It’s not that money is inherently bad or evil, but it’s not inherently good or righteous either. Money is simply a neutral tool that can be used well or poorly. It only has the value—the personality and the relational standing—that we give it.
One of the few criticisms I have of the movement to explore the psychology of money is its use of the phrase “your relationship with money.” Unintentionally, this gives money entirely too much credit by implying personhood. Indeed, if you have a “relationship” with money, you’re likely elevating it unnecessarily, and maybe even subconsciously devaluing those in your life who actually have a heartbeat.
How did we get here, to the point where we’ve personified—and in some cases deified—the “almighty” dollar? Yes, I’m sure it’s due to our culture of consumerism, the perpetual marketing machine, but I primarily blame institutions of which I am a part: the financial industry and the business that has grown up around consumer personal finance experts. In these realms, money has been made the goal or end, when in reality it is only the vehicle or means. What, then, can we do to relegate money to its rightful place?
First, we can better understand how we deal with money by better understanding ourselves.
What is your first memory of dealing with money? Typically, it doesn’t take more than a few seconds for us to recall our first allowance or cash gift, our first theft or childhood extortion. The incredible impact these experiences had on us is apparent. Events decades past immediately spring to mind. Would you rate your first money memory as a positive or negative experience?
Now take a few moments and jot down your prominent memories—both good and bad—of dealing with money, especially early in life. Include anything particularly impactful later in life as well: The job loss that forced an unwanted move away from childhood friends; the windfall that came just in time; the formative investment experience that burned or elated you.
Behavioral science suggests that our money-related hardwiring occurs largely in the first 10 years of life and that our proclivities—for better and worse—are formed by our experiences. Don’t be shocked to discover that the negative experiences seem to have an even bigger impact, as studies show we suffer more (about twice as much) from the pain of loss than we benefit from the joy of gains.
Consider creating a list of your most prominent money memories. Catalogue your estimated age, the event and the impact it had on you, positively or negatively:
“5 – Received an allowance – Felt great; my first taste of independence.”
“8 – Parents divorced – Horrible; insufficient income to manage two households.”
Keep going. See if you can come up with a Top 10 list of momentous money memories. Then review your personal money story and bask in the glow of self-awareness. It explains a lot, right?
Second, we can share our story with those we’re going through life with and learn more about their story. The number-one reason cited for the divorces that split more than half of American families is financial disagreement. This is because we have the capacity (and for some, the tendency) to demonize our spouses for their apparently wayward ways. “You’re a spendthrift!” “No, you’re a miser!”
Completing this exercise will help you see your spouse for who they are—a collection of their experiences. But don’t stop there. Share your money memories with your kids and ask them about their prominent memories (if you dare).
Lastly, it’s helpful to understand an economic term that could help improve your relational money dealings: sunk cost. Sunk cost is water that’s already gone under the proverbial bridge. The rational economist doesn’t weigh what has already been spent and can never be retrieved when making present financial decisions or future plans. The best plan forward is simply the best plan forward, regardless of the past. (That stock or mutual fund, by the way, doesn’t know the price at which you purchased it, and it doesn’t care where you want it to go.)
How helpful might this be in navigating your future? To acknowledge that what’s done is done, opening the door to forgiving your parents, your significant other, your children and, most importantly, yourself?
The good news is that people who see money as it is—a lifeless but effective tool—typically end up managing it better and often accumulate more of it in the long run. The great news is that people who don’t develop a relationship with money tend to have better, richer relationships with the living, breathing humans in their lives.