- Often times, the way we understand and deal with
money as an adult comes from watching our parents or parent-like figures handle them. These are called "money scripts." - Depending on the person's background, this can either help them or hinder them.
- Here are a few things to look out for when thinking about your own finances and how to move toward your own financial goals.
Growing up, there was a lot of anxiety about money in my household. I was raised in a single-parent family, and it was often a struggle for my mom to pick up the monthly expenses.
But coming from this background motivated me in positive ways. I told myself I never wanted to live paycheck-to-paycheck. I wanted to be in control of my financial situation — not living with debt or mindlessly spending money — to ensure I could invest in myself, my future, and my family. I became a Certified Public Accountant and later a Certified Financial Planner professional.
Today, knowing how much my own background influenced my perspectives on money, one of the first questions I ask my clients is: What was your relationship with money growing up, and how does that impact where you are with money today?
In my practice, we call these your "money scripts": your values and beliefs about money that you grew up with that impact your habits today in ways you might not even be aware of.
Once a client understands their own money scripts, it's easier for them to see how they can use their pre-existing beliefs to their advantage — and what might be keeping them from reaching all of their financial goals.
How "money scripts" have worked for my clients
Take one of my clients, a young man who grew up in a household where his parents didn't have many financial resources — though everything they did have was invested in his education. Once he graduated, he did an excellent job of paying down his student debt in just a couple of years. But because he'd been so laser-focused on funding his education, he didn't know where to go from there to build the life he wanted. His money script about the importance of education had started him off on the right foot but left him unsure of how to proceed.
Since then, we've worked together to help him leverage his natural inclination as a saver who values investing in himself — building a safety net and putting his money to work for his future. Among other things, he's implemented a real savings goal and taken actionable steps toward it.
He upped his 401(k) contributions from the minimum to 10%, opened a Roth IRA and non-retirement investment account, and figured out how much of his income he can put toward the things he enjoys.
So how can you ensure your own money scripts are working for you — not against you? There are a few tips I recommend to everyone:
Set financial goals that align with your values
If you aren't actively working toward something, it's easy for money to slip through your fingers.
Have the tough conversations
Your money scripts may be different from your partner's or your parents'. Having open, honest conversations with your loved ones about your priorities, and how your money plays into them, is a key step toward
Invest in yourself
Make sure you're allocating part of your budget toward something that makes you feel good. For my wife and I, that's taking regular vacations.
Money is highly personal and emotional. By understanding where these emotions come from and how they influence your behavior, you can make more rational financial decisions that will set you up for success.
This article was contributed by Joseph Edmondson, CFP, CPA, RICP, a financial professional with Equitable Advisors, and a member of BI's Money Council.