Family Finances: What's Your Money Script?

By Anne Kates, Kiplinger's 

We’re all motivated by money beliefs, many of which we form in childhood. In the same way that a script informs an actor in a play, these money scripts inform our financial life. Some scripts are accurate and functional, says Brad Klontz, a clinical psychologist and certified financial planner. But many contain only partial truths or get twisted somehow. For example, “You should work hard for your money” becomes “Money not earned is not worth having, “ with potential disastrous results. Klontz identifies four categories of money scripts.

Money avoidance. These scripts sound like the following: “Money corrupts people,” or “It’s not okay for me to have a lot of money when others don’t.” Money-avoiding behavior can be as simple as letting 401(k) statements pile up unopened. It can also lead to overspending. Or you might become an easy touch for kids and others – at its extreme, a disorder therapists call financial enabling. Money avoiders may be just as prone to under spending or excessive risk aversion that prevents them from earning decent returns on their money.

Money worship. These beliefs often boil down to variations of “Money can buy happiness” and “You can never have enough money.” Such thinking can lead to workaholism or lots of credit card debt – and possibly to compulsive spending, hoarding or unreasonable risk-taking. The irony is that research shows there is no significant correlation between happiness and money once household income rises above$75,000 a year.

Money status. Such scripts equate self-worth to net worth: “Success is measured by the money I earn, “ or “If I live a good life, I’ll be taken care of financially.” Financial status-seekers pretend to have more money than they have, are okay with keeping money secrets from a partner, and might be drawn to high-risk investments with the goal of striking it rich quick. Extreme status-seekers might be compulsive spenders or pathological gamblers. Both money-worshiping and money-status scripts are common among those who are financially dependent on others.

Money vigilance. Many of these money scripts are helpful, not harmful. Indeed, we advocate plenty of them at Kiplinger. They include “It’s important to save for a rainy day” and “You should always look for the best deal before buying something” – even if it takes more time. But when money scripts become too rigid, it’s a red flag. Some supersavers are so focused on accumulating money that they can never enjoy the fruits of their efforts. Think of someone with $1 million in the bank who won’t take a vacation.

Courtesy of Paul Ray Andrus, LUTCF, ChFC