The Art of Manliness - #529： The Money Scripts That Are Holding Back Your Financial Future

00:00:00.000 Brett McKay here and welcome to another edition of the Art of Manliness podcast. If you struggle

00:00:11.560 with getting your financial house in order, you may feel that what you need is more information

00:00:15.060 on how things like stocks or IRAs or budgets work. However, my guest today would say that

00:00:19.260 what you actually need most of all is a better understanding of the relationship that your

00:00:22.740 parents and even your grandparents had with money and how the money scripts they passed

00:00:26.400 down to you have affected your own thinking about finances. His name is Brad Klontz. He's a

00:00:30.740 psychologist who specializes in money issues and is the author of the book Mind Over Money,

00:00:35.260 Overcoming the Money Disorders That Threaten Our Financial Health. We begin our conversation

00:00:38.640 discussing what Brad calls the big lie in personal finance. Brad then explains how money scripts from

00:00:43.360 your childhood can keep you from making progress with your finances in adulthood. We dig into why

00:00:47.740 you can feel shame over being both poor and rich, why it's hard to move ahead from the socioeconomic

00:00:52.060 status you came from and easy to get dragged back into a financial comfort zone, and how you can

00:00:56.320 break out of old ingrained patterns. We end our conversation with how to be more intentional

00:01:00.240 about the money scripts you're passing down to your own kids, including why you shouldn't tell them

00:01:03.900 we can't afford that. After the show's over, check out our show notes at aom.is slash money scripts.

00:01:09.320 Brad joins me now via clearcast.io.

00:01:21.860 All right, Brad Klontz, welcome to the show.

00:01:25.320 Excited to be here, Brett. Thanks so much for having me.

00:01:27.660 So you're a psychologist, but you specialize in issues people have with money. What led you down

00:01:34.380 to go that path with your practice or your studies?

00:01:38.680 Yeah, I mean, a bit of an odd duck for sure. Thanks for pointing that out. I'll tell you,

00:01:44.300 I got out of graduate school. And for those of you who've gone to college, you can totally relate

00:01:48.600 to this, at least many of you can. I owed $100,000 in student loan debt by the time I was done with my

00:01:53.860 doctorate degree. And I was raised, I would say, lower middle class, sort of working class

00:02:00.740 mentality and environment. My parents were, however, were very frugal around money. And so

00:02:05.720 there was this sense that, you know, there's not enough money. We need to save money. And whatever

00:02:10.100 you do, don't borrow any money. Like, so debt is bad. Try to avoid it at all costs. So when I got

00:02:16.440 out of graduate school, owing $100,000 in student loan debt, I was pretty anxious about it, especially the

00:02:21.800 first year when I saw that I ended up paying about $8,000 in interest. I was mortified. And I was

00:02:28.620 fairly, I would say I was fairly desperate to get out. And I was looking for ways to how can I pay

00:02:32.500 this off as fast as possible? Well, during the same year, I saw a friend of mine make about $100,000

00:02:39.820 in 12 months trading stocks. And the thing about this friend is, he knew nothing about the stock

00:02:45.740 market. So in that sense, he was just like me, right? And I saw him make all this money. And I

00:02:51.080 thought, what a brilliant strategy for me to do, I can get out of debt in a year, and then just move

00:02:56.380 on in my life. And so I sold what I had a value at that time, which was primarily my truck. And I got

00:03:03.460 all the money I could and I put it all in the stock market. And Brett, I had just had a fabulous three

00:03:08.780 or four months watching that money grow. I was on track. I realized this was the solution to my debt

00:03:14.580 problems. And then the tech bubble burst. And I saw my money just start to melt away and slide away.

00:03:22.940 And it was agonizing. I felt ashamed. I felt like I was an idiot. I was sort of beating myself up around

00:03:31.360 it. And then I did what I was trained to do in psychology, which was to try to look at, you know,

00:03:36.760 what is my role in this? So how would a reasonably intelligent person do something so stupid with his 1.00

00:03:43.360 money? And I went ahead and started to do what we do in psychology. We call it a literature search. 1.00

00:03:49.360 I was like, okay, certainly psychology has studied this whole issue of money before. And I can read

00:03:55.580 some articles, read some books and figure out, you know, why I did what I did. And along that journey,

00:04:02.780 very quickly, when I started to do searches, I realized that psychology had totally ignored the

00:04:08.000 topic of money, much to my dismay, because I was actually just looking to find the cure for myself.

00:04:14.600 And then I sort of joke, Brett, that within a matter of about three or four months, I became the

00:04:18.380 world's leading expert in financial psychology, mainly because psychologists had avoided the topic

00:04:23.680 of money for over 100 years. And so I got interested in this, you know, quite a while ago,

00:04:31.020 back in the tech bubble. And really, it came from trying to sort out my own relationship with

00:04:36.180 money. And what I did is I actually, after that experience, I went back home, and I sat down and

00:04:43.440 I started to interview my family members, I sat down with my mother. And I asked her questions that

00:04:49.080 I'd never asked her before, you know, like, so what was it like for you growing up around money?

00:04:53.300 What do you know about grandpa and grandma and what it was like for them? And I did the same thing

00:04:58.460 with my father. And through those discussions, I was sort of blown away with stories that I had

00:05:04.060 never heard of before, that made my experience with money, totally logical, it made total sense,

00:05:11.520 I knew exactly why I did what I did, which was a huge help in terms of like, lowering my feelings

00:05:17.000 of shame and my sense of failure. And really, it was that experience that led me on this journey

00:05:23.200 to become a financial psychologist. So research is me search for you. It's true.

00:05:28.220 Exactly. And you know, I do conduct a lot of research. But I feel like, for me, that's, that's,

00:05:34.180 I got interested primarily to figure out why I did what I did. And since then, I'm trying to help other

00:05:38.940 people figure out why they do what they do. So you, you published a book, authored a book,

00:05:43.140 co authored it with your father, called Mind Over Money. We can also throughout this interview,

00:05:47.980 please talk about that experience of writing a personal book about money with your dad. But in this book,

00:05:52.640 you, you two highlight psychological issues that people have with money. And before we get to the

00:05:57.360 specifics, you talk about in the beginning of the book that everyone believes, or just about everyone

00:06:03.340 believes this big lie about personal finance. What is that big lie that most people believe?

00:06:10.020 You know, the basics of personal finance are incredibly simple. You know, and most Americans go wrong

00:06:16.720 in these two basic areas, saving for the future, and not spending more than you make.

00:06:22.840 And so because it's so simple, there's an incredible amount of shame that goes along with our financial

00:06:31.140 struggles. So the big lie about personal finance is that your financial struggles are the result of

00:06:37.540 you being crazy, lazy, or stupid. And it's a big lie, because your financial outcomes and financial 1.00

00:06:44.720 behaviors are actually totally predictable. If you can understand your financial psychology,

00:06:50.360 if you can understand the money scripts that were passed down to you from your parents, your

00:06:55.940 grandparents, your great grandparents, your culture, we get these from a bunch of different

00:06:59.600 sources. And these belief patterns that get passed down will totally predict for you things like your

00:07:06.340 income, your net worth, and your financial behavior. So it's not the result of you being crazy,

00:07:10.960 lazy, or stupid. It's entirely predictable based on where you're from, and what you learned about money. 1.00

00:07:16.620 Well, another thing you talk about in the book as well is that another, you can call it a lie,

00:07:21.920 but a misconception people have about getting their financial house in order is that if I only had

00:07:27.400 more information, right? So that's why personal finance books are perennial bestsellers. If I can

00:07:33.320 get just enough information, then I'll turn it around. But that usually doesn't work out that way.

00:07:37.500 It doesn't. And information is incredibly valuable. And so I don't want to discount that,

00:07:43.880 especially since I'm a professor, and I, you know, educate people, and I provide information.

00:07:48.000 So it's incredibly effective for about, and this is all research-based, for about 20% of the people.

00:07:54.200 You, 20% of the time, you're in the action phase. We call it around change, where just tell me what to

00:07:59.120 do, and I go do it. That's the sort of the minority of people. That's us, you know,

00:08:05.120 the minority of times, if you will, around any given issue. So much more of it is psychological.

00:08:10.600 A great example on this is, you know, overeating. It's like, we know that we should eat better and

00:08:16.540 exercise more. I mean, it's pretty simple. You can, in about two minutes, Google a good diet for

00:08:21.460 yourself or exercise program. So it's really not about giving you more information, more details

00:08:27.720 about the negative effects of obesity on your health or the benefits of exercise. You already know

00:08:34.300 that. And so that's typically what happens with money. Our problems with money aren't that

00:08:40.360 complicated. It's not like, you know, I'm in financial trouble, and I have a ton of financial

00:08:44.640 stress because I don't know the difference between a traditional IRA or a Roth IRA. Really important

00:08:50.360 information for you to know, but giving up, giving people that information, stuff they already know,

00:08:55.940 isn't very helpful. And so the work that I do is really focused on looking at what is that

00:09:02.140 underlying psychology you have around your relationship with money. Because the research

00:09:06.500 we've done has shown that your beliefs around money, your relationship with money, that is a

00:09:12.100 very strong predictor of whether or not you become wealthy or whether or not you stay in a struggle

00:09:18.120 with money. You've mentioned the idea of money scripts, that we develop these money scripts,

00:09:22.740 oftentimes in childhood, basically when we were growing up. And at the time, these money scripts

00:09:27.780 probably made sense, right? Actually, we developed that script about money because one of the

00:09:32.540 situation we were in, the context we were in, it actually made sense. And then you talk about how

00:09:37.240 there's certain flashpoints throughout our childhood where those money scripts really set in. So what are

00:09:43.600 some examples of those type of financial flashpoints that sort of set money scripts for the rest of our

00:09:49.020 life? Yeah, I'll give a personal example. So I mentioned earlier that, you know, I had made this

00:09:54.340 mistake in the tech bubble, losing all my money. And again, out of a sense of sort of desperation to

00:10:00.560 pay off my debt. And so I went home and I started to interview my mother. And one of the stories I

00:10:05.480 found, which blew my mind, because I had no idea this was happening. And I was actually very close to

00:10:10.780 my grandfather. But when my grandfather was a young man, he lost all of his money when the banks

00:10:18.020 collapsed during the Great Depression. Now, just imagine that. Imagine going to the bank tomorrow

00:10:23.940 and, you know, a lifetime's worth of savings is now gone. And as a matter of fact, you can't get

00:10:28.840 anyone to talk to you. All you know is that the money's gone. It's gone forever. You can't get any

00:10:33.300 of it back. That's what happened to him. Very traumatic experience, I would imagine. My grandfather,

00:10:39.900 through hearing the stories, he arrived at the money belief, you can't trust financial institutions

00:10:45.880 with your money. Now, to your point, Brett, that is an actual true statement from my grandfather.

00:10:53.680 And as a matter of fact, if he had believed that before the banks collapsed, he would have taken out

00:10:58.760 his money and buried it in the backyard, and we probably would have been fine. So 100% accurate

00:11:04.600 back then that you absolutely cannot trust banks with your money. And the people who did put trust in

00:11:10.920 the banks with their money lost their money. So he had such an emotional intensity related to that

00:11:15.740 belief that he couldn't shake it. And what I mean by that is that the context very quickly changed.

00:11:22.100 So the federal government came in and said, okay, we get it. Nobody trusts banks. We're going to start

00:11:26.500 guaranteeing bank accounts up to $100,000, where if the banks collapsed, we'll step in and give you that

00:11:34.100 money. So the context changed. Reality changed. But my grandfather's beliefs did not change. And he

00:11:41.000 passed away in his 90s. And what I didn't know is that he'd never put a dollar in the bank the rest

00:11:47.080 of his life. What he did is he kept his cash in a lockbox in the attic or under his bed.

00:11:52.680 Yeah. So that's a great example. Yeah, keep going.

00:11:55.100 Yeah. So I mean, when I heard that story, my mother's anxiety around money started to make total

00:12:01.660 sense to me. I knew she was afraid of not having enough. I knew that she was afraid of the stock market,

00:12:06.600 didn't want to invest in the stock market. As I mentioned, though, she was extremely frugal. And so 0.89

00:12:11.520 she was a saver. So she took it a step further, and she would put money in CDs, which is good.

00:12:16.840 But because of that intense fear, she missed out on decades of growth in the stock market.

00:12:25.680 And I came along, and I was very committed at an early age to not be poor like my family. I realized

00:12:32.360 that not having enough money is kind of an aversive experience. And it's better to have money in order

00:12:38.740 to do things that you want to do and have opportunities and travel and go to school and all that kind of

00:12:43.720 thing. So I determined at an early age, I don't want to be like my family around this. And so at an early

00:12:48.640 age, I was sort of looking for, I'm going to do things differently than you do. And so that's one of the

00:12:54.180 things that sort of set me up. My family's extreme distrust in the stock market led to, I call it a

00:12:59.980 dysfunctional pendulum swing, where I swing to the opposite side. And what I did is, I'm not going

00:13:04.960 to be like them. Instead of taking a balanced approach, I did the opposite. So I took all my

00:13:09.780 money, and I put it not just in a financial institution, but in the riskiest possible

00:13:14.040 stock market sector. And I put all my eggs in one basket. And so that's a hugely dysfunctional

00:13:21.200 pendulum swing in the opposite direction, which wouldn't have made any sense to me unless I had done

00:13:25.880 that history. And then it made total sense. Here I am trying to sort of desperately not repeat the

00:13:29.480 patterns my family was in. I didn't know the full story. And I went to an extreme behavior on the

00:13:34.800 other side. So money beliefs, like, you know, you can't trust banks with money, you can't trust the

00:13:39.660 stock market, which, by the way, an entire generation of millennials are struggling with

00:13:43.880 this and have been struggling with this because they saw their parents lose their money and homes

00:13:48.020 back in 2008. And so there's been studies showing that this belief that you can't trust the stock market

00:13:53.800 or it's not a good approach in terms of growing your wealth is something that an entire new

00:13:57.840 generation is dealing with. These beliefs, we call them money scripts in our research,

00:14:02.780 and they're typically passed down through the generations. They're typically rattling around

00:14:09.320 in your subconscious. One of the problems with our relationship with money is money is a big taboo

00:14:14.280 topic. So we don't talk about it. We don't talk about it much. And so there's not a lot of opportunities

00:14:20.160 for us to examine our thinking and to challenge and change it or to hear what our friends' parents are

00:14:25.720 thinking about money or aunts and uncles or other people who are further along or more successful.

00:14:30.540 It's kind of a taboo topic. So we're left to sort of make up these stories and try to sort it out

00:14:35.380 ourselves. And so these money scripts are incredibly powerful. The studies we've done have shown that

00:14:42.160 they predict your income, your net worth, your level of debt, the socioeconomic status you grew up in,

00:14:47.880 and a whole host of financial behaviors. And so I think there's a lot of value in examining

00:14:54.080 what did your mother teach you about money? What did your father teach you about money?

00:14:58.860 What experiences did you have growing up around money? What did these experiences and messages

00:15:04.500 lead to in terms of what's rattling around in your own brain about how you believe money works?

00:15:10.320 Because they are definitely impacting your financial behaviors and your sort of ceiling of success.

00:15:16.700 Okay. So a flashpoint is sort of a moment surrounding money that's like

00:15:21.580 emotionally charged, highly emotionally charged. So a stock market crash could be one. A parent losing

00:15:26.820 a job could be one of those flashpoints. And that could ripple down through the generations. But you

00:15:32.240 also, besides these events, these moments that can sort of be the origin of these money scripts,

00:15:38.940 you also talk about how our relationships with other people can set us up into a financial comfort zone

00:15:45.760 that will stick with us for the rest of our life. Even though, you know, we might, our financial

00:15:50.160 situation might've changed, we still feel comfortable in that comfort zone. And so we still

00:15:55.280 carry those scripts that allow us to live within that comfort zone. So walk us through some of these

00:16:01.500 comfort zones and why it's so hard to change as our money circumstance change.

00:16:06.000 Yeah, absolutely. So we are human beings who've evolved over tens of thousands of years in tribal

00:16:13.180 groups. And so being a part of a tribe in terms of our lower brain, our mammalian brain is essential

00:16:21.800 to survival. So, you know, 50,000 years ago, if you were separated from your tribe, you were exiled,

00:16:32.900 you died, you died, and your children died. And that was it for you. So our status and connection 0.57

00:16:42.000 with a tribe is so critically important to us on a psychological level that even today, we will

00:16:48.260 utterly destroy ourselves financially in order to stay within our family group or tribe. This is sort

00:16:55.720 of how we're wired. You've heard many stories, I'm sure, of people who come into massive amounts of

00:17:00.920 money, let's say winning the lottery, or athletes who come into big contracts, or musicians who come

00:17:06.780 into big contracts, who then take this money and then totally get rid of it and destroy it and live

00:17:11.740 totally irresponsibly, and then it's all gone. And it's really easy to sit back and go, oh my gosh,

00:17:16.680 these people are idiots, right? Like if that happened to me, I wouldn't do that. I'd be much more 1.00

00:17:21.520 fiscally responsible. But what happens is that chances are your top closest family members and

00:17:30.520 friends are around the similar socioeconomic level as you are. And it's almost a culture. Like, you know,

00:17:37.780 the culture I grew up in, you know, it wasn't very fancy. Like I remember the first time I went to a

00:17:42.900 restaurant, and I saw that there was more than one fork at my place setting. And I'm like, there's three

00:17:48.820 of them. What am I supposed to do with all these sports? I immediately felt like I was outside of

00:17:51.900 my comfort zone in a big way. I wasn't sure exactly how to behave. I looked around, people are

00:17:56.280 dressed differently than me. They're acting differently than me. It was an incredibly uncomfortable

00:18:00.440 situation. And you've probably had an experience like that either on that end or going into an area

00:18:06.660 where people have much less than you, and they drive different cars, and they dress differently,

00:18:11.180 and you're feeling uncomfortable because people are staring at you, and they can tell you don't belong

00:18:15.380 there. And you're not even sure exactly how to operate, keep yourself safe, or whatever. And so

00:18:21.280 those are examples of sort of getting out of that financial comfort zone. And it's amazing how so many

00:18:28.640 of our behaviors, especially if people are trying to enter into a higher socioeconomic level. So let's

00:18:34.960 say they grew up relatively poor, they go to college, and now they're making much more income than their

00:18:40.900 family or friends. Or as I said, they come into some sort of like sudden money events.

00:18:46.320 It's, we're actually wired to get rid of that money to get back to our comfort zone. So it's

00:18:51.080 extremely powerful. And so to override that, you have to be extremely conscious of what's happening

00:18:56.580 because emotionally, you're going to just feel a sense of disconnection and probably panic that

00:19:02.420 could lead you to make some bad financial decisions.

00:19:05.300 And you can go the other way too. You could start off in a higher socioeconomic level and then you lose a

00:19:10.840 job. But you still feel comfortable in that level. So you'll take on debt to maintain appearances so you can

00:19:16.660 go to the country club or whatever it is that your group does.

00:19:20.060 Yeah, that's a really good point. And that's not an uncommon experience because people are feeling sort of

00:19:25.180 ashamed or that like they don't belong. And so they'll do whatever it takes to sort of maintain their status in a

00:19:30.860 tribe. And from the outside, using your, you know, prefrontal cortex, your scientist brain, you look

00:19:36.700 at it and you say, well, that's very illogical. You know, you should just, of course, you should just sell

00:19:40.600 your house and move to a, you know, a middle class home. That's fine. And you should get rid of your 1.00

00:19:45.080 luxury car and get a Honda or Toyota. And this is a totally reasonable thing to do. Of course, you should

00:19:50.500 do that. That's what the rational brain says. But that emotional brain that's very much linked to tribal

00:19:54.960 survival feels an incredible sense of anxiety. And you'll actually see people with that amount of

00:20:01.120 strain actually take their own life. And that's not an uncommon thing. And quite often, it's males

00:20:07.600 doing it whose self-esteem and self-worth is entirely wrapped up into the money they make and their social

00:20:14.700 status. And just that level of unconsciousness can lead to somebody taking an incredibly, you know,

00:20:20.380 permanent and terrible action because they feel such a sense of desperation because they're separated

00:20:26.460 from their tribe. Okay. So let's get into some of these money disorders and specifics. We've been

00:20:32.000 talking about a few of them so far, but the first one you talk about in the book is this money disorder

00:20:36.240 called money avoidance. And this is kind of weird because you'd think people would want more money,

00:20:41.320 but as you've been talking about in the book, there's a certain situation where people would want to

00:20:46.140 avoid it at all costs. So what's going on there and what are the different ways that money avoidance

00:20:51.720 can manifest itself? Yeah. You know, Brett, you're pointing out that it doesn't make a lot of sense

00:20:56.860 and I'm going to agree with you. What's so interesting in the research we've done is that people who,

00:21:04.120 for example, strongly believe that rich people are greedy and that money corrupts and there's actually

00:21:10.660 virtue in living with less money. So these are actual beliefs that we've tested. People who really

00:21:15.920 strongly believe that also very strongly believe that more money will make them happier, that more

00:21:24.660 money will solve all their problems and that they wish they had more money. So imagine that level of

00:21:29.900 conflict rattling around in your subconscious and how that might play itself out. So that money

00:21:35.280 avoidance, you know, that you have a negative association with money. And typically you're coming

00:21:40.220 from a group of people who share that negative association with money. And one of the things that

00:21:45.760 come into play is a sense of ambivalence around it. So part of you really wants money. Another part of you

00:21:51.480 feels like you don't deserve it or it's, you know, you don't belong in that socioeconomic status. And so,

00:21:57.780 you know, which is easier, like getting more money or having negative feelings about money? Well, it's easier

00:22:02.500 to just hold on to those negative feelings about money. And so then you'll engage in that confirmation

00:22:06.500 search for all the reasons why it's good for you to not actually have money and actually why you're probably even a

00:22:12.440 better person than somebody who has more money than you. These are rationalizations to make us feel

00:22:16.680 better about where we're at. And so some of those money avoidance type disorders are ones where people

00:22:22.840 are squandering inheritances or, you know, like the lottery winners or that sort of thing, or people

00:22:29.720 who are avoiding thinking about money altogether. And then people who sort of seesaw between trying to

00:22:34.680 pursue money and getting it and then kind of blowing up and getting back to their comfort zone.

00:22:38.940 So we're going to take a quick break for a word from our sponsors. And now back to the show.

00:22:44.920 So you, yeah, you highlight examples in the book of, you know, people who grew up in a family or

00:22:49.800 household where money was bad, people who rich people are evil. And so once they've, they inherit

00:22:55.000 money, they, or get a lot of money, they give it to family members or just squander it. But you also

00:23:00.200 highlight examples of people who grew up in well-off families and that made them feel uncomfortable

00:23:05.880 uncomfortable because they weren't like the rest of their peers. Like, I think there was an example

00:23:09.200 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, 0.75

00:23:19.680 you know, going in, you know, she could have had a great life, but she tried to, she just shunned

00:23:24.260 money because it made her feel awkward.

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 1.00

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,

00:35:51.820 for sure.

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 1.00

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

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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

00:47:28.400 heard into action.

The Art of Manliness - July 29, 2019

#529： The Money Scripts That Are Holding Back Your Financial Future

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