Financial Habits
and the
Psychology of Money

Our beliefs, financial habits, and how we view money were likely learned from our parents while growing up. How we were raised has a big impact on how we view money today. Some learned about finances through active and encouraged discussions around the dinner table. Others grew up in households where money was not talked about openly. In some social circles, it’s considered rude and taboo to discuss personal finances. In others, it’s perfectly acceptable.

When parents hide financial issues from the children or don’t encourage discussions about money, it’s the children that ultimately suffer. Like discussions about sex, you don’t want your children learning poor habits from their friends, or others least qualified to be role models.

Some people are “savers.” They want to hoard their money. For them, spending could almost be painful. On the other hand, “spenders” tend to get a euphoric rush from their purchases, even though this rush may be short-lived.

Compulsive savers may have grown up in poverty, watching their parents sacrifice and do without. They are determined never to let this happen to them. For these people, an abundance of money is their way of ensuring financial security.

My grandparents and great aunts and uncles all survived the Great Depression. They were “savers”. They were thrifty and re-used whatever they could. They forewent splurging today in order to ensure the financial security of their tomorrow. Their deeds, financial habits, and examples helped form the “saver” I am today.

Yet similar experiences often have the opposite effect. Many “spenders” also grew up impoverished and watched their parents struggle. They decided not to deny themselves of life’s enjoyments. They are determined to enjoy the things their parents never had. These “spenders” view money simply as a means to experience the pleasures life has to offer.

Other “spenders” may have been influenced by the premature death of a loved one. They witnessed a relative saving all his life for retirement, only to pass away before enjoying it. These “spenders” view life as fleeting. They say things like, “Enjoy your money today because you may not be here tomorrow.”

Some people are “avoiders.” They can’t seem to face such financial practicalities as budgeting or retirement planning. They are often indifferent to their debt. Rising credit card balances don’t faze them. They are indifferent about their debts as long as they get to enjoy their purchases. “I’ll worry about it later,” they say. Or, “I’ll never pay it off. Why should I deny myself?”

Then there are others who can’t stand being in debt for any reason, including mortgage debt. Ownership provides a sense of security. They take pride in their freedom from debt. “No one can take my house, car, etc. away. I own it free and clear.”

And lastly, there are those that I’ll call “financial friars”. It’s like they’ve subconsciously taken a vow of poverty. To them, money is truly unimportant, maybe even to the point of aversion. They feel guilty about having money. They might look upon “the rich” as shallow, greedy, dishonest, and ultimately undeserving of such luxury. These folks don’t want to be corrupted like “them.” So financial friars don’t keep much cash on hand and might even give the rest away!

Do you experience a sense of euphoria when making a purchase? Do you find yourself purchasing items simply because they’re on sale or because they seem like “good buys”? Do you do this even though you don’t really need them? Or do you buy items simply because, “I want it!”? It makes little difference whether the item costs a few dollars or tens of thousands (like a new car).

Some people are driven to earn and accumulate wealth based on a subconscious need for approval. They don’t want their family or peers to believe they are lazy, losers or that they don’t have what it takes to be successful.

Do you look at money as a level of status or affluence? Do you view your status in life based on your level of income or how others see you spend? Do you make purchases, not so much because you want them, but because you will “look the part” to others? In certain instances (like in business circles), there may be some validity to doing this. But be careful; the expensive car, fancy watch and custom made suit may be fooling no one.

Maybe your financial viewpoints and financial habits were affected by the divorce of your parents. Did you watch one parent drain the other dry to the point of financial ruin? Or on the other hand, was your custodial parent constantly struggling because the other refused to contribute fairly?

When talking to your spouse, do you say things like:

• “This is my money.”
• “This is my house.”
• “I earn more than you, so I should have more say on how it’s spent.”

These statements are not healthy and will strain your marriage. As you can see there can be many reasons for you current financial habits.

Once you realize the source of these financial attitudes, you will better understand why you have them. Only then can you move past them to healthier financial habits that both of you can agree upon.

Return to Money and Marriage from Financial Habits and the Psychology of Money.

Go to Home Page from Financial Habits
and the Psychology of Money.