Is there a financial boogeyman in your life?
- People like us never get anywhere.
- You don't earn enough money to save, let alone invest.
- You'll never get out of debt.
We're usually not consciously aware of these statements, but they affect the way we spend or don't spend, save or don't save, plan or don't plan. Even if we do acknowledge these thoughts, they seem rational to us. They feel real.
That's because they are real, until we convince ourselves otherwise.
Want to make smarter financial choices? Banish the boogeyman by figuring out how you really feel about money.
'People like us': A self-fulfilling prophecyThe idea that "people like us never get anywhere" is too often true. People on the economic fringes can barely make ends meet. Where are they going to find the money to buy stocks?
But "people like us" can also be a self-fulfilling prophecy.
"If you say a line often enough, it becomes your truth. Your mindset has everything to do with your level of success when it comes to financial matters," says Ellie Kay, who has written more than a dozen books about money.
Attitudes held since childhood are hard-wired into our brains. Yet they can be altered, Kay says, a process that's best done with support from like-minded friends or a financial program.
Karla Reyes, 23, grew up in a paycheck-to-paycheck family. Her parents rarely discussed finances; when they did, "it was about scarcity, about how much money there wasn't."
Reyes wanted to go to college, but her Latino culture frowned on borrowing money, even for education. Through a San Jose nonprofit called the Opportunity Fund, she opened an individual development account, or IDA, which matched her $2,000 in deposits with an additional $4,000.
That money plus scholarships and part-time work will enable Reyes to graduate debt-free next year. Thanks to the IDA program's educational component, she is drafting long-term financial plans that include investing and a retirement fund.
In short, Reyes is moving past the idea of scarcity. She says, "It doesn't matter (how much) you're making a month as long as you know how to manage it."
'Rich people aren't happy'A corollary to "people like us never get anywhere" is that prosperity is bad. This includes the ideas that:
- Rich people are greedy and selfish.
- Rich people never know who their friends are and who just wants something from them.
- People with money can never be truly happy; they don't appreciate the simple things like we do.
Ted Klontz heard this kind of thing as a child, aimed at an uncle who'd made good. Family members sniffed that the relative "had sold out" or that "his kids were going to be spoiled," says Klontz, a financial consultant and co-author of "Mind Over Money: Overcoming the Money Disorders That Threaten Our Financial Health."
The notion that solvent living changes you for the worse is a "self-limiting belief" that's likely based on fear. In part, that's fear of being the rich uncle who's responsible for fixing everyone's problems.
A deeper concern, Klontz says, is that money means you'll no longer be accepted by family and friends. "We often unconsciously do things to keep ourselves in the neighborhood" -- i.e., to avoid success.
Klontz has faced a couple of his own self-limiting beliefs. For example, he resisted planning for retirement. Eventually he realized that, in his family, retirement had always meant "you quit, and you could never do things anymore."
A financial professional who won't plan for retirement? But this kind of wrongheaded behavior "makes perfect sense if you go back and understand the thinking that drives it," Klontz says. "The thinking is very often a distorted belief about money."