Behavioral finance suggests the power of emotions sways and often overrules our rational, logical minds.  These emotions are often (but not always) inherited from and influenced by our parents through “money scripts” – ingrained, often unconscious beliefs we hold about money.  Scripts may include beliefs about wealth, poverty, budgeting, spending, saving, charitable giving, investing, protecting/insuring, debt, religion, happiness, love, etc.

A presentation at the 2014 NAPFA conference suggested the following are the most common:

  1. More money will make things better.
  2. Money is bad.
  3. I don’t deserve money.
  4. I do (or don’t) deserve to spend money.
  5. There will never be enough money.
  6. There will always be enough money.
  7. Money is unimportant.
  8. Money will give my life meaning.
  9. It’s not nice or necessary to talk about my money.
  10. If you are good the universe will supply all your needs.

These scripts are simultaneously true and false.  Put another way their validity lies in perspective.  For example the “rich” may view the “poor” as lazy but how does a “rich” person feel about the “poor” if s/he one day finds herself/himself “poor?”  Conversely the “poor” may view the “rich” as pretentious but does this view change if the “poor” become “rich?”

As important as perspective is one must recognize how dangerous these scripts may be in causing us to act counter to our best interests.  A person who believes more money will make things better is filling an emotional hole the way an alcoholic or overeater does.  A person who believes money is bad or it has no value if unearned may feel ashamed at the achievement of financial success.  A person who believes money is not to be talked about may make uninformed decisions.  Financially successful people may underinsure their homes and other property while clinging to a view of a “middle class” upbringing.

Regardless of our scripts it’s important we recognize the ones that influence our lives and remind ourselves that we can change the way we feel by changing our perspective.  Identifying and overcoming scripts is one way Apollo Wealth Management tries to help our clients.  When we succeed we feel validated and share in the successes of our clients.  When we fail we need to remind ourselves of what Morpheus said in The Matrix:  “I’m trying to free your mind, Neo…but I can only show you the door.  You’re the one that has to walk through it.”

What are your money scripts?  Do you control your emotions or do your emotions control you?  Do you always make the most rational of financial decisions?  Food for thought…