The Money Mammoth by Brad Klontz, Edward Horwitz and Ted Klontz, helps you get a handle on the tricks your mind plays when it comes to money.
Central to the thesis of this useful book is the idea that our attitudes to money are based on a mix of evolutionary impulses and psychological patterns formed in our childhood or times of crisis. The fact that these attitudes may not serve our purpose in the modern world of money is behind the phrase ‘money mammoth’: like the mammoth, our money attitudes haven’t adapted to the changed reality of our environment. Some readers may find it a little overblown to claim, as the authors do, that this could lead to an extinction level event for humanity. But putting the hyperbole aside, this book is a useful way of raising awareness about our particular money foibles.
What I liked about the book was that it simultaneously addressed two causes of self-defeating money behaviours that are rarely dealt with together:
- Behavioural biases. These arise from the mismatch between the evolutionary development of the brain and the complexities of modern personal finance. This includes well known biases like hyperbolic discounting (irrational short-termism), loss aversion (fearing losses more than we desire gains), illusion of control (over-estimating our impact on events), and confirmation bias (seeking out evidence to confirm our existing opinions).
- Psychological characteristics. These may have a genetic component but are also strongly influenced by our environment, particularly in childhood. Our psychological relationship with money can be reflected in behaviours such as financial enmeshment, hoarding, compulsive spending. Our behaviours are also affected by the tribe we belong to and the role we play in that.
Given their basis in evolutionary development, most people suffer from the core behavioural biases to some degree. Although there are variations, of course, and the relative strength of the biases can vary between individuals. By contrast, the psychological characteristics vary immensely between individuals due to differences in genetic inheritance and life experiences. And they can evolve within an individual over time.
The first part of the book helps you explore the origins of your own money mammoth. The first three chapters explore the influence of history: how your family history informed your parents’ attitudes, which in turn influence how you deal with money in relation to your own children. This kind of self-reflection is very useful. We think we’re being rational and values-based when educating our children about money. However, as I’ve experienced myself, our attitudes are often a reflection more of our own particular life psychodrama then any coherent analysis.
There’s some tough love here for successful professionals who are inclined to indulge their children too much financially, but also some practical tips for creating healthy money habits in your children. As with all parenting advice the trick is to take what’s good in it without being thrown into paroxysms of guilt about your own inadequacies. In this context, I’m a big fan of the theory of ‘good enough parenting’, if for no other reason that, having clearly not been a perfect father, I find it comforting that all is not lost.
This section also contains a useful reminder of the time-bomb that money can be within a relationship if differences in money attitudes are not recognised and dealt with. We tend to forget that there are many different frames of reference for how we approach money matters, and instead assume our own way is a universal truth. It’s worth remembering that our partner’s irritating tendency to be cautious rather than spontaneous with money (or vice versa) may just be different, not wrong.
A weakness in this section is that too straight a line is drawn between the money circumstances and attitudes we experience as a child, and those we go on to develop ourselves, whether through reaction or absorption. In my experience with clients it is common for psychological factors that have nothing to do with money to project themselves on to money behaviours. Perhaps the most common amongst successful professionals is the use of money and success as a replacement for the lack of love and attention they felt as children.
The book then goes on to discuss how broader aspects of your context can influence your money attitudes and behaviour. Different groups within society may have different expectations on the extent to which your success is yours to keep or should be shared as an asset of the community. Managing the different expectations of family and community and new colleagues can be particularly tough for successful professionals that create first generation wealth having come from a less wealthy background. Given the strong evolutionary impulse to fit in with our tribe, what that tribe is and how it evolves over time is a critical factor in forming our money beliefs.
Although we’re born into a particular context increasingly we choose our tribe as we go through life. One very obvious turning point I’ve observed with clients relates to our choice of education for children. Most parents centre much of their social circle around fellow parents that they meet through school. If we privately educate our children, our tribe is more likely to view it as normal to live in a large house, take two or more holidays a year and change the car every three years. Our tribe’s expectations can have implications for how we deal with money beyond the direct impact of private school fees.
Moments of crisis can also strongly affect money beliefs. These may be shared experiences: the great recession, COVID-19, the 1990s bull market. Or they may be particularly impactful experiences unique to ourselves: bereavement, childhood poverty or lack of security. Understanding the imprint that each of these events has left is important to taming our money mammoth.
This section contains a useful tool for identifying your particular ‘money scripts’. These measure your relative focus along four dimensions of money attitudes:
- Money avoidance. Money is bad or we don’t deserve money. This can lead to ignoring financial problems or self-sabotaging our financial success.
- Money worship. Having more money is the key to happiness and solving all of our problems. This can be connected with compulsive spending but also pursuit of money at the cost of more enduring sources of happiness.
- Money status. Self worth equals net worth. This can lead to overspending as we pretend to have more money than we do.
- Money vigilance. People should work for money and save to provide for their future. Can lead to excessive frugality and unwillingness to enjoy money or be spontaneous in spending.
Each ‘money script’ can have a negative dimension with self-defeating consequences. Perhaps underemphasised in the book is the fact that most psychological characteristics come with a good as well as a bad side.
The section finishes with some ideas on how to change your money scripts, which are useful but not revolutionary.
The final section brings everything together into an enhanced planning framework that addresses alignment of your life goals and financial goals, how to develop healthy family relationships around money, and then some particular, slightly US-centric planning tips.
In this final section the book runs out of steam and delivers less value. It’s almost as if the authors had a publication deadline they were struggling to meet. These topics are probably better covered in other books.
Despite the slightly weak ending, The Money Mammoth is a useful book for the first two sections alone. Although it’s not a perfectly structured analysis of the psychology of money, it’s a very readable book that should trigger a good amount of self-reflection for people wanting to get a better handle on their own peccadillos in this area.