Money and mindfulness

Do you need financial therapy?

The emerging field of financial therapy combines the disciplines of psychology and financial planning to bring about behavioural change in clients based on the premise that financial health and overall well-being cannot be separated.

For financial therapists, the way to create long-lasting change in both wealth and well-being is to address underlying beliefs, emotions and anxieties about money.

A key tool used by financial therapists is the Klontz Money Script Inventory, an assessment tool which is designed to give financial therapists insights into money beliefs that may be influencing their clients’ financial behaviours and financial outcomes. The tool was developed by Bradley Klontz, an American financial psychologist.

Money scripts are money beliefs that are developed in childhood and which go on to drive financial behaviour in adulthood. There are three categories of money script which have been found to have a negative impact on financial health: Money avoidance, money status and money worship.

These belief patterns are associated with lower levels of net worth, lower income and higher amounts of short-term debt. A fourth category of money script – money vigilance – which includes attributes such as frugality, discreetness, and anxiety about money, offers some protection against poor financial health and destructive behaviours. However, money vigilance in the extreme can stop someone from enjoying the benefits and sense of security that money can provide.

Money avoiders believe that money is bad, rich people are greedy, and that they don’t deserve money. Money worshippers are convinced that more money will solve all of their problems, that there will never be enough money, and that money brings power and happiness. Money status scripts equate self-worth with net worth – that is, the more wealth you have the more self-worth you will feel. People with money status scripts like buying the newest and best things. Those who are money vigilant are often anxious about having enough money in case of emergency.

Behavioural problems that occur with negative money scripts include compulsive buying, gambling addiction, compulsive hoarding of money or objects, workaholism, financial dependence and financial denial.

Money scripts and their associated behavioural problems are influenced by many factors including age, gender, education level, income and socioeconomic status in childhood.

Research by Klontz shows that compulsive buyers tend to be younger, single females with lower levels of education and income who grew up in wealthier households. People living in financial denial are likely to have grown up in lower socio-economic status households and hold a large amount of credit card debt. Men are more likely to be hoarders, gamblers or workaholics. Financial infidelity is almost universal, with research showing that about 80 per cent of people in relationships have at times hidden spending from their partner. Apparently, women’s secret spending tends to be on clothing and gifts for others while men secretly spend on alcohol and music.

Money scripts typically operate in the subconscious mind. Financial therapy uses psychology to bring these subconscious thoughts into conscious awareness. Simply being aware of your money scripts can bring about changes in behaviour that can lead to better financial outcomes. However, sometimes that is not enough. Psychological intervention can be required to deal with underlying issues such as addiction, the effects of trauma, family dynamics, anxiety and depression, all of which can have a significant impact on financial behaviours and outcomes.

The key learning from Klontz’s research is that the starting point for improving your financial situation is to understand and, if necessary, modify your subconscious beliefs about money.

Only then will you be able to bring about lasting change to your financial health.

Liz Koh is an authorised financial adviser and author of Your Money Personality: Unlock the Secret to a Rich and Happy Life, Awa Press. The advice given here is general and does not constitute specific advice to any person. A disclosure statement can be obtained free of charge by calling 0800 273 847.