Dr. Brad Klontz Pushes Financial Psychology to the Forefront of Wealth Building

Want it or not, money is an important part of our lives, but it can often be a source of stress. People’s opinions about money vary from person to person, and from family to family. We don’t always agree with others in financial matters. Is there an ideal way to think about the money? Is it healthy to be worried about it? Who are rich people?

Dr. Brad Klontz, a financial psychologist and a college professor who researches the individual beliefs people have about money, provided the answers in The Long View’s podcast. Without further ado, let’s explore them and see how they can help you create a healthy mindset around money.

What is your money mindset and how was it shaped?

You grew up in a family with certain financial habits, in a neighbourhood with economic status, and met different people. What you saw in your family and society directly impacted how you define rich and poor people, whether you associate social status with money, or even what you think of investing.

To understand why you think about money the way you do, you have to go back to the times when you were a kid, since it is childhood when your money mindset started to shape.

Maybe you came from a low-income background, and hearing your parents say, “we don’t have enough” all the time made you associate money with worry and stress. Or, on the contrary, you lived in abundance and now you overspend, with no financial literacy whatsoever.

Some situations even created traumas. Take the Great Depression in the United States, or the crisis in 2008. For many, these events caused distrust of banks and fear of investing.

Now, it’s time for you to reflect. What do you think of money and why?

4 belief patterns (money scripts)

Dr. Klontz, too, reflected on his past, and, inspired by the views his family and friends shared with him, he got into deep research about the matter. As a result, he identified 4 main money belief patterns, known as “money scripts”, that people adopt subconsciously. These are money avoidance, money worship, money status, and money vigilance.

• Money avoidance – You’ve probably heard opinions like “money corrupts”. This is a common stereotype, especially among people with lower income. It says the richer you are, the worse you become, and that the poor are more virtuous. People with the “money avoidance” mindset view money as something negative, oftentimes because they feel frustrated about not having enough. The only way to cope with that is to suspect rich people of having accumulated big amounts by fraud or taking advantage of others. Because of such a negative opinion about money, as soon as they see a larger amount of money in their bank account, they subconsciously try to get rid of it. Because of this fear, they often have trouble saving.
• Money worship – Others put money on a pedestal and believe that more money equals greater happiness. This is a very common belief in today’s consumerist world. According to Dr. Klontz, it’s common for people with one of these two mindsets to bounce back and forth between them, because they create a paradox: people who most hate rich people want to be rich themselves. Just like in the case of money avoidance, this mindset leads to terrible financial outcomes.
• Money status – Next, some people associate money with their self-worth. Social media is the perfect example of this, where people get fooled by hundreds of videos and photos of people showing off their expensive possessions and a carefree lifestyle. However, these images are, in most cases, inaccurate, as research shows that millionaires are people who invest, rather than spend.
• Money vigilance – Money-vigilant people are the ones who have a future-oriented mindset. They worry about their money and save rather than spend.

Who are rich people?

Think of a rich person. Chances are you picture someone with poor morals, an extravagant lifestyle, and expensive things, who spends because they can.

However, research shows rich people fall into the money vigilance category. They are the opposite of what you see on social media, where wealth is shown as excess. Rather than overspending, they are future-focused, saving and investing wisely to secure long-term financial stability.

What is the healthy mindset around money?

So, how should you create a healthy mindset around money? According to Dr. Klontz, it’s all about finding balance.

On one hand, it’s positive to feel a little anxious about financial matters, as it paths a way towards setting financial goals, saving, and securing a future.

On the other hand, no extreme bears good fruit, and just like everything, also money vigilance can get out of your hand. A person who feels extreme anxiety over money then acts upon these charged emotions in unhealthy manners. In pursuit of money, they end up making unnecessary sacrifices, neglecting their relationships, or even losing all at online casinos.

While spent with reason and saved with a vision of the future, money can give you more freedom and improve the quality of your life. Hopefully, the four money scripts will help you reflect and improve the way you have thought about money so far. Or better yet – you’ll confirm to yourself that your approach to finances has been a healthy one.