to you. All you know is that the money's gone. It's gone forever. You can't get any
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of it back. That's what happened to him. Very traumatic experience, I would imagine. My grandfather,
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through hearing the stories, he arrived at the money belief, you can't trust financial institutions
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with your money. Now, to your point, Brett, that is an actual true statement from my grandfather.
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And as a matter of fact, if he had believed that before the banks collapsed, he would have taken out
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his money and buried it in the backyard, and we probably would have been fine. So 100% accurate
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back then that you absolutely cannot trust banks with your money. And the people who did put trust in
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the banks with their money lost their money. So he had such an emotional intensity related to that
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belief that he couldn't shake it. And what I mean by that is that the context very quickly changed.
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So the federal government came in and said, okay, we get it. Nobody trusts banks. We're going to start
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guaranteeing bank accounts up to $100,000, where if the banks collapsed, we'll step in and give you that
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money. So the context changed. Reality changed. But my grandfather's beliefs did not change. And he
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passed away in his 90s. And what I didn't know is that he'd never put a dollar in the bank the rest
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of his life. What he did is he kept his cash in a lockbox in the attic or under his bed.
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Yeah. So that's a great example. Yeah, keep going.
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Yeah. So I mean, when I heard that story, my mother's anxiety around money started to make total
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sense to me. I knew she was afraid of not having enough. I knew that she was afraid of the stock market,
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didn't want to invest in the stock market. As I mentioned, though, she was extremely frugal. And so
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she was a saver. So she took it a step further, and she would put money in CDs, which is good.
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But because of that intense fear, she missed out on decades of growth in the stock market.
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And I came along, and I was very committed at an early age to not be poor like my family. I realized
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that not having enough money is kind of an aversive experience. And it's better to have money in order
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to do things that you want to do and have opportunities and travel and go to school and all that kind of
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thing. So I determined at an early age, I don't want to be like my family around this. And so at an early
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age, I was sort of looking for, I'm going to do things differently than you do. And so that's one of the
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things that sort of set me up. My family's extreme distrust in the stock market led to, I call it a
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dysfunctional pendulum swing, where I swing to the opposite side. And what I did is, I'm not going
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to be like them. Instead of taking a balanced approach, I did the opposite. So I took all my
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money, and I put it not just in a financial institution, but in the riskiest possible
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stock market sector. And I put all my eggs in one basket. And so that's a hugely dysfunctional
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pendulum swing in the opposite direction, which wouldn't have made any sense to me unless I had done
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that history. And then it made total sense. Here I am trying to sort of desperately not repeat the
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patterns my family was in. I didn't know the full story. And I went to an extreme behavior on the
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other side. So money beliefs, like, you know, you can't trust banks with money, you can't trust the
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stock market, which, by the way, an entire generation of millennials are struggling with
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this and have been struggling with this because they saw their parents lose their money and homes
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back in 2008. And so there's been studies showing that this belief that you can't trust the stock market
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or it's not a good approach in terms of growing your wealth is something that an entire new
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generation is dealing with. These beliefs, we call them money scripts in our research,
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and they're typically passed down through the generations. They're typically rattling around
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in your subconscious. One of the problems with our relationship with money is money is a big taboo
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topic. So we don't talk about it. We don't talk about it much. And so there's not a lot of opportunities
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for us to examine our thinking and to challenge and change it or to hear what our friends' parents are
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thinking about money or aunts and uncles or other people who are further along or more successful.
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It's kind of a taboo topic. So we're left to sort of make up these stories and try to sort it out
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ourselves. And so these money scripts are incredibly powerful. The studies we've done have shown that
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they predict your income, your net worth, your level of debt, the socioeconomic status you grew up in,
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and a whole host of financial behaviors. And so I think there's a lot of value in examining
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what did your mother teach you about money? What did your father teach you about money?
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What experiences did you have growing up around money? What did these experiences and messages
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lead to in terms of what's rattling around in your own brain about how you believe money works?
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Because they are definitely impacting your financial behaviors and your sort of ceiling of success.
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Okay. So a flashpoint is sort of a moment surrounding money that's like
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emotionally charged, highly emotionally charged. So a stock market crash could be one. A parent losing
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a job could be one of those flashpoints. And that could ripple down through the generations. But you
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also, besides these events, these moments that can sort of be the origin of these money scripts,
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you also talk about how our relationships with other people can set us up into a financial comfort zone
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that will stick with us for the rest of our life. Even though, you know, we might, our financial
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situation might've changed, we still feel comfortable in that comfort zone. And so we still
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carry those scripts that allow us to live within that comfort zone. So walk us through some of these
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comfort zones and why it's so hard to change as our money circumstance change.
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Yeah, absolutely. So we are human beings who've evolved over tens of thousands of years in tribal
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groups. And so being a part of a tribe in terms of our lower brain, our mammalian brain is essential
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to survival. So, you know, 50,000 years ago, if you were separated from your tribe, you were exiled,
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you died, you died, and your children died. And that was it for you. So our status and connection
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with a tribe is so critically important to us on a psychological level that even today, we will
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utterly destroy ourselves financially in order to stay within our family group or tribe. This is sort
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of how we're wired. You've heard many stories, I'm sure, of people who come into massive amounts of
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money, let's say winning the lottery, or athletes who come into big contracts, or musicians who come
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into big contracts, who then take this money and then totally get rid of it and destroy it and live
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totally irresponsibly, and then it's all gone. And it's really easy to sit back and go, oh my gosh,
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these people are idiots, right? Like if that happened to me, I wouldn't do that. I'd be much more
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fiscally responsible. But what happens is that chances are your top closest family members and
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friends are around the similar socioeconomic level as you are. And it's almost a culture. Like, you know,
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the culture I grew up in, you know, it wasn't very fancy. Like I remember the first time I went to a
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restaurant, and I saw that there was more than one fork at my place setting. And I'm like, there's three
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of them. What am I supposed to do with all these sports? I immediately felt like I was outside of
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my comfort zone in a big way. I wasn't sure exactly how to behave. I looked around, people are
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dressed differently than me. They're acting differently than me. It was an incredibly uncomfortable
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situation. And you've probably had an experience like that either on that end or going into an area
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where people have much less than you, and they drive different cars, and they dress differently,
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and you're feeling uncomfortable because people are staring at you, and they can tell you don't belong
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there. And you're not even sure exactly how to operate, keep yourself safe, or whatever. And so
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those are examples of sort of getting out of that financial comfort zone. And it's amazing how so many
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of our behaviors, especially if people are trying to enter into a higher socioeconomic level. So let's
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say they grew up relatively poor, they go to college, and now they're making much more income than their
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family or friends. Or as I said, they come into some sort of like sudden money events.
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It's, we're actually wired to get rid of that money to get back to our comfort zone. So it's
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extremely powerful. And so to override that, you have to be extremely conscious of what's happening
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because emotionally, you're going to just feel a sense of disconnection and probably panic that
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could lead you to make some bad financial decisions.
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And you can go the other way too. You could start off in a higher socioeconomic level and then you lose a
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job. But you still feel comfortable in that level. So you'll take on debt to maintain appearances so you can
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go to the country club or whatever it is that your group does.
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Yeah, that's a really good point. And that's not an uncommon experience because people are feeling sort of
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ashamed or that like they don't belong. And so they'll do whatever it takes to sort of maintain their status in a
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tribe. And from the outside, using your, you know, prefrontal cortex, your scientist brain, you look
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at it and you say, well, that's very illogical. You know, you should just, of course, you should just sell
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your house and move to a, you know, a middle class home. That's fine. And you should get rid of your
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luxury car and get a Honda or Toyota. And this is a totally reasonable thing to do. Of course, you should
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do that. That's what the rational brain says. But that emotional brain that's very much linked to tribal
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survival feels an incredible sense of anxiety. And you'll actually see people with that amount of
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strain actually take their own life. And that's not an uncommon thing. And quite often, it's males
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doing it whose self-esteem and self-worth is entirely wrapped up into the money they make and their social
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status. And just that level of unconsciousness can lead to somebody taking an incredibly, you know,
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permanent and terrible action because they feel such a sense of desperation because they're separated
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from their tribe. Okay. So let's get into some of these money disorders and specifics. We've been
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talking about a few of them so far, but the first one you talk about in the book is this money disorder
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called money avoidance. And this is kind of weird because you'd think people would want more money,
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but as you've been talking about in the book, there's a certain situation where people would want to
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avoid it at all costs. So what's going on there and what are the different ways that money avoidance
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can manifest itself? Yeah. You know, Brett, you're pointing out that it doesn't make a lot of sense
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and I'm going to agree with you. What's so interesting in the research we've done is that people who,
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for example, strongly believe that rich people are greedy and that money corrupts and there's actually
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virtue in living with less money. So these are actual beliefs that we've tested. People who really
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strongly believe that also very strongly believe that more money will make them happier, that more
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money will solve all their problems and that they wish they had more money. So imagine that level of
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conflict rattling around in your subconscious and how that might play itself out. So that money
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avoidance, you know, that you have a negative association with money. And typically you're coming
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from a group of people who share that negative association with money. And one of the things that
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come into play is a sense of ambivalence around it. So part of you really wants money. Another part of you
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feels like you don't deserve it or it's, you know, you don't belong in that socioeconomic status. And so,
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you know, which is easier, like getting more money or having negative feelings about money? Well, it's easier
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to just hold on to those negative feelings about money. And so then you'll engage in that confirmation
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search for all the reasons why it's good for you to not actually have money and actually why you're probably even a
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better person than somebody who has more money than you. These are rationalizations to make us feel
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better about where we're at. And so some of those money avoidance type disorders are ones where people
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are squandering inheritances or, you know, like the lottery winners or that sort of thing, or people
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who are avoiding thinking about money altogether. And then people who sort of seesaw between trying to
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pursue money and getting it and then kind of blowing up and getting back to their comfort zone.
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So we're going to take a quick break for a word from our sponsors. And now back to the show.
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So you, yeah, you highlight examples in the book of, you know, people who grew up in a family or
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household where money was bad, people who rich people are evil. And so once they've, they inherit
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money, they, or get a lot of money, they give it to family members or just squander it. But you also
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highlight examples of people who grew up in well-off families and that made them feel uncomfortable
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uncomfortable because they weren't like the rest of their peers. Like, I think there was an example
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of a girl, you know, parents were really rich and like, she got dropped off by a chauffeur and like,
00:23:14.280
had like a nanny that would come to the parent teacher conference. And it kind of set her up for,
00:23:19.680
you know, going in, you know, she could have had a great life, but she tried to, she just shunned
00:23:26.240
And it's not uncommon to have shame about having too little and feeling really embarrassed about that.
00:23:30.100
But studies also show that people feel ashamed and embarrassed when they have more than the people
00:23:34.540
around them. And so a lot of it has to do with, you know, who's in your neighborhood and who are
00:23:39.020
you hanging around? And for, for many of our clients, and you're, you're mentioning one and
00:23:44.180
her story is when you're growing up around people who don't have as much than you, you can start to
00:23:49.000
feel really bad about yourself. Yeah. So you have more than people, but you're feeling bad about
00:23:53.320
yourself. What's that about? Well, the fact is that you're not belonging to the tribe. And so you're
00:23:58.000
feeling like a sense of threat and not a lack of belonging. And so this isn't, this is not an
00:24:04.280
uncommon experience where people grow up having wealth and feeling ashamed about it and embarrassed
00:24:10.160
and feeling guilty about it because compared to the people closest around them, they don't belong
00:24:15.080
and they don't feel a sense of connection. And so they link that to money. And so their little brains
00:24:21.080
as kids say, you know, it's bad to have money. If you want to have love and connection, you need to
00:24:27.220
not have money. And so that's the interesting thing about these money scripts is they're very often
00:24:31.820
developed with a childlike mind because we're children when we're developing them. And we don't
00:24:37.360
really sit back and think about them. Like, is that really true? Is that really accurate? Let me look
00:24:41.720
at the pros and cons and weigh the evidence. That's not what kids do. They're just sort of like, we have
00:24:45.880
money. We're not, you know, my friends don't, I feel bad. They look at me weird. Okay. I don't want any
00:24:51.460
money. And so that gets played out in adulthood where people will, as I said, engage in self-destructive
00:24:57.760
financial behaviors or somehow sabotage themselves right before they reach success or live, you know,
00:25:03.860
basically way below their means, not out of sense of this is how I want to live my life, but out of
00:25:09.900
sense of guilt. And I mean, how do you overcome that money avoidance disorder? Is it just a matter of
00:25:15.580
being self-aware or is there some like some work you have to do? I think awareness is hugely important
00:25:22.080
and valuable. And quite often you do need to do some work, some extra work related to that.
00:25:28.180
But since money is such a huge taboo topic for many people, this is sort of like a light bulb
00:25:32.700
popping on for them for the first time, because we just don't really talk about it that much. And
00:25:36.340
there's not a lot of places where you can go and examine this. And so I think just having some
00:25:40.820
consciousness, like it did for me with my grandfather, just understanding that that fear and
00:25:45.540
that anxiety of not having enough is something that just goes back for generations in my family.
00:25:49.500
And so when I'm experiencing, it gives me another perspective, like, well, I don't have to do the
00:25:53.940
same thing they did. So I can actually engage my scientist brain a little bit by putting that into
00:25:59.620
perspective. And so the other thing that we do on a very practical level with entertainers we work with
00:26:07.180
and athletes and other people who've come into large sums of money, part of what we do in their
00:26:12.240
financial plan is how can, you know, if your value is to help family and friends and community,
00:26:17.980
which is incredible. You know, that's not a value that I would discourage anyone from having.
00:26:22.640
It's kind of essential, I think, to how we function as a society. So how can we meet those needs of
00:26:28.280
wanting to love and support your family, friends, and community in a way that will be helpful for them,
00:26:34.520
not hurtful, if you just give money to the average person without sort of, you know, some structure to
00:26:42.560
it. And let's imagine somebody who's been living at a certain level for years, or maybe not be a great
00:26:48.660
manager of money themselves. I mean, you're probably not helping them very much by giving them a bunch
00:26:52.540
of money, they'll probably just blow through it, or spend it irresponsibly or whatever, and it's gone.
00:26:56.920
I mean, this is the pattern for most of us that I mentioned, you know, all of a sudden you get a bunch
00:26:59.960
of money, and it creates a sense of anxiety or excitement or whatever, and then it all disappears.
00:27:03.760
So how can we take that need to want to help people and structure it in a way that maintains
00:27:09.920
your wealth, allows you to continue to provide support for years and years to come, and also
00:27:14.980
does it in a way that doesn't enable somebody or set up some sort of financial dependency that can
00:27:20.140
be crushing for them? And what sort of advice do you give your clients who they come into money,
00:27:25.800
or they graduate college, they're first to graduate college, and they get a good job,
00:27:29.480
but their family is still where they were. And then they start experiencing the friction
00:27:36.240
with, you know, just, you know, offhand remarks, right, sort of cutting remarks.
00:27:42.280
How do you advise your clients to how to manage that?
00:27:47.020
Yeah, and it's a very real experience, Brett, and it's a very painful experience for many people.
00:27:53.020
And so it's a combination, typically. So obviously, a lot of it has to do with the exact situation,
00:27:58.700
exact people involved. But typically, it's a, it's a combination of perhaps you're not going to be
00:28:03.920
quite as and this is this happens in research to like people who actually have more money than the
00:28:09.340
people around them tend to be more secretive about it, for very good reasons. And some studies have
00:28:14.500
shown that, you know, children of wealthier families, they totally get that people don't like
00:28:18.860
them, and judge them because they have more money. And so they're actually pretty secretive about it,
00:28:23.280
and they don't want to flaunt it, and they don't want to show it off,
00:28:25.180
because they're worried about people not seeing them for who they are, and judging them.
00:28:30.560
So so part of it is that in terms of like, how much are we going to disclose? What's a what's a
00:28:35.120
good thing to disclose? And then what sort of conversations might you need to have? And by the
00:28:40.580
way, some relationships can't tolerate this. So let's say that you have a family assumption that,
00:28:46.320
you know, there's there's six of us, you come into money, you're going to break it up into,
00:28:50.620
you know, six portions and give it to us. And by the way, this is not an unusual assumption that
00:28:56.860
that can come from a family system. And so how are you going to handle that? I mean, that's the
00:29:02.320
question, like, and for some people, they have to be willing to have some difficult conversations,
00:29:06.400
you know, I'm not, I'm not going to do that. And that comes with a tremendous amount of risk,
00:29:10.940
maybe people aren't going to want to be around you anymore, or love you anymore, or like you anymore,
00:29:14.620
talk to you anymore, that's a very real thing. And so typically, it's trying to find,
00:29:18.380
strike a balance between, you know, is it your value to try to help your family in a very direct
00:29:24.640
financial way? And if so, how can we do that in a way that takes care of you and takes care of them?
00:29:32.120
So let's move on to another money disorder, which is the opposite of money avoidance,
00:29:35.280
which is money worshiping. So what are the scripts that are going on there with money worshiping?
00:29:41.620
Yeah, these are very common in our culture. And they are beliefs like more money will make me
00:29:47.500
happier, more money will solve all my problems, things will get better when I have more money.
00:29:52.800
And you know, there's some scientific evidence to prove that that's actually correct. Okay. So it is
00:29:58.320
true that being in poverty is a terrible experience for people, and that their happiness actually goes
00:30:06.600
up when they enter that middle class level. And the number shifts, you know, but typically,
00:30:13.460
it's the median income in the United States, you're able to pay your rent or mortgage, you're able to
00:30:18.200
put food on the table, you're able to take care of the basic needs of your family. So there's a
00:30:22.360
certain level of stress that you no longer have. So totally true, more money will make you happier
00:30:27.160
and solve a lot of your problems once you hit that level. Now, what's interesting is that the most of
00:30:33.260
the research shows that money above that level, there's no correlation between happiness and having
00:30:38.460
more money. And so that belief, which becomes very true, as you're moving into the middle class becomes
00:30:44.320
utterly false, as you're moving up into higher socioeconomic areas. Now, not to say that, you know,
00:30:51.320
a happy person can't, you know, find other ways to express their happiness and enjoy life more
00:30:56.020
by having more money. It's just to say that odds are, it won't, and odds are it won't happen for you
00:31:01.580
as much as you might think it would. So money worship is really this intense belief that that's
00:31:07.200
enduring, that, you know, money's going to solve all my problems. And frankly, it won't. And the
00:31:12.320
research shows that people who really strongly believe that are likely to have less money, less
00:31:16.840
income, less net worth, and engage in self-destructive financial behaviors. Because the flip side of that
00:31:21.860
is, you know, more stuff will make me happier. And so these individuals have a tendency to overspend
00:31:27.000
in an effort to have money and stuff, bring them happiness, joy, and a sense of fulfillment.
00:31:32.100
And how do those scripts develop? What's, is there like a flashpoint in childhood that sort of sets
00:31:36.640
them on that path? Yes. And I feel like our culture is an entire flashpoint for that message. You know,
00:31:44.300
back when I was a kid, there used to be a show called Lifestyles of the Rich and Famous.
00:31:48.340
Oh yeah. And it was like, wow, look at what money can give you. But you know, that show was on only
00:31:53.420
once a week or whatever. But now you can pick up your phone and on Instagram, you can look at people,
00:31:59.940
you know, posting, you know, the best parts of their life. And you can constantly feel like you're
00:32:03.800
missing out because, wow, somebody's on an island somewhere. That's incredibly beautiful. I'm not,
00:32:09.800
I don't have that. You know, I'm feeling now I'm starting to feel poor. And it's this concept called
00:32:14.980
relative deprivation. And so our actual happiness related to what we have is entirely subjective.
00:32:22.880
And what I mean by that is there's not an actual dollar amount across the world. It's where we
00:32:28.260
stack up compared to people close to us. So in the United States, as I mentioned, all that research
00:32:33.140
was around the median income. So like you're kind of average, so you're okay. But when you are put in
00:32:37.800
front of people who have way more than you, it creates a whole psychological avalanche of bad
00:32:45.120
feelings that emerge for you. And in an effort to feel better, you are at risk of overspending and
00:32:51.680
abusing credit to try to get yourself access to some of that other stuff those people are
00:32:56.520
experiencing that seems to make them happier. So in our current culture, we're inundated with
00:33:02.160
lifestyles of the rich and famous type television shows and social media, constantly making people
00:33:07.500
feel like they're deprived and reinforcing the belief that if I had more money, I'd be happier.
00:33:13.480
Yeah, that relative deprivation thing can be a burger because there's been studies where they show,
00:33:17.760
you highlight this in the book, where people would rather make, like they have an option of
00:33:22.660
making more money, like just more than they're making right now, or making less than someone
00:33:29.780
else, even though, you know what I'm talking about? So it's like they'd rather make less money
00:33:33.680
as long as they're not making less money than the guy next to them.
00:33:37.640
Yeah. Yeah. Perfect example of how crazy we are when it comes to money in terms of our logical
00:33:43.860
brain. And you're, you're referencing a study that was done with Harvard graduate students where they
00:33:47.800
asked them, you know, would you rather make $100,000, but you're like, I don't forget the
00:33:52.880
numbers, but this is essentially what it was. Would you rather make $100,000, all your friends are
00:33:56.840
making $200,000? Or would you rather make $50,000, but your friends are making $25,000?
00:34:03.980
So, you know, obviously, you should pick the $100,000, because that's twice as much as $50,000.
00:34:08.740
But the majority of those Harvard graduate students said, I'd rather make half as much,
00:34:13.320
but more than my friends. And that makes no logical sense. That's why you have to think about
00:34:18.120
that emotional brain, that tribal brain, because it makes perfect sense when you look at it from
00:34:23.280
that angle. And I imagine this money worshiping can also be the result of being deprived in childhood.
00:34:30.640
So maybe you had a hard childhood, and then you come into money, and you're like, man, I'm going to
00:34:34.980
spend this money because I didn't get to do this as a kid. Sort of like your example, right? Where
00:34:40.020
you, you know, you had, you know, grew up relatively poor, you came into money, you started, you know,
00:34:45.140
you put it all in the stock market and lost big. Yeah. So Brad, are you saying that my money script
00:34:50.940
might be some money worship? Are you being my psychologist? Because you're actually right.
00:34:55.660
Yes. I'm being a psychologist. Yes, I'm putting.
00:34:57.420
Yeah. So no, it's totally true. And people who grow up in lower socioeconomic levels, you know,
00:35:05.740
that belief is really common. Because, you know, as I mentioned, not having money, enough money for
00:35:10.160
basic needs can be a really uncomfortable and somewhat traumatic experience for many people.
00:35:15.560
And so there is truth to that. The problem is that the truth only extends to once your basic needs
00:35:21.220
are met. And so if you're not balancing that truth with actual, the actual things that will
00:35:26.320
actually make you happier, which by the way, aren't money, it's close relationships, it's
00:35:31.080
being immersed in an endeavor that you love that fulfills you, you know, you're not going to be
00:35:35.740
happy chasing a job that is you find miserable and working 100 hours a week at that job just to get
00:35:41.580
you money and then expect to be happy. That's just actually not how you become happy. And so it's a
00:35:46.980
accurate belief to a certain point, but it becomes destructive, the more intense you believe it,
00:35:52.140
So let's talk about some relational money disorders, because like, you highlight this in the book is
00:35:57.160
that money is one of the biggest sources of marital conflict, sources of divorce. So what are some of
00:36:04.200
the big issues you see pop up between spouses, but also parents and kids when it comes to money?
00:36:11.400
Yeah, so, you know, money is one of those things that just weaves into every aspect of our lives,
00:36:16.880
and certainly relationships. And the odds are that you and your spouse have different money scripts,
00:36:23.040
you're coming from different family systems. And you know, maybe the same side of the tracks,
00:36:26.640
maybe not. But you know, it's just assume there's going to be some disagreements around money,
00:36:31.580
because you grew up in different families. And one of the challenges is if you're not aware
00:36:34.800
that the you're playing out these scripts that were written by your great grandparents,
00:36:38.040
you can spend an entire marriage trying to convince your spouse that their beliefs are wrong,
00:36:42.980
and yours are right, without really understanding that yours might be a little biased too. So you
00:36:47.400
know, problem, you know, fights around money in marriages, it's relationships, it's just ubiquitous,
00:36:52.440
it just happens all over the place. It's a huge issue. And so it really does help to understand your
00:36:57.280
psychology in order to find good ways to negotiate. Another common one within couples is you'll find
00:37:03.780
people who hide their spending or lie, if you will, we call it financial infidelity, lie about their
00:37:10.380
spending, or how much money they're making, or their investments they're making, or even money
00:37:14.040
they're receiving. There's a lot of different ways that couples can not give the full truth around
00:37:19.240
what's happening. And as a matter of fact, it's about one out of three couples, people in a
00:37:23.900
relationship admit to lying in some form to their partner around money. So it's a it's a pretty common
00:37:29.480
issue, which can be a big problem when it gets discovered where people start to wonder, you know,
00:37:33.700
okay, what else are you lying to me about? So it can sort of rattle the sense of security and safety
00:37:38.500
in a relationship. Other ones we see have to do with that larger family system. And a real common
00:37:44.740
one that I run across is the relationship between financially enabling someone, and then the
00:37:51.040
financial dependent. So a financial enabler is giving money to someone always out of a sense of I want to
00:37:57.980
help, or even out of a sense of guilt. So it's it's it's financial help, but it hurts. So that's the
00:38:04.900
enabling part. It hurts because money is an incredibly powerful reinforcer. So there are
00:38:10.880
days that you get up, and you don't really want to go to work, you know, you maybe you love your job,
00:38:15.840
but you'd rather go fishing today, or skiing or whatever it is. But you do go to work. And the
00:38:20.700
reason you go to work is because you get money for it. And that's an incredibly reinforcing thing.
00:38:25.700
So money increases behavior. So that's what a reinforcer does. So if I get money for doing nothing,
00:38:32.380
it is going to totally reinforce me doing nothing. Or if I get money for begging my parents to give
00:38:38.440
it to me, and then then they give it to me, it's going to increase my begging my parents to give it
00:38:42.180
for me. This is just human nature. So you know, I'm not criticizing people who are financially
00:38:48.060
dependent, it could happen to anyone, you could set up that situation and create this in anyone.
00:38:52.740
And so the financial enabler is giving money that it actually hurts. And on the financial
00:38:56.300
dependent side, and studies have shown this the research we've done, financial dependence leads to
00:39:02.100
a sense of a lack of creativity, a lack of drive, a lack of life satisfaction, and even resenting
00:39:07.220
the people who are giving it to you, because invariably, there's some strings attached.
00:39:11.280
And so that financial dependent personality is a really tough way to go through life. And what's
00:39:16.680
interesting is, that personality is really similar in terms of how they look at the world and their
00:39:22.360
experience of the world, for people who come from like multi generational welfare families to
00:39:27.260
multi generational trust fund families, you'll find you'll find in both of those individuals,
00:39:31.940
sort of a fundamental lack of drive, a lack of passion, some self loathing, and then of course,
00:39:38.260
resentment towards the source of the money. So I'm listening to this, the relational aspect,
00:39:43.340
I'm a dad, and I'm thinking, okay, what can I do to, you know, make sure that my kids have a healthy
00:39:48.820
relationship with money, and that I don't pass on any money scripts that I might have picked up,
00:39:53.980
because, you know, grandfather or grandma experienced the Great Depression, and I still have that with
00:39:58.720
me for whatever reason. So what can parents do to sort of break that cycle that might be going on
00:40:05.220
within their family? You know, Brett, I mean, I'm so glad you asked that. And, you know, I've,
00:40:11.040
of course, got it all figured out, because I'm a financial psychologist. But I do have two little
00:40:14.800
boys myself. And so of course, I don't at all. And, and, you know, I think being aware of,
00:40:20.140
of your money scripts, and just being aware that you are teaching your children stuff right now
00:40:24.800
today about money. And whether you're talking about it or not, they're picking up on it. And I'll tell
00:40:29.320
you, this is a true story happened last week, my wife and I are in the middle of moving, which is a
00:40:34.340
very stressful thing. And my son, for whatever reason, he said, Dad, I wish I had a million dollars.
00:40:39.360
And, you know, now I'm curious. I'm like, wow, that's interesting. He's six. I'm like, well,
00:40:43.620
what would you do with a million dollars? And he said, I would take the money and I would give it to pay
00:40:47.700
for the movers. And I was like, oh, my gosh, he must have overheard us talking about paying the
00:40:54.660
movers. And so by paying attention to that, first of all, I feel like, you know, huge mistake. Like
00:41:00.440
my son overheard this. Oh, no. Now he thinks he needs to chip in or whatever. Where did he get that
00:41:06.060
idea? But my awareness of that gave me an opportunity to sit down with him and say, you know what, son,
00:41:12.720
you don't need to worry about that. We've got it covered. We can totally afford it. I appreciate
00:41:17.040
you're thinking about us. But that's not something you would need to worry about. So assuming you
00:41:21.620
don't need to worry about that, what else would you do with the million dollars? So this is just a
00:41:25.900
really, you know, personal example that happened just the other week. And again, I'm a father and we
00:41:30.580
are giving messages to our children every single day. And I think just really being conscious of
00:41:35.620
that and noticing if they're saying something that seems to be a money script, that we can work with
00:41:41.160
them a little bit and sort of expand it. And that's really what health is in terms of money
00:41:45.520
beliefs is making that belief more accurate in more situations. So, you know, for example,
00:41:52.240
the belief that rich people are greedy, certainly true that, you know, some rich people are greedy.
00:41:56.800
So now all of a sudden that becomes a much more accurate statement. I mean, it becomes even much
00:42:00.740
more accurate if you say some people are greedy and money can corrupt people, but some wealthy people
00:42:06.780
are incredibly generous and have done incredible things in the world. Now that's a money script
00:42:10.480
that's even more accurate. And so part of it is observing what's happening in your kids,
00:42:15.340
being conscious, of course, as you can, in terms of what you're teaching them, but then also looking
00:42:19.460
for those opportunities to sort of expand that definition of whatever script that you have given
00:42:25.540
them probably unconsciously. Yeah. So that's a perfect example of sort of countering that money
00:42:30.620
avoidance script. But another one would be like with the money worshipings, like, hey, you know,
00:42:34.900
money's great, but you know, it can't can't buy you can buy you happiness to a certain point. But after
00:42:40.480
that, it's not going to do much for you. Yeah, you know, another one that comes to mind, too, is
00:42:44.400
I really encourage parents to not tell your kids, we can't afford that. I think that's a terrible thing
00:42:49.860
to say. Because I would bet you that you probably could, like, if you sold your house and cashed out
00:42:56.240
all your retirement funds, you could probably go to Disney World. And so I don't think you should do
00:43:01.720
that. But I'm just saying that it's not that you can't afford it. So you don't want to give your kids
00:43:06.300
a message that, you know, there's not enough money. But what you might want to do is take that as an
00:43:10.200
opportunity to say, you know what, we're not, we're not spending our money that way. And here's the
00:43:15.300
reason why. We're spending it in these other categories. We do want to take that vacation. And so
00:43:20.200
this is what we're going to do. We're going to actually start saving for that. And it's going to
00:43:23.300
take us a year and we're going to save X amount per year, per month, we're going to put it in this
00:43:27.880
account. And once all that money is saved up, then we're going to so what you're doing is you're
00:43:31.180
actually educating them on a skill set and a mentality you want them to carry with them.
00:43:36.380
That's a huge mistake in our culture too, is that we have such immediate access to the stuff we want
00:43:41.460
that kids will just watch you want a new TV and then just go buy one. And so what's the message?
00:43:46.260
Oh, when you want something, you just go buy it. And there's this little piece of plastic and you
00:43:49.820
just swipe it and then you get to take it home. And because of that, our kids don't get to watch us
00:43:55.360
saving for something. And so looking to contrive experiences that teach your kids how to delay
00:44:01.400
gratification by modeling it yourself. So pick something that you want as a household. Maybe
00:44:06.380
you can go buy it right now, but how about if you tell your kids you're going to save up for it
00:44:10.120
and involve them in that process? Put a little thermometer on the wall and it goes up until you
00:44:16.780
get that thing you want. Because you're teaching your kids how to delay gratification and the importance
00:44:21.160
of saving if you can model it for them. What's your advice to parents when their kids
00:44:26.620
ask them, like, Dad, are we rich or are we poor? What should be the response there? How do you have
00:44:32.880
that conversation? Well, I think that the first thing you should do is to become really curious
00:44:37.940
about that. And so don't just start educating your kid. Just say, what do you mean by that?
00:44:44.520
And chances are, they'll start to tell you a story about something that someone said or
00:44:50.040
the context. And then it's your opportunity to start to pass along your values. And so this is a
00:44:58.020
very personal thing. And for me, I would probably talk about that compared to the rest of the world,
00:45:07.680
we are. We're incredibly rich. And it's true for just about every American. If you compare yourself
00:45:14.400
to the average income, even if you're on public assistance, you are incredibly wealthy compared
00:45:19.360
to everyone else in the world. And so it's a matter of perspective. And so I would like to
00:45:24.980
flesh it out like that. Well, in many ways, we are. And these are the ways we have access to all
00:45:30.280
this and that. And in some ways, we're not. Some people have more than us. And so I would talk about
00:45:35.040
it in those terms. Well, Brad, where can people go to learn more about your work in the book?
00:45:38.900
Well, I'm putting a lot of energy into my YouTube channel at this point, where I'm trying to
00:45:43.920
make videos that educate people on financial psychology and doing my best to make them
00:45:47.700
entertaining, which is Dr. Brad Klontz. I'm also at Dr. Brad Klontz on Twitter and all the social
00:45:54.140
media places. And then I actually have, if people are interested in looking at their money scripts,
00:46:01.100
the test that we used in all of our research projects is available to take for free online. You just
00:46:06.460
stick in your numbers there and your answers. And then the email will get sent to you. And that's
00:46:10.260
at yourmentalwealthadvisors.com. Fantastic. Well, Brad Klontz, thanks so much for your time. It's
00:46:15.180
been a pleasure. My pleasure, Brad. Thanks so much for having me. My guest today was Dr. Brad Klontz.
00:46:19.620
He's the author of the book, Mind Over Money. It's available on amazon.com and bookstores everywhere.
00:46:24.060
You can find out more information about his work at his website, yourmentalwealth.com. Also check out
00:46:28.740
our show notes at aom.is slash money scripts, where you find links to resources where you delve deeper into this topic.
00:46:36.460
Well, that wraps up another edition of the AOM podcast. Check out our website at
00:46:44.180
artofmanliness.com, where you find our podcast archives. There's over 500 episodes there,
00:46:48.260
as well as thousands of articles we've written over the years about personal finances, physical
00:46:52.120
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00:47:24.560
this is Brett McKay, reminding you not only to listen to the AOM podcast, but put what you've