The money factor

A lot of financial planning jumps straight from identification of a goal to designing a financial plan to meet that goal. But building a financial plan without first understanding the role of money plays in your life can be a big mistake. The most logical plans can be completely undermined by the emotional triggers created by your relationship with money.

Many of our actions relating to money are attempts to meet an underlying emotional need. Our attitudes to money are heavily influenced by our childhood experience and by what we learned, implicitly or explicitly, from our parents. But beyond this, money attitudes can be a reflection of a broader emotional legacy.

So in the money factor we explore the role that money plays in our lives. What did you learn about money when you grew up? Is money scarce or is it abundant? Is it a source of pride, power, security, guilt or shame? We all have our own unique relationship with money. And our psychology is reflected in how we use and react to money.

In my own case, money has at times been a proxy for recognition, but also a source of safety: a protective barrier against criticism and a source of immunity from judgement. Money has also been tied up for me with complex questions of morality: materiality versus spirituality. These emotional dimensions of my relationship with money have had some benefits. I’ve tended not to become sucked into a high spending lifestyle, at least compared to peers. But these same factors probably caused me at times to take too little risk, to be too reluctant to enjoy money.

Understanding our relationship with money, the lessons we learned as a child, and how we use money to express our personality are all vital requirements for using money to live the life we want to lead. Are you a saver or a spender, a planner or a prevaricator? These behaviours are often the result of us trying to meet an underlying emotional need.

Emotions are often at the root of money habits that can undermine our ability to meet long-term financial goals. Understanding our money beliefs and the cognitive distortions they create can help us to reframe and shift those beliefs. This helps us to avoid financial pitfalls and to develop financial plans that we can stick to.

Have a look at the next factor — spending.

Questions to start

What were your early experiences of money as a child, what example did your parents set?

What beliefs about money did you take from these experiences?

How do you think these beliefs affect how you act with money today?

Start a conversation

If you like what you see, do get in touch to ask a question, share some thoughts or fix a time to chat. I’ll do what I can to help.