Mind over Money

1. Money Problems Stem from Deep-Seated Issues, Not Lack of Knowledge

Financial advice is not enough to change destructive financial behaviors.

Information is insufficient. Most people know the basics of good financial health: save more, spend less, avoid debt. Yet, many struggle to implement these principles. The problem isn't a lack of information, but rather deep-seated emotional and psychological issues that drive self-defeating financial behaviors.

Emotional roots. These behaviors often stem from early life experiences, family dynamics, and traumatic events that shape our beliefs about money. These experiences create "money scripts" that operate outside our conscious awareness, influencing our financial decisions. For example:

• A child who grew up in poverty may develop a scarcity mindset, leading to hoarding or underspending.
• A child who witnessed constant arguments about money may develop a fear of financial intimacy.
• A child who was given money as a substitute for love may develop compulsive spending habits.

Beyond the basics. Addressing these underlying issues is crucial for lasting change. Simply providing more financial advice is like treating a brain tumor with aspirin; it addresses the symptom while ignoring the disease. True financial health requires understanding and resolving the emotional roots of our money problems.

2. The Brain's Triune Nature: Animal vs. Rational

In times of great stress, all bets are off.

Three brains in one. Our brain is composed of three interconnected systems: the reptilian brain (crocodile), the limbic brain (monkey), and the neocortex (scientist). The reptilian brain focuses on survival, the limbic brain on emotions, and the neocortex on rational thought.

Animal brain takes over. In times of stress, the animal brain (crocodile and monkey) often hijacks the rational brain (scientist), leading to impulsive and irrational decisions. This is why we often act against our better judgment when we're feeling anxious or overwhelmed. The animal brain triggers fight, flight, or freeze responses, which are not always helpful in modern financial situations.

Training the brain. We can train our brains to better manage stress and make more rational financial decisions. This involves recognizing when the animal brain is taking over, taking deep breaths, evaluating the accuracy of our thinking, and delaying rash decisions. Just as athletes train their bodies to react automatically in high-pressure situations, we can train our brains to respond more effectively to financial stress.

3. Herd Mentality: The Powerful Pull of Belonging

Like the horses in a stampede, our decisions about what direction to take, and the speed with which we take them, are driven by the fear of being left behind.

The need to belong. Humans are social animals, and our desire to belong to a group is a powerful instinct. This "herd mentality" can lead us to make irrational financial decisions, such as chasing market trends or overspending to keep up with our peers.

Financial comfort zones. We each have a "financial comfort zone," a range of income and spending that feels safe and familiar. When our circumstances push us outside this zone, we may experience anxiety and engage in self-sabotaging behaviors to return to our comfort zone. This can manifest as overspending after a windfall or underspending after a loss.

Relative deprivation. We often compare ourselves to others, leading to feelings of inadequacy or envy. This can drive us to make impulsive purchases or take unnecessary risks in an attempt to keep up with the Joneses. The fear of being left behind can be a powerful motivator, often leading to irrational financial decisions.

4. Financial Trauma: The Lasting Impact of Early Experiences

The more traumatic the flashpoint, the more serious the lasting effects.

Financial flashpoints. These are emotionally powerful early life events associated with money that leave a lasting imprint on our financial behaviors. These events can be dramatic, like a bankruptcy or a theft, or more subtle, like a parent's constant complaints about money.

Trauma rewires the brain. Traumatic experiences can alter the physical structure of the brain, particularly the amygdala, which is responsible for processing emotions. This can lead to automatic, fear-based responses to financial situations, bypassing the rational brain.

Money scripts. Our interpretations of financial flashpoints lead to the development of "money scripts," beliefs about money that shape our financial behaviors. These scripts, often formed in childhood, can be incredibly resilient and difficult to change. Examples include:

• "Money is the root of all evil."
• "You have to work hard to be worthy of money."
• "Money equals love."

5. Money Disorders: Avoidance, Worship, and Relational Patterns

In our experience, financial pathology typically manifests itself in one of three ways.

Three categories of disorders. Money disorders manifest in three main ways: avoidance, worship, and relational patterns. Avoidance disorders involve a systematic rejection or avoidance of money, often stemming from the belief that money is bad. Worship disorders involve an excessive focus on money, often stemming from the belief that money equals safety or happiness. Relational disorders involve using money to control or manipulate others, or being controlled by others through money.

Avoidance disorders:

• Financial denial: Ignoring financial problems
• Financial rejection: Feeling unworthy of money
• Excessive risk aversion: Avoiding any financial risk
• Underspending: Hoarding money and depriving oneself

Worship disorders:

• Hoarding: Compulsively accumulating possessions
• Workaholism: Obsessively working to earn money
• Unreasonable risk taking: Gambling or making risky investments
• Overspending: Compulsively spending money

Relational disorders:

• Financial infidelity: Lying to a partner about money
• Financial incest: Using children to meet adult financial needs
• Financial enabling: Giving money to others to their detriment
• Financial dependency: Relying on others for financial support

Overlapping disorders. These disorders are not mutually exclusive; people can exhibit symptoms of multiple disorders. Recognizing these patterns is the first step toward healing.

6. Resolving Unfinished Business: The Key to Lasting Change

When people come to concentrate selectively on reminders of their past, life tends to become colorless and contemporary experience ceases to be a teacher.

Unfinished business. This refers to unresolved emotions and memories surrounding past experiences that continue to influence our present behaviors. These unresolved issues keep us trapped in the past, limiting our ability to make healthy financial decisions.

The power of the past. Traumatic experiences can create neuropathways in the brain that remain long after the event is over. These pathways can trigger automatic, emotional responses to financial situations, even when those responses are no longer appropriate.

The need for resolution. To break free from these patterns, we must address the unfinished business from our past. This involves acknowledging our hurts, understanding the lessons we learned, and rewriting our money scripts. This process allows us to release the emotional energy tied to the past and move forward with greater clarity and purpose.

7. Financial Therapy: Rewriting Your Money Story

Before we can start to change our behavior, we have to take a look at the place where it all begins: the mind and its fascinating, sometimes contradictory systems for interpreting and responding to the world.

The power of awareness. The first step in financial therapy is to become aware of our money scripts and their origins. This involves identifying our financial flashpoints, understanding the emotions they triggered, and recognizing the beliefs we formed as a result.

Challenging our beliefs. Once we're aware of our money scripts, we can begin to challenge their validity. We can ask ourselves: Are these beliefs still accurate? Are they serving me well? Are they aligned with my values?

Rewriting our scripts. By consciously rewriting our money scripts, we can create new, healthier beliefs about money. This involves replacing negative, self-limiting beliefs with positive, empowering ones. This process is not about erasing the past, but about changing its meaning and impact on our present lives.

Tools for change. Financial therapy utilizes various tools, including journaling, meditation, and visualization, to help us access and process our emotions, challenge our beliefs, and create new, more productive patterns of thinking and acting.

8. Transforming Your Financial Life: Practical Steps to Financial Health

Change is possible. In fact, when we remove the mental and emotional blocks, peel off the outer layers, and take a long hard look at the true forces driving our behavior, change is inescapable.

Practical strategies. Transforming your financial life involves more than just understanding your money scripts; it also requires taking practical steps to improve your financial habits. This includes creating a budget, paying down debt, saving for the future, and making informed investment decisions.

The importance of support. Seeking support from a financial advisor, therapist, or support group can be invaluable in this process. These resources can provide guidance, accountability, and encouragement as you work to change your financial behaviors.

Focus on progress, not perfection. Change is a journey, not a destination. There will be setbacks along the way, but it's important to stay focused on your goals and celebrate your progress, no matter how small.

A holistic approach. True financial health involves more than just managing your money; it also requires addressing your emotional and psychological well-being. By integrating these aspects of your life, you can create a more fulfilling and prosperous future.

Last updated: January 31, 2025