There is no one-size-fits-all strategy for how to best manage your money, despite what some personal finance gurus might claim. After all, personal finance is personal. Each of us has unique values, personality traits, and life experiences that shape our relationship with money, meaning that devising an effective personal finance plan is often less about understanding finance and more about understanding yourself.
“We all think we need to learn more about money, and we might, but most of us kind of know what to do,” Lindsay Bryan-Podvin, a financial therapist, told Big Think.
The intuitive aim of personal finance is simple enough: manage your money such that you’ll be able to achieve future goals. What is more complicated is figuring out how to modify the behaviors and emotions that block you from setting yourself up for financial success.
So, how can you improve your personal finance? To the financial psychologist Dr. Brad Klontz, one of the first steps is recognizing the nature of your relationship with money.
“You got to dive into your psychology,” he told Big Think. “You have to understand why you think the way you think around money, and how that’s manifesting in your life, in order to change it.”
Watch our full interview on money personalities:
Identifying common beliefs about money
In a 2011 study published in The Journal of Financial Therapy, Dr. Klontz and his colleagues surveyed more than 400 people on their beliefs about money. The participants were asked to rate their level of agreement with statements like:
- Money is what gives life meaning
- People get rich by taking advantage of others
- People should work for their money and not be given financial handouts
- You should always look for the best deal before buying something, even if it takes more time
The study, along with subsequent research, led the researchers to uncover four broad patterns of belief that people hold about money. The researchers called these beliefs “money scripts.”
“Money scripts are often at the root of money disorders, and when associated with emotionally charged or traumatic events, these belief patterns can be highly resistant to change,” the study noted.
The scripts include:
Money avoidance: This pattern describes a general belief that money is bad. People who score high in this category might believe that there’s virtue in living without money, that wealthy people are greedy or otherwise immoral, or that they don’t deserve money themselves. This group might also have trouble with overspending and sticking to a budget.
“Now, no surprise, if you have a negative association with money, it is going to …….
