Study after study has shown that our personal beliefs have a direct effect on our financial behavior.
In 1982, researchers like Yamauchi and Templer established what they called the “Money Attitude Scale,” which outlined four basic money attitudes:
1. Power-prestige (using money to show status)
2. Retention-time (preparing for one’s financial future)
3. Distrust (not wanting to spend money)
4. Anxiety (a fear of spending money and a desire to spend it)
A decade later, Tang developed the “Money Ethic Scale,” outlining six defining money beliefs:
1. Money is good.
2. Money is evil.
3. Money represents achievement.
4. Money is a sign of respect.
5. Budgeting is important.
6. Money is power.
These were two definitive studies on money and beliefs, yet they lacked a few essential details –mostly demographics.
A third researcher, Klontz, designed a comprehensive study incorporating much of what Yamauchi, Templer, and Tang had established earlier, but he correlated his research with the all-important demographic data to substantiate and elaborate upon the earlier claims.
Klontz and his team came up with a list of 72 questions broken into eight concepts, and they surveyed individuals of varying ethnicity, income, and education levels.
The concepts he studied were:
1. Money worship (8 questions)
2. Anti-rich (6 questions)
3. Money is bad (5 items)
4. Money mistrust/openness (12 questions)
5. Frugality/fiscal responsibility (12 questions)
6. Money anxiety (8 items)
7. Money status (18 questions)
8. Money is unimportant (3 questions)
Klontz and his team discovered exactly what they expected: education, income, and culture played a role in beliefs, and therefore, behaviors.
What Do Your Beliefs Mean?
If you believe money will solve all your problems, then you worship money. If you worship money, you’re likely to do anything it takes to get it. Even if it means hurting those you love. And you’ll likely use it to buy the things you want — things that show status.
If you believe money is the root of all evil, you’re likely to be satisfied with what you have and won’t be doing much to save for the future. You may not be in debt, but you may also lack a cushion for emergencies.
If you have a general mistrust surrounding money, you may not discuss it, or you may lie if you’re asked how much you earn. You may cheat to get more of it, believing that it’s something you’re owed.
When you think about your reaction to money issues, you’ll discover the core beliefs that define your financial approach.
People who live by the credo, “You can’t take it with you,” likely have little (if any) savings, and may even have too much debt because they feel no need to save for their future. These people may also be more reckless spenders — buying what they want because they feel as though they “deserve” it. According to Klontz, this behavior is most often exhibited in the young (and immature).
On the flip side, you’ll find that many people believe it’s important to save for rainy days, nest eggs, and emergencies. As a result, they tend to be better savers.
Your money beliefs help to dictate behaviors. A positive mental attitude about money means better money habits and less stress over non-essential money matters.
It means saving more and losing less.
It means less anxiety.
How Can You Change Your Beliefs?
Having a healthy set of money beliefs is key to nurturing healthy money habits. Yet, changing any belief requires constant practice.
Changing beliefs means shifting your point of view. Often, to change the way you see things, you must undergo some sort of emotional event.
For example, someone who wants to lose weight may have a hard time doing so until they go through an emotional trauma involving their weight, like a heart attack. Once threatened with death because of their weight, they’re able to see the importance of weight loss in a new light. It becomes something they want to do because they want to live a full life again.
However, you should never wait for tragedy to force you into new behavior. Instead, make it a point to practice every day until you see success at what you’re doing, then pile all of those successes on top of each other.
When you’re mindful of each purchase before you make it, or each time you save instead of spend, you’ll see your financial health continue to grow. Watching that growth is what will gradually shift your point of view. Your beliefs and behaviors will follow.
Record your habits. When you find yourself making good decisions, write them in a journal. Re-read them to remind yourself that you can do what you set out to do.
The Takeaway for January’s Financial Awareness Month:
1. Assess your money beliefs.
2. Choose a belief to change by taking small steps each day.
3. Record your victories (no matter how small or large) and revisit them often.
What is your most devastating money belief?