Money Scripts: Learning To Manage Our Beliefs About Money

Have you ever wondered why you make certain decisions about money? Have you ever sat down to think what you believe about money? I believe our emotions, beliefs, and values about money drive how we live our lives, and yet we don’t even acknowledge their existence. To get started, complete the following 5 sentences – write the first thing that comes to mind without putting much thought into it:

The rich got that way by _________________
Poor people are poor because _________________
Being in debt is _________________
Financially, I am entitled to _________________
One should never spend money for _________________

Do you believe that the rich got that way by cheating, or did they work hard for it? Are poor people poor because they are lazy or because they got shafted by the system? Your answers to the above questions are indicators of your Money Scripts, or your beliefs about money.

Money scripts are deeply engrained beliefs that are formed throughout our lifetime. They may develop out of seeing how our parents managed their finances, or by experiencing traumatic events. If your dad was laid off due to a greedy boss, you may have beliefs about how rich people became rich!

Think about the last time you bought toothpaste. Did you stand in the isle and evaluate every single brand? Did you look at all of the new brands, and check the ingredients and pricing, to determine the best option? Probably not… like the rest of us, you probably just bought the one you always buy. This is because our brains create mental shortcuts to help us make these decisions. By creating a shortcut that tells you to buy Brand A without even having to think about it, it saves us a lot of time and energy.

Money scripts are the same mental shortcuts. Due to events in our past, we form shortcuts to help make sense of the world. We then confirm these beliefs when we see “proof” in the world, and tend to ignore conflicting evidence (also called confirmation bias).

The real question is, are money scripts bad? Money scripts are neither good nor bad, they simply are. How you apply them is when they become good or bad for your situation.

Let’s say you answered “I am entitled to drive a new car.” If you are making a good income and are saving enough for the future, buying new cars may be okay. For many however, buying a new car means they are not putting that money towards higher priority goals such as saving for retirement. The belief that you are entitled to new cars could wreck your retirement plan. Beliefs such as these can be so engrained that it can be difficult for the person to even imagine life in a used car, as their values, beliefs, and self-worth are tied to the ability to buy new.

The opposite is also true. If you believe “One should never spend money for a new car” then you may be a very frugal person. Even if you have the ability to pay for a new car, you chose not to because you believe you shouldn’t. This may lead to chronic under spending (yes, this is a real thing) which in turn leads to not taking full advantage of experiences in your lifetime.

Believing you should always buy new cars, or never buy new cars, are not good or bad beliefs. They are simply beliefs that we have formed in order to make sense of a very complex world. The goal is to rescript these money scripts to “It is okay to buy a new car if you can afford it” or “I will only buy a new car if I can afford it.”

I bet you are still thinking “You should never buy a new car” and that’s okay. The point is to become aware that you have that belief. As long as your belief is working for you, then you may not want to change it. Becoming aware it exists will help if it ever jumps up and leads you towards a poor financial decision. Hopefully you can say “Oh, that’s just my money script talking”, set aside the urge to act on the money script, and then make the best decision for the time and place.

So what do you think? Can you identify other money scripts that you may have? Can you think of a time you acting based on your money script and later realized it was a bad decision? Share your experiences with us!

I would like to thank my mentor, Rick Kahler, for his pioneering work on Money Scripts and the countless hours of teaching and training he has provided on the important topic to clients and advisors.

About the author

Alan Moore, CFP®, MS

Alan is passionate about providing individualized financial advice to individuals and families, regardless of their net worth, income or investable assets. An educator at his core, he strives to serve as his clients’ guide, available to help with the sometimes stressful or exciting financial situations that life inevitably brings.

Alan is the founder of Serenity Financial Consulting, which he started after noticing the lack of hourly, as-needed financial planning advice available to consumers. With experience working in several nationally recognized firms including Kahler Financial Group and Financial Service Group, Alan combines his industry experience and technical knowledge with his entrepreneurial spirit and penchant for teaching others to create a refreshing style of truly personal financial planning.

Alan is a Certified Financial Planner™ professional and Certified Retirement Counselor™. He earned his bachelor’s degrees in Family Financial Planning and Consumer Economics and his Master’s Degree in Family Financial Planning from the University of Georgia. Driven by his desire to educate, Alan also taught undergraduate financial planning courses while in graduate school.

Alan prides himself on being active in his community and feels privileged to have served in the Georgia National Guard for four years before receiving an honorable discharge. Originally from Georgia, Alan now lives in Shorewood with his wife Melissa, and enjoys taking advantage of the abundance of activities that Milwaukee has to offer.

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