What if I told you the way you think about money ultimately determines how much you have in your bank account? Our money beliefs impact the way we think about and relate to money in our lives.   Your childhood experiences, all that self-limiting talk, and your daily money habits have a direct impact on your financial situation.

Recognizing your money personality is the first step toward financial health.

What determines your money personality?

We carry beliefs about money learned in childhood into our adult lives and subconsciously pass it on to our kids.

Our attitudes towards money started forming early (around 3 or 4 years old) as we absorbed, watched, and listened to our parents…every day.  Young kids think that parents know everything.  The way your parents handled (or mishandled) money had a tremendous impact on how you believe money should be handled.

For example, growing up I remember that money has always been a source of tension in my family.  On occasions that we had extra income, things were good, and mom and dad were happy.  That environment formed my belief that money can solve a lot of problems and that financial security is very important for a happy marriage.

What are 4 money personalities

Identifying which money personality you lean towards could help you address potential money issues that are holding you back.  According to the study lead by Dr. Brad Klontz from Kansas State University, there are four main financial personalities:

• Money avoidance (avoid dealing with money),
• Money worship (accumulate money),
• Money status (differentiate one’s self from other socioeconomic classes),
• Money vigilance (keep one’s money issues private).

You may be a mix of these or evolve from one to another with age or as your personal and financial situation changes.

Money avoidance

Money avoiders believe that money is bad or that they do not deserve it. Money is often seen as a force that brings up fear, anxiety, or disgust.   People with money avoider scripts may be worried about abusing credit cards or over-drafting their checking accounts.

They often self-sabotage their financial success.  Money avoiders may be reluctant to spend on even reasonable or necessary purchases.  They may unconsciously spend or give money away in an effort to have as little as possible in their control.

Interestingly, money avoidance beliefs tend to weaken with age.  Also, people who do not know their net worth score high on the money avoidance scale.  It makes total sense because money avoiders are unlikely to be aware of their financial situation.

Action steps for money avoiders:

• start looking at money as a tool versus a curse
• get a clear 360-degree picture of your finances by utilizing free financial tools offered by Personal Capital or similar companies
• automate your finances – saving, bill paying and especially investing for retirement and other financial goals

Money worship

“More money will make things better” is the most common belief among Americans.  Money worshipers believe that increase in income or a financial windfall would solve their problems.

Money worship scripts could lead to unreasonable risk-taking, gambling, workaholism, and compulsive buying.  People who identify with money worship beliefs tend to carry revolving debt and not to pay credit card debt in full every month.

Action steps for money worshipers:

• set up a budget
• make a list of your most important values and deepest priorities. Use that list as your north star when you’re making decisions on what to do with your money
• only make significant purchases after “a cool down” period to avoid impulse buying
• create a plan and commit to repaying your credit card debt

Money status

“Money is status” beliefs show the connection between self-worth and net-worth.  People with such scripts can be trapped into the competitive stance of acquiring more stuff than those around them.  Overspending and excessive risk-taking are two of the most common money disorders associated with money status scripts.

People who believe that money is status have often been raised in lower socioeconomic status homes.

Action steps for money status believers:

• make a list of your most important values and deepest priorities. Use that list as your north star when you’re making decisions on what to do with your money
• only make significant purchases after “a cool down” period to avoid impulse buying
• set up a budget

Money vigilance

For a lot of people, money is a deep source of shame and secrecy.  It doesn’t matter whether they have a lot or a little.

In a survey of 1,001 people, more than half considered money to be a sensitive topic in their households (S. Medintz, “Secrets, Lies and Money”, 2004). 40% reported that they had lied to their spouses about the cost of purchase and 40% expressed that they felt it was okay for spouses to not share financial information with each other!

Someone who is secretive with his money may be developing financial behaviors that are damaging to his financial future. Money vigilance believers may hide money under their mattress or keep it in cash in order to avoid taking risks with investing.

This behavior may lead to a loss of purchasing power due to inflation.  Not to mention the lack of funds for retirement or other money goals, such as their children’s college education.

While this money style can encourage saving and frugality, it can also keep someone from enjoying the benefits and sense of security that money can provide.

Action steps for money vigilance believers:

• find someone you can comfortably talk to about money. This could be your spouse, sibling, or friend.  Also, there are a lot of Facebook groups (I like Women on FIRE) that create a safe space to have money conversations
• automate your finances, especially investing for your retirement

The Bigger Picture

Be proactive and take the time to understand what money personality type you are leaning towards.  Try to figure out what your financial blind spots are.  Paying attention to how you think about money can be an instrumental first step in improving your financial health.