Nearly all of my clients ask some variation of the same question: “Why wasn’t I taught how to handle money?”
Most people I know didn't have a single financial class before graduating high school. Even fewer were taught personal finance skills in college. And only the lucky few had conversations about money while growing up. Lucky with an asterisk, of course, as what you learned may have turned out to be unhelpful or outdated financial advice.
The education we received on finances as a collective isn’t worth a dime.
Fortunately, basic financial literacy has become more and more accessible.
You can find bite-size education on social media from fin-fluencers, like Her First 100k and Organized Finance. One or two good books can take you from noob to novice, my favorites are I Will Teach You To Be Rich and Get Good With Money. You can even learn while on your hot girl walks with podcasts like So Money and ChooseFI.
These people and brands are doing amazing work to bring personal finance education to the masses. Pick one, two, or all of the creators above to start learning and I bet you’ll see change in no time.
And yet, I don’t think we are asking the right question. I believe what we’re really craving to learn isn’t how to handle money, but how to think about money.
Yes, we need to learn the basics of personal finance. Any bit of education there is welcomed! But we need to go deeper. We need to teach and learn the psychology of money. But why?
What can we gain when we explore money psychology?
Understanding more than just the numbers can:
Supercharge changes in your behavior
Separate you from your financial decisions
Highlight that you’re exactly where you need to be
Alleviate financial stress
Bring you into the present
Understanding money psychology can supercharge changes in your behavior
Using brute force to change a behavior is both hard and quite unpleasant. How many times have you told yourself, “I’m going to go to the gym more” only to fall short again and again? I know I have and I remember how it feels, not great.
When I look back at the motivation behind that goal, and any other failed goal, there are a lot of ‘shoulds’ and attachments to outcome. Neither of these has ever successfully changed my behavior in the long term.
Understanding your financial behaviors is like finding a user manual for your brain. You may learn what motivates you. You can observe what triggers you and your spending. You may find why you even want to level up your money management skills in the first place.
Imagine telling yourself you want to eat out less to save money. We’ve all been there, right? Without more information, this new financial behavior doesn’t have a strong chance of sticking. Now imagine you set the same goal, but you understand a bit more about yourself.
You’ve realized you want to save money to spend more time with your family, rather than working overtime. You learned that when decision fatigue kicks in, eating out feels like the obvious choice. But that meal prep feels impossible to you. You decide to get a meal subscription for half of your meals. That takes care of the decision-making problem. The other half of your meals will come from a short list of your favorite recipes, all under 15 minutes. This means no meal prep & more time for family. Does this plan sound like it has a better chance of sticking?
The more you study your own brain’s user manual, the easier it becomes to change behavior.
Understanding money psychology can separate you from your financial decisions
For a moment, think about your brain as an Excel file or ChatGPT. First, you need to feed it data, the more it has the more conclusive the outcome will be. Then when it comes to a problem or a question, it looks at all the data it has and outputs the best answer it can.
The outcome feels neutral and factual, and perhaps most importantly, the outcome doesn’t impact the software’s value. If you change the input based on new information, the output will change too. You wouldn’t shame the software for not coming up with this newer answer in the first place.
Financial decisions are more or less the same. We make decisions on how to save, spend, and invest money based on the information we have. Realizing this can help separate ourselves from our decisions. It can help overcome shame from past decisions, like consumer debt, a failed investment, or student loans for a field we're no longer in. Just like you didn’t blame the software for not having different or better data, you can’t blame yourself for not knowing then what you know now. Or what you’ll know someday!
When you understand how you make financial decisions, your choices can be neutral and factual. Then, if you realize you don’t like the outcomes you are getting, you can search for new data.
Understanding money psychology can highlight that you’re exactly where you need to be.
We’re all just figuring it out. You, me, your dad, even your dad’s financial advisor who might try to tell you otherwise. No one has ticked the box and mastered every single aspect of financial wellness.
When we move beyond the numbers things become a lot less black and white. That's actually a good thing! Operating in the grey areas of life makes everything a lot more malleable. We can see that there’s more than one way to do things. There’s no line with people who are ‘good at money' on one side and people who are ‘bad at money' on the other. Those classifications don't exist. There are no benchmarks or timelines that we must follow. Because of that, there’s no way to ‘be behind.’ Phew!
You can only be exactly where you need to be. In other words, you are exactly where you need to be. We’re all doing the best we can with the information we have and figuring the rest out along the way.
Understanding money psychology can alleviate financial stress
Most clients that I’ve worked with, and I’d guess most people in general, believe that financial stress could be alleviated with more money. This makes sense in our logical brains and I don’t blame anyone for believing it. I used to too. The truth is, above a certain threshold of meeting your basic needs and some wants, I’ve yet to see more money solve all the problems.
It’s only when you change the way you think about money that the financial stress starts washing away. Given what you’ve read so far you might see why.
If you unlock a manual into your brain and its relationship to money, if you drop the shame and separate yourself from your financial decisions, and if you realize that we’re all out here doing our best, it becomes a lot easier to find financial peace.
But it's not just that, either. When we're more in tune with ourselves and the way we think about money, we can more aligned decisions. We can spend money on things we care about, rather than keeping up with the Jones'. We can save for goals that matter to us at our core and drop all other expectations like a hot potato.
When we do that - save, spend, and invest for ourselves - things become easier. It's a lot less stressful to work towards the handful of goals that light you up than all the things you think you 'should do' to win the approval of others.
Understanding money psychology can bring you into the present
If nothing above has convinced you that learning money psychology is worth your time and energy I hope this does:
Improving your relationship with money can help ground you in the present.
To me, this is the most important benefit of doing this work. Improving your financial wellness is not about how much money you can save or invest. It's not about how fast you pay down debt. It's definitely not about the budget or how you track your spending. Money has never been, well, about money.
Money and the pursuit of financial wellness is about leading a life well lived. It's about being present in your day-to-day life. Which, by the way, is hard to do when stressed about money. Or trying to make changes that have no chance of sticking. Or measuring yourself against irrelevant and unrealistic expectations. Or carrying shame from past financial decisions...
Our time on this earth is finite. If you need a reminder of that, check out one of my favorite articles of all time: The Tail End from Wait, But Why. My hope here is to highlight how important and what a privilege it is to be fully embodied in our lives. Understanding money psychology can help you do exactly that. The truth is if this was the only benefit of studying money psychology it would still be worth it.
Conclusion
I hope you stick around to explore money beyond the numbers. If you do, you might find learning more about the psychology of money supercharges changes and helps achieve your goals. You might find separating yourself from your decisions alleviates financial shame and anxiety. You’ll probably notice that we’re all in the same boat, we figuring it out as we go and we’re exactly where we need to be. And hopefully, all these things help you be more present in the here and now.
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