Emotions play a big role in our financial lives, and often influence our responses to certain money decisions. Despite our best efforts, it can be challenging to detach from an emotional response when evaluating our finances.

Our emotional connection to money is deeply rooted and often forms at a young age. For example, even if someone acknowledges the importance of saving over spending, their emotional attachment to the joy of spending can hinder them from breaking that pattern, which leads to fewer savings.

Recognizing the impact of emotions on your finances and the origins of your money habits allows you to understand why certain emotions drive your financial choices. Let’s explore where these habits come from and what you can do to rewrite your money script into one that helps you reach your financial goals.

The Money Script

Do you sometimes feel like the discipline to make rational and well-thought-out financial decisions must be too good to be true? Because no matter how hard you try, you just can’t seem to stick to it? Well, I am sure there are others that feel the same way. These feelings are not uncommon and are most likely due to the emotional and psychological baggage we all carry around relating to our money, otherwise known as our money scripts. And, as with most of the baggage we’ve lugged into our adult lives, these scripts usually start forming at a very young age. 

Even though we may not be aware of it, we spend our childhood picking up on how our parents and other significant role models relate to and handle money, and over time, our brains are subconsciously trained to respond in similar ways. If your parents were confident in their ability to make wise investments, you will likely face investing with confidence as well. Contrarily, if you experienced your parents scrounging to get by and often quarreling over expenses, you may experience some pretty strong feelings of guilt when making certain purchases. 

The seeds of money scripts are planted in childhood, watered by observation, and eventually grow to influence your emotional beliefs about finances as an adult. For this reason, it is vital to be intentional and diligent in talking to your kids about money and modeling healthy financial behaviors. It is just as important to take the time to examine yourself and understand your money scripts and how they influence your financial behavior. 

The Negative Side of Money Scripts

To be fair, not all money scripts are bad. Some behaviors we learn plant seeds for beneficial emotions about finances. However, other behaviors, such as money avoidance, focus on financial status, or the idolization and even worship of money, can be flat-out detrimental. Unhealthy emotions and belief patterns can lead to all kinds of financial problems, such as financial infidelity, compulsive buying, pathological gambling, and financial dependence. Certain money scripts have been tied to lower levels of net worth, lower income, and higher amounts of revolving credit. 

Those may sound extreme, but have you ever let panic during a market downturn take your focus off of your long-term investing plan? Have you ever been unable to make a decision because you were paralyzed with worry and anxiety about the future? Have you ever wreaked havoc on your budget for the momentary high of acquiring something you really wanted? All of these behaviors stem from your personal money script.

Money Scripts Can Be Changed

We often think that if we had more money, we wouldn’t have any problems. But we have money problems because of how we approach money, not necessarily because we don’t have enough. This is good news! We might not be able to drastically increase our income, but we can learn to control our attitudes and perceptions. Our money scripts may be ingrained from childhood, but they are not permanent. With a focused and concerted effort, they can be changed. 

The first step you must take in overcoming your money scripts is to identify them. To do this, you must become aware of your emotional responses to common financial situations. Begin to stop and notice your emotional responses to these common experiences:

• Earning money
• Buying things
• Saving for the future
• Budgeting and tracking expenses
• Making financial decisions
• Volatile markets
• Healthy markets
• Meeting with a financial professional
• Thinking about your financial future

How do these things make you feel? Anything that elicits strong emotions warrants further reflection. Keep in mind that negative emotions are not the only ones that can harm your financial life. Some positive emotions, like optimism and self-confidence, can bring about negative results if unwarranted and left unchecked.

How to Manage Emotional Money Decisions

The key to changing your money scripts and developing healthier money habits is learning to control your emotions. You can also build some new, healthy habits that protect you financially and incorporate them into your life. Habits and disciplines such as taking advantage of automatic savings, investing through your bank or employer’s retirement plan, scheduling regular family budget meetings, and enlisting the help of someone reliable to keep you accountable are great places to start. Eventually, you will learn how you respond to emotional triggers and you can then take steps, like mandating a “cooling off” period for yourself, before making any decisions. 

Finally, you need to be willing to forgive yourself when you make mistakes. Leave the past in the past and move forward with the new knowledge you have gained. Choosing to forgive yourself for past mistakes frees you up to be more effective with your new tools. As you begin to collect victories, both big and small, you will likely find it even easier to extend forgiveness.  

A Partner to Keep You on Track

Choosing a financial partner is a decision that requires careful thought, and it’s highly important that you feel confident and comfortable with your advisor. Financial planning is a continuous journey, and I am committed to supporting you at every stage. If you’re ready to explore our services and how we can enhance your financial portfolio, I invite you to schedule a 20-minute introductory call online or by calling us at 608-348-2274. For any questions, feel free to reach out to me at payton@rosemeyermg.com. Let’s determine if I’m the right partner to guide you on your financial path.

About Payton

Payton Simon is an investment advisor representative at Rosemeyer Management Group, an SEC Registered Investment Advisor based in Platteville, WI. Payton spends his days providing in-depth investment analysis and aiding in the development of customized, comprehensive retirement, tax, and estate planning strategies to help his clients reach their retirement goals. Payton is passionate about doing his best for every client he serves and making sure they don’t have any blind spots or missed opportunities in their financial plan. He strives to do his part to close the financial literacy gap so people can feel confident and empowered about their financial future. Payton has a bachelor’s degree in finance with a minor in accounting from the University of Wisconsin-LaCrosse. Outside of work, Payton is active in his local Catholic parish and incorporates his faith into every aspect of his life. He loves spending time with his family and friends and is a sports enthusiast, playing golf, basketball, and baseball. To learn more about Payton, connect with him on LinkedIn.