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The Psychology of Money: Understanding Your Relationship with Finances

Money isn’t always easy or comfortable to talk about. Have you ever wondered why that is?

We all have different emotions and feelings about money—some people save every penny they’ve earned, while others are more of a free spirit. The psychology of money helps you better understand this phenomenon.

Let’s take a closer look at the psychology of money, how money scripts come into play, and how you can improve your relationship with money.

What is the psychology of money, and why does it matter?

The psychology of money is the study of our behavior with money. Are you a saver or a spender? Are you motivated by financial status or financial security? The more self-aware you are about your tendencies and behaviors toward money, the easier it will be for you to uncover any bad habits.

With the idea of the psychology of money comes the term money scripts. Understanding your money scripts can help you uncover your personal narrative and attitude about money.

What are money scripts?

The term ‘money scripts’ was coined by financial psychologists Dr. Ted and Brad Klontz during a study about money beliefs and financial behaviors. In this case, money scripts are subconscious beliefs and ideas about finances, and money in general, that typically develop early on in childhood. For example, are you a saver or a spender? Are you constantly worried about money? Do you find yourself chasing the feeling of never having enough money?

Understanding your money scripts can help you make better decisions regarding your finances and feel overall more confident about money. 

There are 4 types of money scripts: Money Avoidance, Money Worship, Money Status, and Money Vigilance.

Note: You may not fall into any of these categories, and that’s perfectly fine. Money scripts are distortions around money that may cause anxiety or stress; they are not a one-size-fits-all money belief system. 

1. Money Avoidance

People in this category find money to be a source of anxiety or stress and may resonate with the saying that “money is the root of all evil”. A money avoider may:

  • Feel unworthy of money or wealth
  • Feel guilty for wanting more money
  • Avoid thinking about money entirely 

Removing the problem—money—from your mind completely may seem like a good solution to some, but it can be incredibly detrimental to your financial status. Avoiding bills or refusing to create a budget can result in a rapid downward spiral.

Wealth and money don’t have to be ‘dirty’ words—you deserve financial freedom and security. To help a money avoidance mindset, start by facing your financial situation head-on with a financial expert that you trust. Learn how to budget your money to become more financially independent and set goals for yourself.

2. Money Worship

Money worship is the polar opposite of money avoidance. This mindset takes the importance of money to the extreme, as if it’s the key to love and happiness. Money worshipers believe that having more money equates to having the best life possible.

Ironically, money worshipers also tend to overspend. They buy expensive things to help fill a void because if they buy that one perfect item, they will finally be happy. But that happiness never comes to fruition, and the cycle continues resulting in piles of debt.

Remember that money is a tool; it’s not the ultimate goal or a solution to your problems. Breaking down a money worship mindset starts with putting the credit card down and focusing on spending intentionally. Avoid making impulsive purchases by:

  • Stepping back and asking yourself if you really need that item
  • Creating a budget 
  • Avoiding temptation (If social media is encouraging you to purchase more often, limit your time on social media or delete the app altogether)
  • Participating in a no-spend challenge

3. Money Status

People who fit into this money script directly tie their self-worth to their net worth. They are very competitive with money and always try to ‘one-up’ the people around them. This mindset can have a lot of consequences, including overspending, unhappiness, and anxiety around money.

Do you find yourself comparing your wealth to others in your life? 

Do you believe that the more money you have, the happier you’ll be? 

Do you pride yourself on having materialistic things like the latest iPhone?

Focus on the intention of your money instead of just putting it on a pedestal. This will help you detach yourself from the idea that your self-worth is directly related to your net worth. Don’t try to impress others or appear wealthy instead, work on spending with intention and work toward financial security.

4. Money Vigilance 

People with this mindset are hyper-aware of their financial health and status to the point where it causes intense stress and anxiety. If you relate to the money vigilance script, you are extremely cautious with how you spend your money and avoid buying on credit.

At first glance, this doesn’t seem like a real problem, right? Saving your money and spending it only on the things you absolutely need is what you’ve been told to do. While saving your money is crucial, there is a point where you can become too vigilant and induce anxiety over spending any kind of money (even a $1 coffee at Mcdonald’s). 

Remember, it’s important to spend your money on the things that matter most to you. There’s no joy in saving for forever! You can spend money on the things you enjoy in life, like nice dinners or seeing your favorite band’s concert, and still have healthy money habits. It’s all about finding the right balance between saving and spending.

Knowing your money scripts can help you better understand your relationship with money and wealth. 


*While a second mortgage is a home equity loan, it is technically only one type of home equity loan. For more information it’s best to talk to your lending institution of choice to get more details about the products that they offer.

This material is intended for informational purposes only and should not be construed as legal or tax advice. Information here is not intended to replace the advice of your investment advisor or financial advisor. This information is not an offer or a solicitation to buy or sell securities. This information may have been compiled from third-party sources and is believed to be reliable. All investing involves risk, including the loss of principal.

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