Have you ever noticed how differently people behave around money?
That some people seem to make money like Midas while some spend it like Tyson?
I know high-income earners who consistently spend more than they make and people with average salaries who tuck away nearly half of it. Also, many people suffer from very complex and negative emotions about money.
Personally, I had my own irrational financial behavior. I received financial windfalls twice in my twenties. Don’t get me wrong, I didn’t win the lottery, but these checks were in amounts that, if invested, could have contributed nicely to my retirement savings. And even though I have a degree in Economics and I’m a responsible person, I simply couldn’t spend the money fast enough. I have nothing to show for it today, except a well-learned lesson.
So, what explains all of this widely varied and sometimes even destructive behavior? What is shaping people’s thoughts and actions around money?
The Power of Language
The idea that language might shape our thoughts and actions may seem foreign to you. Yet, Dr. Lera Boroditsky, Assistant Professor of Psychology at Stanford University and Editor in Chief of Frontiers in Cultural Psychology, has shown that language doesn’t merely express what are otherwise universal thoughts, rather, language gives rise to our thoughts, our experience of the world, and therefore our actions.
Her research has demonstrated the causal role of language in how people think. According to Boroditsky, “It turns out that if you change how people talk, that changes how they think. If people learn another language, they inadvertently also learn a new way of looking at the world. When bilingual people switch from one language to another, they start thinking differently, too.”
For example, our experience of time, which can never be seen, touched, tasted or felt, is almost entirely a function of language. What do you say to yourself and others about time?
“I don’t have time.”
“Time marches on.”
“Time flies when you’re having fun!”
“The clock stood still.”
Both the first and third statements refer to the experience of time moving quickly. Yet, notice when you read the first statement to yourself, you probably experience some form of frustration, anxiety, pressure, or perhaps confinement. And when you read the third statement to yourself, you experience some happy memory of the past, time spent with loved ones or an especially exhilarating experience.
Language gives rise to experience.
Money, like time, is also largely conceptual.
What Is Money?
Cash is just a representation of money. If even half of Americans stopped recognizing cash as money it would quickly be worthless.
Actually, an increasing number of retailers have stopped taking cash, and if you don’t believe me, try paying cash for a cocktail on a commercial flight. Cash is not money.
Money is also not the numbers you see in your bank account when you log in to see your balance or open up your monthly statement. Your credit card, though it has the power to transfer money, does not physically contain money that somehow exchanges ownership when manipulated by the sales clerk.
Further, gold is not money, and checks are not money. So, I ask again, what is money?
For you economists and sociologists, money is a solution to the problem of double coincidence of wants. It is merely an agreement about something having universal value, and without the agreement it is absolutely nothing.
Money, therefore, is a concept.
And yet, money and the social meaning that surrounds it are extremely significant in our culture. People have strong emotions about money, fight over money, divorce over money, even kill for money.
Where does all that meaning come from?
It comes from the language we use about it.
And the language we use about money is far from universally agreed upon.
Each of Us Has Our Own Money Vocabulary
And this fact should begin to explain to you why some people fight so much about money.
It is estimated that there are some 100,000 adjectives in the English language, but few of us use more than a handful of them to describe money.
And the words you use to describe the concept of money limit what money can be for you. Because money is so conceptual, we must use language to describe it. However, the word “describe” can also mean “to trace the form or outline of.” In other words, once you have described it, you have put it in a box. Now, in your understanding, money is what you have described it to be, but it is not anything else.
At some point in our childhoods, we all got an idea of what money was, we started to talk and think about money that way, and we got stuck with it. I call this your Money Mindset.
What is Your Money Mindset?
According to Klontz, Kahler, and Klontz, some of the most common Money Mindsets are as follows:
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I don’t deserve money.
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I deserve to spend money.
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There will never be enough money
*Incidentally, this one was mine, and I’ll give you one guess what someone has to do with a large check when their Money Mindset is “There will never be enough money.”
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There will always be enough money.
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Money is unimportant.
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Money will give me meaning.
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It’s not nice (or necessary) to talk about money.
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If you are good, the universe will supply all your needs.
My experience is that Money Mindsets are as varied as people are. Do you relate with any of these?
It is possible to transform your Money Mindset, and therefore your financial situation, experience, and results.
I personally have done this work. I used to gleefully spend every dollar that came into my possession (and more), only to return to scarcity and lack of freedom. And now I consistently save almost half of my income.
I have also done this work with our Sudden Money clients to ensure that they maximize the value of their financial windfall to themselves and the people they care most about by avoiding the all-too-common fate of windfall recipients.
Identifying your Money Mindset, the systems of behavior it causes, and the emotions that surround it is the beginning of gaining freedom.
Once you accept that your Money Mindset is merely one (valid) way of relating to and experiencing money, but that it is not true in any objective sense, you have dislodged certainty and made room for exploration.
So, tell me, what do you think your Money Mindset is today, and better yet, what would you like it to be?
Referenced Book Citation:
Klontz, Psy.D, Brad, Rick Kahler, CFP, and Ted Klontz, Ph.D. Facilitating Financial Health (Tools for Financial Planners, Coaches, and Therapists). Cincinnati, Ohio: National Underwriter, 2008. 78-79. Print.
