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Episode: Rewrite Your Money Story
Author: Hidden Brain, Shankar Vedantam
Duration: 00:50:42
Episode Shownotes
Money worries are one of the biggest sources of anxiety in our lives. Psychologist Brad Klontz says these worries are shaped by more than the number in our bank accounts — they’re often driven by our unconscious beliefs. This week, we bring you a favorite 2022 conversation with Klontz, who
says it’s possible to identify and change what he calls our “money scripts.”For more of our work, please consider joining our podcast subscription, Hidden Brain+. It's our home for conversations and ideas you won't hear anywhere else. Plus, you'll be providing vital support for the work that we do. If you listen on Apple Podcasts, you can find us at apple.co/hiddenbrain. If you use other podcast platforms or devices, you can sign up at support.hiddenbrain.org. Thanks for your support!
Summary
In this episode of Hidden Brain, psychologist Brad Klontz discusses how individuals' financial challenges are often influenced by unconscious beliefs known as 'money scripts'. These scripts, developed from early experiences, shape our financial behaviors and attitudes. Klontz emphasizes the importance of identifying these scripts to reshape one’s relationship with money and reduce financial anxiety. He also explores various patterns like 'money avoidance' and 'money worship', and highlights the risks of a scarcity mindset formed from familial financial histories. Klontz encourages open discussions about money in relationships to foster understanding and break harmful cycles.
Go to PodExtra AI's episode page (Rewrite Your Money Story) to play and view complete AI-processed content: summary, mindmap, topics, takeaways, transcript, keywords and highlights.
Full Transcript
00:00:00 Speaker_08
This is Hidden Brain. I'm Shankar Vedanta. Around the world, when you ask people what keeps them awake at night, they'll invariably tell you money problems.
00:00:13 Speaker_08
Our challenges with money are varied, but we generally tend to have a fixed way of thinking about them. Most of us point to external factors as the root cause of our money problems.
00:00:24 Speaker_00
The price of higher education keeps increasing and tuition hikes at many colleges and universities are expected to continue.
00:00:31 Speaker_02
Sales of existing homes slumped last month. The National Association of Realtors says July sales were down almost 17 percent from a year ago.
00:00:38 Speaker_01
Every American is feeling the bite of inflation. Groceries cost more. Gas costs more. Everything seems to cost more.
00:00:54 Speaker_08
It certainly is true that a layoff or an unexpected medical expense can send our finances into a tailspin. But it's also the case that psychological factors within us can play a powerful role in determining our financial successes and failures.
00:01:10 Speaker_05
All I know is I have these beliefs around money that are banging around in my subconscious. And in our studies, we have found that these beliefs, most of us aren't even really aware of them, they have a profound impact on our financial outcomes.
00:01:27 Speaker_08
Our money and our minds, this week on Hidden Brain.
00:01:51 Speaker_06
Many of us struggle with money.
00:01:52 Speaker_08
We have a hard time saving it. We spend more than we earn, and we blow through budgets.
00:01:58 Speaker_08
Others of us have the opposite problem, focusing so much on saving for the long term that we never commit to spending on things that will give us pleasure in the short term. One thing we don't do? Few of us stop to think about how we think about money.
00:02:14 Speaker_08
We don't notice the psychological patterns in our behavior. That's why each money challenge can look like a brand new problem. Psychologist Brad Klontz studies how people think about money.
00:02:26 Speaker_08
It turns out that once you understand the underlying patterns that shape your money-related behaviors, it can transform the way you think about your finances. Brad Klontz, welcome to Hidden Brain. Thank you so much for having me.
00:02:39 Speaker_08
Brad, I want to start by looking at a moment in your own life. You were just out of grad school, and you had a massive amount of debt. I think you were staring at a $100,000 student loan.
00:02:51 Speaker_08
Can you start by telling me what it felt like to owe so much money?
00:02:55 Speaker_05
I knew that the only way for me to get through school was to take on loans, and I was very fortunate in undergrad that I had some sports scholarships and academic scholarships, but grad school was very expensive, and I knew that was the only way for me to get where I wanted to go, so I took on that debt, and staring at that, looking at that interest rate, it was terrifying for me, and it was something that I was very anxious to tackle and try to get rid of as fast as I could.
00:03:23 Speaker_08
Now, you had a friend at the time who was making a lot of money. What kind of amounts are we talking about here?
00:03:30 Speaker_05
Well, I saw him make, over the course of a year, about $100,000 by day trading.
00:03:36 Speaker_08
And what was his secret?
00:03:37 Speaker_05
When you watched him, what was he doing? What was so attractive about it to me is that he had no idea what he was doing. I would sit there and...
00:03:49 Speaker_05
Yeah, and I knew I had no idea either, so I sat there and I'd watch him buy a stock, and one that comes to mind is like EMC, and I'm like, what's EMC? And he's like, I have no idea, click, and he buys a bunch.
00:04:00 Speaker_05
And this strategy had been extremely effective for him over the course of this year.
00:04:06 Speaker_08
So your friend is raking in the cash, even though he doesn't know what he's doing. He's buying and selling stocks in companies he's never heard of. Meanwhile, you're working three jobs. I understand you had lawn furniture inside your home.
00:04:18 Speaker_08
You're sleeping on the floor. Obviously, I can imagine the next thought that goes through your head, Brad.
00:04:23 Speaker_05
Well, absolutely. And it really was for me, the focus, I was very honed in on getting rid of this debt because I knew this was a big monkey on my back and the interest rate was like eight and a half percent at that time.
00:04:35 Speaker_05
And so I thought I saw this was a viable way for me to just clean the slate. And my goal was to get to a net worth of zero. That was my goal.
00:04:44 Speaker_08
How did you go about doing it? I mean, where did you generate the capital to begin day trading?
00:04:49 Speaker_05
Yeah, I didn't have much money, but what I did have was a truck. And the truck was worth probably about $7,000 at the time. So I decided to sell it and take the money and start trading with it. It just made logical sense.
00:05:04 Speaker_05
And from that point of view, it's like, of course I should do this. And I was living in Hawaii at the time and I didn't have a lot of material needs. And, uh, I bought a couple of $500 cars.
00:05:15 Speaker_05
Um, and I would, the reason I bought two is because the first one broke down in the first month. And I, so I bought another one and I would alternate fixing one and driving the other. And I thought this was totally fine.
00:05:26 Speaker_05
I can totally do this for a year so I can become wealthy or at least make that a hundred K to pay off my student loans.
00:05:32 Speaker_08
Did you have any success when you began day trading? Did you have moments where you suddenly felt, oh my gosh, this easy money is rolling in?
00:05:40 Speaker_05
I did, it was incredible. I had three months of just bliss watching these stocks that I was buying move up in value. And I think by the time I cobbled together savings and all that, I think I had about 10,000 in.
00:05:54 Speaker_05
And I remember vividly just seeing it go up 500, 1,000 a month. And I knew that if I could get better at this, I would have no problem reaching my goal within a year.
00:06:05 Speaker_08
So you must have felt that you made the right call to sell your truck, quit your jobs, become a day trader. How did the story turn out?
00:06:13 Speaker_05
Well, unfortunately for me, but I think fortunately in retrospect, given that this experience launched my entire interest in financial psychology, was about three months into it, the tech bubble burst.
00:06:27 Speaker_05
So I had invested at just about the peak of the tech bubble. And I started to then watch my accounts go down and stocks go down. And I went to my friend and I'm like, what do I do? And he's like, I have no idea. He's never experienced this.
00:06:41 Speaker_05
And I'd say over the course of three to six months, I mean, I was down about 70, 80%. And when it was all said and done, I'm gonna say about 90% of it was gone.
00:06:52 Speaker_05
You know, the question I asked myself was, why would a reasonably intelligent person do something so stupid with his money?
00:07:00 Speaker_05
Fortunately, being trained as a clinical psychologist, I had gotten here in a very logical way, as I knew that it could make sense if I analyzed it and learned from it.
00:07:14 Speaker_08
Brad, you fell for what was essentially a get-rich-quick scheme. And of course, it's not just you. This happens all the time. I remember some time ago, people began buying stock in a company called GameStop.
00:07:25 Speaker_08
This was a company that was failing, but some traders on Reddit wanted to drive up the value of the stock, so they invested tens of thousands of dollars, and the stock skyrocketed.
00:07:34 Speaker_08
It went from, I think, $4 a share to $325 a share, or some astronomical number like that. Here's a clip from CNN's Christine Romans.
00:07:44 Speaker_04
The fundamentals of the company have been rough here. They're not making any money. They've been closing stores. Someone's gonna be hurting when this thing turns, but for now, it's not turning.
00:07:55 Speaker_08
Eventually, of course, Brad, it did turn. Some people made massive profits, but many others lost a lot of money.
00:08:02 Speaker_08
So clearly, your story is not the first time we've heard a story about a get-rich-quick scheme, and it's almost certainly not gonna be the last.
00:08:09 Speaker_05
Yeah, there's nothing worse than the idea of hard work and drudgery and waiting years and discipline to become wealthy. And so anything that looks like it could be a shortcut, of course it's like instantly attractive to most of us.
00:08:30 Speaker_08
The average American has a credit card balance of more than $6,000, and collectively, Americans owe more than a trillion dollars in credit card debt, by any measure, a heart-stopping number.
00:08:43 Speaker_05
It's an unbelievable number. And I remember the statistics showed that when we are in really good economic shape, that's when we tend to have the higher credit card debt and the lower savings rates. It's really fascinating.
00:08:55 Speaker_05
When we're really excited about things, we go into more of a spending frenzy, not really thinking about the future, this optimism that everything's going to be fine. And so we see that.
00:09:04 Speaker_05
I mean, that's the biggest problem in America, I believe, is not saving enough for the future and spending more than we make.
00:09:10 Speaker_08
So we'll talk later in the conversation, Brad, about why people engage in overspending, but I wanna flag that if you don't understand the underlying thought patterns that lead to some of these behaviors, it can seem like the same irrational things keep happening over and over and over again.
00:09:26 Speaker_05
That's right, and studies have shown three out of four Americans over the last 10, 15 years, it's one of the top stressors in their lives. And you can argue that we're in one of the richest, wealthiest countries in the world.
00:09:37 Speaker_08
So we've seen how lots of people are drawn to get-rich-quick schemes and to overspending, but it turns out some people have the opposite problem. One of your earliest memories involves your dad giving you a crisp $20 bill to spend at a county fair.
00:09:53 Speaker_08
What did you do with this windfall, Brad?
00:09:55 Speaker_05
Well, it did feel like a windfall. I did not have much money growing up. My parents divorced when I was about two and they were both public school teachers, so we did not have much.
00:10:06 Speaker_05
And when he would give me that crisp $20 bill, I felt an intense need to hoard it and to save it.
00:10:12 Speaker_05
And so I would go through the entire day not buying any cotton candy and looking around at things I wanted, but feeling so good I had that $20 bill in my pocket, not really enjoying the money that was given to me.
00:10:23 Speaker_05
I was anxious about not having enough.
00:10:26 Speaker_08
So I have to say some listeners might say, look, this doesn't really seem like a problem. Many adults have trouble saving money. You were already saving money as a kid. Why do you feel your frugality or your hyper frugality is a problem?
00:10:41 Speaker_08
And perhaps you might explain that in the context of a conversation you had some time ago with your wife about a new couch.
00:10:47 Speaker_05
Yeah, so I think one of the problems with that mindset is you can look at it as a scarcity mindset. There's this belief, and it's really deeply held, almost on a cellular level, that there's not enough money.
00:11:01 Speaker_05
And quite often, if you're growing up in lower income, it's true, there really isn't enough money. But when you're able to climb that socioeconomic ladder, that thought and that emotion doesn't just disappear.
00:11:12 Speaker_05
And so then what you're left with is potentially an experience of scarcity and poverty, even though you have money and resources. And for me, what I saw happening in my life is that I felt like it was never enough.
00:11:24 Speaker_05
And so what I would do is I would get more and more jobs and work more and more hours. It's sort of comical when I think about it, but my wife wanted a couch and I'm about 40 years old and I'd never bought a couch in my life.
00:11:37 Speaker_05
It's like, we don't need to buy a couch. These lawn chairs are fine. So in that moment, I realized I'm going to have to sit with my anxiety. And I got to tell you, she was right because they are way more comfortable than a lawn chair.
00:11:51 Speaker_08
We've looked at different problems that people have when it comes to money, get-rich-quick schemes, spending more than we can afford, and miserliness. When we come back, the common threads that Brad has discovered that connect these different issues.
00:12:05 Speaker_08
You're listening to Hidden Brain. I'm Shankar Vedantam.
00:12:21 Speaker_06
This is Hidden Brain, I'm Shankar Vedantam.
00:12:24 Speaker_08
Save, avoid debt, spend less than you earn. The basic rules of money are pretty simple, but in our day-to-day lives, many of us struggle to put these rules into practice. As a young college graduate, Brad Klontz chose a risky financial path.
00:12:42 Speaker_08
It ended up draining his bank account. When the dust settled, Brad asked himself a simple question. Why do smart people make bad money decisions? He took it upon himself to answer that question.
00:12:54 Speaker_08
As a psychologist, he has spent decades studying the way we think about money. He found there are powerful influences that shape us, and the first has to do with our family history with money.
00:13:06 Speaker_08
Brad, I understand you were an avid martial arts fan as a kid. For your 11th birthday, your mom got you a special present. What was it?
00:13:16 Speaker_05
Yeah, I was so incredibly excited. I got three months of karate lessons, and then I got my white belt, and it was the thing that I loved more than anything.
00:13:27 Speaker_05
And my gift was for three months of karate lessons, and then when that time was up, my mom said, I'm sorry, sweetie, we don't have any more money.
00:13:36 Speaker_05
And it was actually a devastating experience for me, realizing, well, there goes the end of my martial arts training.
00:13:43 Speaker_08
Tell me a little bit about your mom. I understand that she was extremely frugal. Where did her anxiety about money come from?
00:13:51 Speaker_05
She went to school or grew up in Detroit and went to high school and she went to a high school where there was half the school was poor and the other half had money. And so she was one of the poor ones.
00:14:03 Speaker_05
And she felt extremely self-conscious about this, anxious about it. And as she's talking about it, I'm saying, oh, okay, so I get why I'm anxious. This is starting to make sense.
00:14:12 Speaker_05
And then I asked her, what was it like for grandma and grandpa growing up around money? And this blew me away. So first of all, I knew we didn't have money. And so at this point, my grandparents, they're living in a trailer park community.
00:14:25 Speaker_05
So I know we didn't have much money, but I know everyone's really hardworking and smart. So this was one of the mysteries I had in my mind.
00:14:31 Speaker_05
And I found out that my grandfather went to the bank as a young man right during the Great Depression, and all the money was gone. And then my mom said that your grandfather never put a dollar in the bank again the rest of his life.
00:14:46 Speaker_05
Now he lived into his 90s. He kept all of his money in a lockbox either in the attic or under his bed.
00:14:54 Speaker_08
So you call experiences like this a financial flashpoint, an experience that leaves this long-lasting imprint on our minds.
00:15:02 Speaker_08
The Great Depression was clearly a financial flashpoint for a lot of people, but you argue that these financial flashpoints in some ways stay with us, not just for the rest of our lives, but sometimes for the rest of our children's lives and our grandchildren's lives as well.
00:15:16 Speaker_05
They absolutely do. And that's what I found to be true in my own experience. I realized that my grandfather's trauma, I mean, what does that experience tell you? What do you walk away with in terms of understanding money in the world?
00:15:28 Speaker_05
And it's like, well, very clearly, you can't trust banks with your money. Then my mother's reticence to invest anything. She wouldn't invest in anything. She bought CDs in the bank, but she would not put money in the stock market.
00:15:41 Speaker_05
And all of a sudden that makes sense to me. And so then, this is the real light bulb moment for me, is I did what I call a dysfunctional pendulum swing, right? You see this quite often in extreme behaviors.
00:15:53 Speaker_05
For example, if you grew up with an alcoholic parent, some people either become alcoholics themselves or they never touch the stuff.
00:16:00 Speaker_05
And I went from don't trust any financial institutions, be super conservative with your money, to investing in the riskiest possible asset class. And so I realized if I hadn't been aware,
00:16:12 Speaker_05
And thinking about it, I would have then swung back to that money belief my grandfather had, which is you can't trust financial institutions. And what we've seen in our culture is that's the typical response.
00:16:22 Speaker_05
And the crazy sort of creepy part is you don't even have to know the story. All you know is you have this emotional response to money.
00:16:30 Speaker_05
And that's what blew me away, was realizing, searching through my family history, all of a sudden, it made total sense why I did what I did.
00:16:38 Speaker_08
I mean, it's almost like Faulkner-esque. The past is not dead, it's not even past. That's the same idea here.
00:16:44 Speaker_05
And it really helps me feel less ashamed. Of course, I felt ashamed and embarrassed. Here, I had made this financial mistake.
00:16:51 Speaker_05
When I put it in the context of these financial flashpoints that went back for generations in my family system, it actually freed me up a bit to give myself a break and be like, okay, great, I made this mistake, I get why I did it, now what can I do about it?
00:17:09 Speaker_08
A more recent financial flashpoint might be the Great Recession of 2008. The housing market, which had been booming for years, suddenly crashed. Millions of people lost their homes, sparking a global economic downturn that lasted for a very long time.
00:17:24 Speaker_08
That downturn had a profound effect on young people. Many of them found themselves struggling to afford the things their parents owned at the same age. And Brad says even those who could afford to spend were reluctant to take financial risks.
00:17:39 Speaker_05
Well, some early surveys have shown that millennials, and it makes sense, are more reticent to owning homes, to investing in the stock market.
00:17:47 Speaker_05
I mean, as a kid, if you watch your parents have to delay retirement or lose their home, it is going to make you anxious around the thought of buying a home or investing.
00:18:02 Speaker_08
It's not just laypeople who are affected by these financial flashpoints. Experts seem to be affected as well. I understand you once ran a study on how the Great Recession of 2008 changed the advice that financial planners were offering.
00:18:14 Speaker_08
What did you find?
00:18:17 Speaker_05
Yeah, so I was consulting with financial planners at the time, and in my training as a psychologist, I'd been trained at the National Center for Post-Traumatic Stress in Hawaii.
00:18:26 Speaker_05
And so I was aware of post-traumatic stress, and I'm talking to these advisors, and I'm like, these people are traumatized. So imagine it's not just your money, but it's your
00:18:35 Speaker_05
parents money and your family's money and your best friend's money that you're managing and watching a huge drop. When we did a study, we saw that 90% of the people we surveyed had medium to severe levels of post-traumatic stress.
00:18:47 Speaker_05
They had trouble concentrating. They were anxious. They were worried about the future. And when you experience a trauma like that, your brain tries to sort it out so that it never happens again.
00:18:58 Speaker_05
So the other thing we saw, they were questioning their entire approach to investing, how they're helping people.
00:19:04 Speaker_05
And interestingly, there was a dramatic shift going on at the same time where financial advisors were moving from more of a strategic buy and hold strategy to more tactical asset management.
00:19:14 Speaker_05
So it had a profound impact on how the investing profession was actually operating.
00:19:20 Speaker_08
So we've seen how these experiences, financial flashpoints, our experiences with money growing up, even the way our parents and grandparents thought about money, all these things influence the way we think about money.
00:19:32 Speaker_08
In our minds, they form what you call money scripts. What do you mean by that term, Brad?
00:19:38 Speaker_05
So money scripts is the term that we use to describe beliefs about money that we quite often inherit from our grandparents and our great-grandparents and the culture and the people around us and events that are happening.
00:19:50 Speaker_05
And I use the word scripts because they're almost like a script written in a play, you know, that was passed down to me. And I don't even know who the author was. I don't know what they were thinking.
00:19:59 Speaker_05
All I know is I have these beliefs around money that are, banging around in my subconscious.
00:20:05 Speaker_05
And in our studies, we have found that these beliefs, most of us aren't even really aware of them, they have a profound impact on our financial outcomes, like our income, our net worth, our financial behaviors, our credit card debt.
00:20:17 Speaker_05
And so I think it's really important to be aware of your money scripts.
00:20:21 Speaker_08
So your money script came from growing up in a household where having enough money was a struggle, but there are other scripts that also come from growing up poor or watching your parents fight about money or being around other people who are in dire straits.
00:20:34 Speaker_08
And let's look at some of those other scripts. One is something that you call money avoidance. Can you describe for me what this is?
00:20:41 Speaker_05
So money avoidance is a pattern of beliefs that make you have some anxiety or negative associations with money, and specifically they're beliefs like rich people are greedy, money corrupts, or there's virtue in living with less money.
00:20:56 Speaker_05
And this is actually not an uncommon belief pattern in lower-income communities and environments because quite often, the thing about money scripts, they all are valid in a certain context.
00:21:08 Speaker_05
So without a doubt, you can find people who are rich who are total jerks and do terrible things in the world. And that's the tricky thing about money scripts, is there's always an element of truth.
00:21:19 Speaker_05
But this belief set, when we study it, it damages the holder. People who have these beliefs and believe them very strongly
00:21:26 Speaker_05
are much more likely to have lower income, lower net worth, and engage in self-destructive financial behaviors because they have a negative association with money, it's a lot easier to adopt a belief that having money is bad and rich people are evil.
00:21:40 Speaker_05
You can do that a lot faster than you can go become rich, which can take decades or generations. And so if you want to feel better instantly, the bailout is to vilify the people who have something that you wish you had.
00:21:53 Speaker_08
The opposite of money avoidance is another money script. This one is called money worship. This money script also affects people who grew up without much money. What are the hallmarks of money worship, Brad?
00:22:05 Speaker_05
Yeah, money worship, I would say, could potentially be the average American. It's beliefs that more money and more stuff is going to make me happier and it's going to solve all of my problems.
00:22:16 Speaker_05
Now, the crazy part is in our studies, there is a very strong correlation between people who hate money and also wish they were rich.
00:22:26 Speaker_05
Now, just to illustrate the confusion that so many of us have around money, they're very, very much in conflict, but that's a common pattern we see.
00:22:34 Speaker_05
And if you believe that more money, more stuff's gonna make you happier, first of all, there's an element of truth in that. If you're growing up hungry and poor and you can't afford karate lessons and you love them, having more money will help.
00:22:44 Speaker_05
And if you're able to use some money to better your life and give you better experiences, I think it's a beautiful thing.
00:22:51 Speaker_05
But if you're putting money on a pedestal, there's no amount of purchases of things that are going to make you happy in any sort of sustainable way.
00:23:00 Speaker_08
Another script that you talk about is something called money status.
00:23:04 Speaker_08
People who follow the script place a lot of value on money, so unlike money avoiders, they are willing to say that money is important, but you say they confuse their net worth with their self-worth. What do you mean by that?
00:23:16 Speaker_05
So in some ways, we have shown that the keeping up with the Joneses effect is actually real and it actually happens.
00:23:24 Speaker_05
And this is where people would, if you ask them how much they made, they would probably tell you they make more than they actually do. They don't wanna buy something unless it's new.
00:23:33 Speaker_05
They really wanna show the world that they have status, that they have value, that they have importance. And unfortunately, of course, this can lead to overspending and there's another huge problem with it.
00:23:45 Speaker_05
Our culture lies to us about how rich people actually spend their money.
00:23:51 Speaker_05
And the money status scripts, you see it all over the place, like Instagram, TikTok, all the social media platforms sell this idea that rich people have outward displays of wealth.
00:24:03 Speaker_05
And certainly there are people who are wealthy who spend money quite lavishly. And there's nothing wrong with that if you can afford it. That is just not how most wealthy people spend their money.
00:24:13 Speaker_05
First of all, most millionaires in the US are self-made in the sense that they didn't inherit all the money. And so how do you become wealthy and how do you grow your net worth?
00:24:22 Speaker_05
Well, it's actually by saving and by investing and not by buying the latest flashy thing to try to impress your friends.
00:24:30 Speaker_08
You know, I'm thinking about that book that came out some years ago, The Millionaire Next Door, and it was all about how the people who are next door living very ordinary lives, you know, driving, you know, 12-year-old cars and, you know, not even very expensive cars, these are the people who are truly wealthy.
00:24:47 Speaker_08
Many of the wealthiest people, in fact, are living fairly modest lives. Can you talk about that idea, Brad, that in some ways there's a disconnect between what we see in the media
00:24:57 Speaker_08
the representations of who we think are rich and who is actually rich in our society.
00:25:03 Speaker_05
Yes, one of the most profound things about The Millionaire Next Door is it took our vision of who rich people are and how they live their life and it just turned it on its head.
00:25:12 Speaker_05
And there's such profound wisdom in that because if you live the life that you think most wealthy people are living, you're gonna get a paycheck and then you're gonna start buying watches, expensive cars, feeling like this is what you need to do to join that group.
00:25:26 Speaker_05
That is actually the opposite of what most millionaires do in the United States.
00:25:35 Speaker_08
So all the scripts that we've talked about so far seem like, you know, they're pretty bad. They produce problems in people's lives. Are there scripts that actually point to good money habits?
00:25:46 Speaker_05
Thankfully there are, and scripts we can aspire to, and so what we call those in our studies, we call them money vigilance.
00:25:54 Speaker_05
And this is the group of people in our culture that have the most money, they fight with their spouse the least, they have more income, and there are beliefs like it's important to save for a rainy day.
00:26:06 Speaker_05
I'd be a nervous wreck if I didn't have money saved for an emergency. So there's that real emphasis on saving and investing is important. There's a future orientation and a little bit of anxiety associated with it.
00:26:16 Speaker_05
And so interestingly, if you ask them how much they made, they're actually likely to tell you they make less than they actually do, which is fascinating in terms of social media because the people who are least likely to brag about what they have are the people who tend to have the most.
00:26:36 Speaker_08
And in some ways, you seem like a money-vigilant person yourself, but I also hear you say that perhaps this can spill over into a form of hyper-anxiety, where money vigilance can become hyper-vigilance, and then you become unable to spend money even when you can afford it.
00:26:51 Speaker_05
Yeah, actually my first book I wrote about Ebenezer Scrooge. Ebenezer Scrooge is the perfect example of a hyper-vigilant, ultra-wealthy individual. And the problem was, he had a scarcity mindset.
00:27:04 Speaker_05
Now what is so fascinating about that mindset is if you grow up in poverty and not having enough, it can make you an incredibly hard worker. Some of the richest people I know were immigrants who had nothing.
00:27:17 Speaker_05
And their work ethic was so incredible, but they were so anxious about not having enough. they can have a difficult time enjoying life. And so that's really, we need to be able to do both. We need to be able to save for the future and enjoy the moment.
00:27:31 Speaker_08
I'm also reflecting that money scripts in some ways teach us to be vigilant to the kinds of things that produced trauma in our past or in our family's past.
00:27:39 Speaker_08
But unfortunately, money traumas are not like the trauma of encountering a predator where you just want to stay clear of the predator.
00:27:45 Speaker_08
You know, if you lost all your money in the Great Depression, but now you're choosing to stick your money under your mattress or in the attic, you're solving a trauma that was in the past
00:27:54 Speaker_08
even as you're exposing yourself to the risk of an even bigger trauma in the future. So in some ways, it makes intuitive sense why we would have these scripts, but in actual practice, they can be deeply destructive.
00:28:06 Speaker_05
That's right, and in my experience, the ones that are the most difficult to change and shift are the ones that have intense emotion attached to them.
00:28:15 Speaker_05
So the example of my grandfather, it wasn't just this thought, oh, you shouldn't trust banks, because beliefs can change very easily. When the federal government came in and guaranteed banks, well, I guess what? Now you can trust them.
00:28:26 Speaker_05
But that emotion was so intense. And so when we have really emotional experiences or they go back in our family for generations around money, that's when it can become really difficult to change our relationship with money.
00:28:38 Speaker_05
This is where we find ourselves knowing that we shouldn't be doing things, but finding ourselves continuing to do it.
00:28:48 Speaker_08
Our experiences, our upbringing, and our financial background all play a role in how we think and behave when it comes to money. Because these scripts are so deeply ingrained, our problems with money can seem impossible to solve.
00:29:02 Speaker_08
When we come back, how to change that. You're listening to Hidden Brain. I'm Shankar Vedantam.
00:29:21 Speaker_06
This is Hidden Brain.
00:29:22 Speaker_08
I'm Shankar Vedantam. Brad Clance is a psychologist at Creighton University in Omaha, Nebraska. He is the author of the book Mind Over Money. He studies the thoughts, attitudes, and beliefs that people have about money.
00:29:36 Speaker_08
Brad calls these our money scripts. These scripts are rooted in our past experiences with money, but they determine the way we deal with money in the present and in the future.
00:29:49 Speaker_08
The solution to many of the problems we face with money lies in first understanding the way these scripts influence us. Once we do that, there are ways to get around these scripts or even get these scripts to work for us.
00:30:06 Speaker_08
Brad, I want to talk about a study you conducted where you and your colleagues went into a workplace and tried an intervention to get people to save more for retirement. You started by helping people understand their money scripts.
00:30:19 Speaker_08
How did you go about doing this?
00:30:21 Speaker_05
A big part of that was helping people identify their early experiences around money, and I gave them a little questionnaire on money scripts on the categories we just discussed, and then asked them to think about what did your mom teach you about money?
00:30:36 Speaker_05
What did your father teach you about money? What was your earliest experiences around money? Your most joyful, your most painful? These types of reflections are going to help you identify these underlying beliefs you have around money.
00:30:48 Speaker_05
And then, of course, you can then challenge and change them. As I said, every money belief, every money script has an element of truth. And I think it's really important to validate where you learned that or where your ancestors learned that.
00:31:02 Speaker_05
And the most healthy mind around money is one that's flexible. So we wanna be able to take in new information. So for example, my grandfather, you can trust banks at least up to $100,000 in his time, and you need to have flexibility in thinking.
00:31:16 Speaker_05
So that is really the goal.
00:31:19 Speaker_08
I understand that contribution rates increased by about 40%, which is just an astronomical increase in the amount of money that people were saving.
00:31:27 Speaker_05
That's absolutely right, so that was 401k contributions.
00:31:31 Speaker_05
And people had been in these meetings previously, the mandatory 401k meeting, but I think really connecting with who they are, where they come from, and what they really want on the other side of this deferral, this salary deferral, really, really important.
00:31:47 Speaker_08
So we talked about four money scripts that produce problems. Money avoidance, money worship, money status, and hypervigilance about money.
00:31:55 Speaker_08
With money avoidance, people avoid dealing with money altogether because they have negative associations with it. Money worshipers, in some ways, have the opposite problem.
00:32:03 Speaker_08
They overestimate how much money will buy them happiness or make them feel good about themselves. People who follow a money status script tend to focus on how having money and possessions can increase that status in the eyes of other people.
00:32:15 Speaker_08
So they're using money and possessions almost as a signaling device. And both people who have a money worship script and a money status script can end up doing a lot of overspending. And then finally, there are people who are hypervigilant about money.
00:32:28 Speaker_08
They allow their anxieties about money, their scarcity mindset, to turn them into misers. Let's look at some of the ways we can disarm these scripts. Let's start with money avoidance.
00:32:38 Speaker_08
In one study where you looked at people's savings behavior, you asked people to come into a lab and you split them into two groups. The control group was given a financial literacy presentation.
00:32:47 Speaker_08
They learned some basic money management lessons on things like compound interest and saving for retirement, different kinds of banking accounts.
00:32:54 Speaker_08
In the experimental group, rather than give people the financial education presentation, you asked them to bring an interesting object into the lab with them. What kind of objects did you ask people to bring and why did you ask them to do this?
00:33:08 Speaker_05
We asked people to bring in something they had saved, a sentimental object. Maybe it was something they got from a grandparent. People brought in pieces of jewelry. Some people brought in stuffed animals.
00:33:21 Speaker_05
Some people brought in pictures of vacations they took as kids. And what we were trying to do was get people connected to their core values, what really matters to them.
00:33:33 Speaker_08
And what was this intervention designed to do? How does that help change their behavior when it comes to money?
00:33:40 Speaker_05
From my perspective, I was theorizing that if we could get people in touch with what really matters to them in a visceral way, that's why I wanted it to be very experiential, not just think about it, but bring in the item.
00:33:52 Speaker_05
I had people close their eyes and think about how this item came into their life, how it felt, what it meant to them, to really get at these core values. And then what I did is I had them identify their
00:34:05 Speaker_05
their values, like, so what does this represent to you? It represents family, safety, adventure, comfort, and then I use that as a bridge to have them identify their top three financial goals. It looked like a kindergarten classroom.
00:34:20 Speaker_05
We had paper, we had scissors, we had people drawing pictures, cutting out pictures, really getting a very clear vision of why they want to save for the future.
00:34:35 Speaker_08
So I can imagine that if someone is a money avoider, they have negative associations with money, they don't want to deal with it at all, they want to push thoughts of money out of their heads, connecting money to their personal values might help them in some ways rewrite or rethink that script.
00:34:50 Speaker_05
That's right. So we expose them to the idea and try to encourage them to explore the idea that not all money is bad. Because the belief that rich people are greedy and money corrupts is accurate in only one context.
00:35:04 Speaker_05
It's much more accurate to say, some rich people do bad things in the world. I can become wealthy and do good things in the world. And so it was really important to tackle that and examine it and to make it, frankly, more accurate.
00:35:16 Speaker_05
We were looking for more accurate thoughts.
00:35:19 Speaker_08
So when you connected people in some ways to things that were important in their past, perhaps made them more, I guess, emotionally available to things that had happened, the values that they cared about, and then after each experiment you checked back in with people and looked at how much they were saving, did you find that it made a difference in terms of increasing their savings rate?
00:35:37 Speaker_05
For that particular study where we had people bring in the sentimental object, we saw a 73% increase in savings as a percentage of gross income in comparison to the 22% increase for the financial education group.
00:35:50 Speaker_05
But I think it really came down to getting people really excited. And then another hack, once you have a really clear vision of what it is you're wanting, that's when you want to automate towards those savings goals.
00:36:01 Speaker_05
And that's the instruction that I encouraged everyone to do. Get real excited, share this with somebody you love, and then immediately automate to capitalize on that status quo bias we have.
00:36:12 Speaker_08
So we looked at some techniques to combat money avoidance. Let's look at the next money script, money worship. So these are people who believe that money or possessions can buy them happiness.
00:36:23 Speaker_08
Can you explain what you found about how you can disrupt this script by changing patterns of behavior?
00:36:30 Speaker_05
So part of it comes down to educating people around happiness in general. So happiness is a state, right? It's not a trait. It's not like you're either happy or you're not happy.
00:36:41 Speaker_05
It's like you're gonna be happy 10 times today and you're gonna be sad 10 times today. And so realizing that stuff is not the cure to happiness. And I love the example of thinking to your birthday as a kid and you got this shiny new toy.
00:36:55 Speaker_05
I mean, this thing you always wanted, you know, that Red Ryder BB gun. Have you been happy ever since then? I mean, did that thing create happiness in your life? Of course not, it's fleeting. The emotion is fleeting.
00:37:06 Speaker_05
And so really identifying that money in and of itself and items in and of itself are not the key to happiness.
00:37:13 Speaker_08
So the third problem we looked at was the script of money status. You found that people who follow the script prioritize outward displays of wealth and they often end up with a lot of debt. How can people learn to combat this grip, Brad?
00:37:27 Speaker_05
One study that we did, we saw people from an ultra net worth group, and we compared them to a middle class group.
00:37:35 Speaker_05
And the ultra wealthy had a net worth of about $10 million, and we compared them to a group of people who had a net worth of about $500,000.
00:37:43 Speaker_05
And what was so interesting about this study is that ultra net worth group, they had about 18 times more money, but they only spent twice as much. as that middle class group on their watch, their house, their car, and their last vacation.
00:37:59 Speaker_05
And so for me, a huge part of it is educating people on if you really do want to have quote status and have wealth, this is how you need to operate and this is how you need to get there. It's actually the opposite
00:38:12 Speaker_05
of what you're seeing people do on social media. Those people are quite often trying to do a brand deal, or they're selling you a course, or a get-rich-quick scheme. That is not how most people become wealthy, and it makes logical sense.
00:38:23 Speaker_05
They become wealthy by growing their net worth, not getting rid of their net worth.
00:38:30 Speaker_08
We talked earlier about how money scripts can produce interpersonal conflict, conflict within marriages, within families, within households.
00:38:38 Speaker_08
I'm wondering how you have tried to resolve this yourself in your own relationship, perhaps with your wife or with other people in your family, but also more generally, how people can resolve problems with their money scripts that are not just rooted in themselves, but are rooted in relationships and interpersonal behavior.
00:38:56 Speaker_05
Well, quite simply, I've spent 20 years convincing my wife that she's wrong about everything around money and that her parents were wrong and her grandparents were wrong. This is what most couples do, actually. They're unconsciously battling it out.
00:39:10 Speaker_05
And if you're not careful, the conflict is going to push you further and further apart.
00:39:16 Speaker_05
And before you know it, you're going to be saying some ridiculous things like, we only should live in lawn chairs, you know, not, not couches, you know, because you're so worried about your partner's spending.
00:39:24 Speaker_05
So, so when I work with couples in conflict, what I have them do is table that whatever this issue is like, we'll, we'll get to the, by the way, that's the easy part. is fixing that.
00:39:33 Speaker_05
But what we should really do is have a conversation that you all should have had on date seven. Okay, now we could debate which date number it is, but about the date where you're saying, hey, do you wanna have kids someday? Where do you wanna live?
00:39:48 Speaker_05
We don't talk about money. We don't talk about what are your financial goals? How do you handle money? How do you wanna handle money? And so I encourage couples to just rewind to date number seven sit down and have a conversation.
00:40:01 Speaker_05
Some of those questions are, what was it like for you growing up around money? What did your mom teach you? What did your dad teach you? What is your most painful money experience? Your most joyful money experience? What are your financial goals?
00:40:16 Speaker_05
What are your financial fears? I love this one too. How did you feel about your socioeconomic class growing up? And then I also ask them to say, you know, what am I most proud of in my relationship with money?
00:40:28 Speaker_05
And what do I appreciate about you, my partner, around money? And what I have found is that this has two benefits. People get insight about their own relationship with money. And then I get insight about my partner's relationship with money.
00:40:43 Speaker_05
And so, for example, I might have seen some irrational spending that made no sense to me. Now I see that my partner grew up not having much.
00:40:52 Speaker_05
And for them, whatever that purchase was, was almost this desperate sort of need to say, it's okay, I can actually have some things because I grew up with nothing.
00:41:01 Speaker_05
And if I can look at it through that lens, I have much more compassion and it's much more easier for us to negotiate a solution around whatever this thing it was we were fighting about.
00:41:12 Speaker_08
You know, as you're talking, Brad, I'm realizing that one reason I think many people don't do this, and perhaps don't think to do this, is that many of these conversations involve the emotion of shame.
00:41:23 Speaker_08
And especially when it comes to money, people have grown up, especially if you've grown up poor, or especially if you've grown up around people who are much richer than you,
00:41:30 Speaker_08
There is shame often involved in the way we think about money and shame prompts us in some ways to withdraw and to hide and to not communicate.
00:41:40 Speaker_08
And of course, those things make our scripts invisible, not just to other people, but invisible to ourselves.
00:41:47 Speaker_05
That's right. Shame is an emotional glue trap and it keeps us stuck in our financial behaviors. And so de-shaming is so important. And part of what I'm talking about, I can take any baby born and I could probably stick them in your family.
00:42:02 Speaker_05
stick them in your culture, give them the experiences you had, and they'd be thinking and behaving exactly the way you are around money. So shame does us no good at all, and when we're shaming each other in relationships, it's terrible.
00:42:14 Speaker_05
I think it's really great to start with, we're all screwed up when it comes to money, so let's all move forward.
00:42:20 Speaker_08
How does this speak to people who might be currently in very difficult financial straits?
00:42:26 Speaker_08
So let's say someone's working a minimum wage job, they're not able to make ends meet, and they hear this conversation and they say, well, it's all very well for you to talk about money scripts and what I should be doing psychologically, but I'm not getting paid enough, I just don't make enough.
00:42:41 Speaker_08
Are money scripts or the conversations about money scripts and the psychology of money, is this a conversation primarily for people who are well-off or do you think people who are poor have something to gain from this conversation as well?
00:42:54 Speaker_05
I'll be honest, I'm not that worried about trying to help people who are well off. That's not really why I do the research I do.
00:43:01 Speaker_05
I believe money scripts are most important for people who are struggling financially, for people who are poor and low income and working class. I think they're the ones who can benefit the most from understanding their money scripts.
00:43:13 Speaker_05
And it's not just understanding, oh, I have these beliefs. There's another very key element, And that is challenging them and changing them and realizing that these beliefs predict income. They predict net worth.
00:43:27 Speaker_05
They have a profound impact on your relationship with money for the rest of your life. And so understanding, though, that a part of why you are where you are is just a stroke of fate. You can't help where you were born.
00:43:40 Speaker_05
You can't help what family system you were born in. But understanding that you have the ability and the power to examine those beliefs, to modify and change them so you can better your life.
00:43:50 Speaker_05
The studies we have done have found that people who have more money are more likely to have an internal locus of control, believing that the mistakes in their life are because of them.
00:44:00 Speaker_05
The successes are because of what they're doing, and they have the power to change their life. And so that's a message that I think is great for everybody, especially people who are struggling financially.
00:44:11 Speaker_08
I'm wondering if you can tell me about a time when your own study and research into money scripts helped you revise or even recognize that you were operating under a money script and perhaps give you the latitude to change what it is that you were doing.
00:44:29 Speaker_05
So for me, part of understanding my money scripts was a conversation that I had with my father and my wife was sitting there at the time. And I said that I had worked 70 hours the past week, but I felt lazy compared to him.
00:44:43 Speaker_05
And my father said, I worked 100 hours. And I feel lazy compared to my dad, so which is my grandpa. And I was like, what? I said, dad, why? He goes, well, I don't know if you know this.
00:44:55 Speaker_05
And by the way, I didn't know this, but my grandfather's father was a lazy good for nothing. And my grandfather had lived his entire life trying to please his mother by being a hard worker and supporting her.
00:45:09 Speaker_05
And my dad is here working 100 hours a week trying to live up to his father's standards, and I'm feeling guilty working 70 hours a week. I gotta tell you, when I saw that pattern, I laughed. I thought it was crazy.
00:45:21 Speaker_05
I can't believe I'm living out this script that goes back four generations and has nothing to do with my life.
00:45:28 Speaker_05
All I know is that I'm not taking care of myself, I'm not spending as much time as I want to with my wife, I know I don't wanna be an absent father like my father and my grandfather, profound understanding for me, but I'm going to tell you this.
00:45:42 Speaker_05
It was so hardwired that I had to write a script for myself and read it at the end of the workday that said this, I have worked enough today. My family and my health is more important to me than this job. I'm getting up and I'm going home.
00:45:58 Speaker_05
I literally had to read that to myself for at least a year to try to change that money belief.
00:46:07 Speaker_08
Brad Clance is a psychologist at Creighton University. He is a co-founder of the Financial Psychology Institute, and he's the author of Mind Over Money, Overcoming the Money Disorders That Threaten Our Financial Health.
00:46:21 Speaker_08
Brad, thank you so much for joining me today on Hidden Brain.
00:46:24 Speaker_05
It was my pleasure. Thank you so much.
00:46:32 Speaker_08
Hidden Brain is produced by Hidden Brain Media. Our audio production team includes Annie Murphy-Paul, Kristen Wong, Laura Querell, Ryan Katz, Autumn Barnes, Andrew Chadwick, and Nick Woodbury. Tara Boyle is our executive producer.
00:46:48 Speaker_08
I'm Hidden Brain's executive editor. We end today's show with a story from our sister podcast, My Unsung Hero. Today's My Unsung Hero is brought to you by T-Mobile for Business. Our story comes from Leah Ruth Gemmillo.
00:47:08 Speaker_08
One Friday afternoon in January 2021, Leah Ruth was on her way to a weekend getaway with friends. It was supposed to be a much needed break from her emotionally exhausting job, but the week had been so hard, she couldn't muster any excitement.
00:47:23 Speaker_03
I was crying while I was driving, which, note, is not a good idea, but I was doing it as safely as possible. And along the way, I came upon the Illinois Skyway toll booth.
00:47:36 Speaker_03
And as I approached the toll booth wearing my sunglasses, I noticed the toll booth worker because she had these really beautiful, very bright, purple, long braids in her hair and was wearing these incredible, really long purple feather earrings.
00:47:58 Speaker_03
And it's just something that you take note of. And like many interactions that you have throughout the day, you often say, hi, how are you? And the person responds, I'm good, how are you? And that's typically it, right?
00:48:11 Speaker_03
Well, not for me on this particular day. The toll booth worker said, hi, how are you? And I immediately burst into tears. And I said, I am actually not good. I am really not good. And I took my sunglasses off and tears were streaming down my face.
00:48:31 Speaker_03
And she looked at me and her eyes were so kind. And she pointed her finger at me and she said, listen, I got you, girl. You're going to be in my prayers and everything is going to be okay."
00:48:47 Speaker_03
And my tears actually dried up when she said that, and I felt lighter in that moment. And I said, thank you so much for your kindness. I really appreciate it. I paid the toll.
00:49:03 Speaker_03
And I drove away and then I found myself crying happy tears because to have a stranger who knew nothing about my life, didn't know the details or the circumstances of why it was that I was as emotional as I was, but she felt compelled and had empathy.
00:49:24 Speaker_03
for me and wanted to help make me feel better. And it was amazing to me that she showed that kind of kindness to a stranger who just happened to be driving through her part of the toll booth.
00:49:50 Speaker_08
Leru Gemelo lives in Chicago, Illinois. Today's My Unsung Hero story was brought to you by T-Mobile for Business. If you like Hidden Brain, please consider joining our podcast subscription, Hidden Brain Plus.
00:50:07 Speaker_08
It's where you'll find conversations and ideas that you won't find anywhere else. And you'll be helping to support our efforts to bring you future episodes of the show.
00:50:16 Speaker_08
You can join Hidden Brain Plus by going to apple.co slash hiddenbrain or to support.hiddenbrain.org. I'm Sankar Vedantam. See you soon.