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In our curtain raiser on Financial Therapy, we discussed the importance of this new field that sits between financial planning and psychological therapy and its role in helping people navigate their financial journeys successfully. We reproduced the following two quotes from leading financial therapists:
The aim of financial therapy, says Brad Klontz, a psychologist and financial planner, is "to find out what aspects of your upbringing, your money beliefs, or your relationship with money are causing you distress, sabotaging you, or keeping you stuck."
"It's not a financial literacy problem, it's an emotional problem, and that's where the therapy comes in," Kahler explains. "How do I stop doing something that I really don't want to be doing?"
Money scripts lie at the root of our attitudes towards money
At the heart of this disconnect between doing something relating to your money which you perhaps know deep down that you shouldn't be doing, is your relationship with money. Financial therapists call it your "money script" - your basic attitude towards money. Klontz suggests that we develop one (or sometimes more than one) of 4 broad money scripts, which go on to influence our attitude towards money and our financial profiles (Source: Dallas News):
Money avoidance: People with this trait believe that money is bad, that rich people are greedy and that they don't deserve money.
Money worship: These folks are convinced that more money will solve all of their problems, that there will never be enough and that money brings power and happiness.
Money status: Status lovers believe that owning the newest and best things confers status.
Money vigilance: People with this trait embrace frugality, the importance of saving and being discreet about how much they have or make.
We always knew this, didn't we ??
On a lighter note, we in India have long-held stereotypes by geography for each of these money scripts that Klontz talks about: Capitalist Mumbai is stereotyped as a land of money worshipers, Delhi - the epicentre of power in the country is generally seen as filled with "money status" scripted people, the conservative Southern bastion Chennai is generally regarded as studded with "money vigilance" oriented people and the more artistically inclined and socialist minded Kolkata is seen as home to many "money avoidance" type of people. One can say that we knew it all well before Klontz came up with his ground-breaking work on money scripts!
Money scripts help you understand your clients better
It is possible for a person to have more than one trait, but usually, one of these money scripts ends up being dominant. You could for example be "money vigilant" as well as display signs of the "money worship" script. When you look at these money scripts, they begin to clear your mind on why some of your clients behave the way they do. A client who finds it very difficult to implement an agreed monthly budget and savings plan and therefore never commences that SIP that he agrees he should, could well have a "money avoidance" script playing out in his life. A married couple who can never see eye to eye on financial matters and where money becomes a source of tension in the family could well be a case of a "money status" script clashing with a "money vigilance" script. As an advisor, understanding the money script of your clients can give you a much deeper insight into why they behave the way they do with their money decisions - which can then put you in a good position to help them more meaningfully.
Go beyond - find out what's causing the money script
Knowing your client's money script is very useful - but the real value add you can offer is going a step deeper - delving into what caused this money script to be so forcefully implanted into your client's psyche. That's when you can try to gently talk your client out of some pitfalls that his money script is getting him into. In this series of articles, we will explore some specific examples to give you practical insights on how you can use financial therapy to make a meaningful contribution in helping your clients navigate their financial journeys successfully.
As advisors, remaining shackled in the world of risk profilers is never going to help you make that meaningful contribution you yearn to in your clients' financial lives - delve into the world of money scripts if you really want to make a difference.
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