Before we can take the right actions in our personal finances, we must be sure to apply right thinking. This is because financial thoughts—or as the psychology of money gurus Rick Kahler and Ted Klontz call them, “Money Scripts”—precede and drive our actions. They are our underlying beliefs about money, the “beliefs behind the behaviors,” as Kahler says.
To explain, Kahler reminded me of Daniel Kahneman’s book, Thinking, Fast and Slow, in which Kahneman segregates the human brain into two systems:
System one is fast, automatic, frequent, stereotypic, and subconscious. It’s the emotional brain. System two, on the other hand, is slow, effortful, logical, calculating, and conscious. It’s the thinking or rational brain.
Interestingly, 90 percent of our decisions—including financial decisions—are made in our emotional brain. It is in this part of our brain where Money Scripts are learned. Most of this prewiring takes place before the age of ten.
Money Scripts aren’t necessarily true or false, right or wrong. They just are.
I often conduct an exercise in educational sessions that I lead at SEO Leeds. The audiences vary but are always relatively homogenous groups. Forty accounting students. Thirty theater performers and staff. Twenty-five clients of a financial advisory firm. Two hundred financial advisors. And what shocks me (and them) is how wide-ranging their responses are in this exercise.
The wealthy got that way by . . . everything from “working hard” and “investing well” to “inheritance” or even “taking advantage of people.”
Poor people are poor because of . . . “a lack of education” or “bad circumstances” and, invariably, “they’re lazy.”
How is it that a group of people so similar to each other could have such disparate answers to the same questions? Regardless of how similar they appear now, they each had different parents, different childhoods, different friends, different educations, and most importantly, different reactions to each of these stimuli.
We’ve each had a different life.
For better and worse, our financial actions are entirely logical when our financial worldview comes into focus.
So what if we don’t like what we see? How do we change it?
First, we acknowledge our current money beliefs and the experiences that led us to them. Then, we modify and rewrite a new script.
Here are the top ten Money Scripts, according to Kahler and Klontz: