Even before you got your first piggie bank, you may have been witness to events that permanently affected your relationship with money—including, obviously, how you spend it. These events might be quite dramatic, like your father losing his business, or more mundane, such as being teased at school for wearing ragged hand-me-down clothes. Either way, these experiences have the power to unconsciously lead you to make bad decisions, from blowing your savings in a crazy weekend to hoarding and extreme, misguided, and irrational attempts to never spend money on anything, ever.
These early life events that shape how we view concepts of money and worth are called “financial flashpoints” by Dr. Ted and Dr. Brad Klontz, co-authors of a new book called Mind Over Money: Overcoming the Disorders That Threaten our Financial Health.
When I first picked up the book, I was a bit thrown by the “disorders” in the subtitle. Seemed a bit over the top. And when I turned over the back cover and saw the lead blurb of endorsement came from Wynonna Judd, I was doing more than raising an eyebrow. (There are also blurbs of praise from some more trustworthy reviewers, including psychologists and Jeffrey Zaslow, the WSJ writer and co-author of The Last Lecture.)
But the Klontzes, both specialists in an emerging field called financial psychology, say that many people—perhaps even the majority of Americans—have relationships with money that are so twisted they can be categorized as disorders. And think about it: Many, many people have more trouble controlling their spending than they do controlling their weight, or their tendencies to fall into abusive relationships, or even addictions to alcohol or drugs.
From the book:
You might be thinking that the term money disorder sounds pretty extreme, maybe a little scary. To be sure, money disorders are extreme reactions, and by their nature they create exaggerated behaviors. But that doesn’t change the fact that they are incredibly common, completely normal responses to the difficult life events that we all go through, in some form or another.
According to the docs, these disorders show up in one of three ways:
We might repeat destructive financial patterns learned from our early socialization, either observed within our family or in the broader culture. We might also flee to the polar opposites of those patterns in an attempt to avoid repeating the experiences and consequences of our past. Or we might alternate between those two extremes of behavior, shooting past the middle option in an unhealthy “pendulum swing.” Whatever our particular pattern might be, the end result is an equally unbalanced and damaging relationship with money.
I don’t know about you, but I certainly recognize some of these behaviors (and patterns of behaviors within families).
I asked the authors to explain more about why they feel “disorder” is the correct term, and just how many people could be categorized as having such disorders. They responded to my questions together via e-mail:
Brad & Ted Klontz: Not everyone’s relationship with money is a disorder. If there is no evidence of a problem, there is no disorder. But, 3 out of 4 Americans suggested that money was their number one stressor in their lives BEFORE the economic meltdown.
Prior to the crisis, the average American DID have a money disorder. In 2006 we had an average savings rate of -0.5% and in 2008 had over $10,000 in credit card debt in homes that had credit cards. Thirty-percent of couples suggest that the most recent financial events have “ruined their marriages”, and 40% admit to lying to their partners about their money behaviors.
People whose lives are negatively impacted by persistent self-defeating, self-destructive money behaviors that create chaos in their lives, have a money disorder. This is a condition that simply more information about saving or investing (which everyone knows they should do anyway) is not going to fix.
I hate how reluctant people are to take personal responsibility for their actions nowadays. Everyone always seems to be blaming someone else—the government, the real estate market, Wall Street, big business, etc.—for their problems. And so I rolled my eyes a bit when the book tells people that their money problems are disorders based on early life experiences, and therefore, if you’re bad with money and regularly squander your savings, it’s not your fault. And regardless of whose fault it is, it’s the individual’s responsibility to address and fix his/her problems with money, no? Who else can fix the problem?
Brad & Ted Klontz: It is not their fault in the sense that the most dysfunctional financial behaviors (as adults) are always tied to some kind of traumatic or dramatic experience with money, (usually when the person was quite young), that sets them up for failure. So like an adult who walks with a limp because their leg was broken as a child and not properly set, the child who survives a traumatic/dramatic financial event, will be similarly crippled as an adult when it comes to money. So, what we are saying is that the genesis of their problem is not their fault, however fixing it is their responsibility.
Similarly, Americans are under a great deal of stress right now, due to factors out of their control, such as job loss and a struggling economy. However, many of us set ourselves up to struggle with our self-destructive money behaviors and distorted money beliefs BEFORE the crisis, putting us in homes we couldn’t afford and without adequate emergency funds.
OK. So it’s not your fault that you’re bad with money. The problems arose out of your control. How do you take back control of the situation, address your issues, and deal with money more sensibly and rationally?
Brad & Ted Klontz: The origin of our money disorders (those early “financial flashpoint” experiences), were quite often totally out of our control. That said, when we recognize where we are tripping up, examine our histories, and challenge and change distorted beliefs about money, we are able to make healthy and lasting changes in our financial behaviors and cure our money disorders. Just like with other chronic, self-defeating behaviors, sometimes this requires additional help and support.
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One more tidbit from the book. The docs suggest that after you screw up, you should do something of a post-mortem and examine what really happened, rather than simply ignore the event:
Think of a financial situation that ended badly. Let’s say it’s a shopping trip during which you spent far more than you intended. As much as you’d like to forget the whole thing, sit down and really think about it. How were you feeling when you went to the mall? Did you have certain purchases in mind, or was this an impulse visit? If you were shopping for something specific, how did you find yourself even looking at the other items you bought? Concentrate on remembering your thoughts and emotions at each point. Pretend that you’re a detective investigating a crime and trace your actions back to whatever prompted them. When did you lose control of the spending? What were you feeling at that moment?
Why put yourself through all of this? Because if you can’t understand how and why you’ve made mistakes in the past, you’re bound to repeat them.
Related:
Why You Buy What You Buy and Do What You Do: Because It’s Easy
How the Different Voices in Your Head Affect What You Eat, Drink, Wear, Drive, and Buy
Q&A with Consumer Psychologist Kathleen Vohs