On Financial Psychology and “Money Scripts”

Join Our Mailing List 

What they Are – How they Work?

  • By Brad Klontz PsyD CFP®
  • By Ted Klontz PhD
  • By Eugene Schmuckler PhD MEd MBA CTS
  • By Kenneth Shubin-Stein MD CFA
  • By David Edward Marcinko FACFAS MBA CMP®
  • By Sonya Britt PhD CFP®

Money Scripts are unconscious beliefs about money that are typically only partially true, are developed in childhood, and drive adult financial behaviors.

Money Scripts may be the result of “financial flashpoints,” which are salient early experiences around money that have a lasting impact in adulthood. Money Scripts are often passed down through the generations; and social groups often share similar Money Scripts. The animal brain stores associations around money based on early experiences, which can result in rigid and often problematic money attitudes.

And so, we argue that Money Scripts are at the root of all illogical, ill-advised, self-destructive, or self-limiting financial behaviors.

Money Scripts

The Research

In research at Kansas State University [KSU], researchers identified four distinct Money Script patterns, which are associated with financial health and predict financial behaviors

The 4 Money Scripts

  1. Money Avoidance
  2. Money Worship
  3. Money Status
  4. Money Vigilance

When Money Scripts are identified, it is helpful to examine where they came from. What three lessons did you learn about money from your mother?


A simple technique involves reflecting on the following questions:

  • What three lessons did you learn about money from your father?
  • What is your first memory around money?
  • What is your most painful money memory?
  • What is your most joyful money memory?
  • What money scripts emerged for you from this experience?
  • How have they helped you?
  • How have they hurt you?
  • What Money Scripts do you need to change?

More: Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™


Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com


Financial Planning MDs 2015

4 Responses

  1. Money can’t buy happiness?

    Maybe you can’t physically exchange money for positive emotions, but it turns out a higher level of wealth really does equate to an overall higher satisfaction with life.

    Did you know that Economists Betsey Stevenson and Justin Wolfers of the University of Michigan examined Gallup poll world data to discover that the more money people around the world have, the more satisfied they are.

    Don’t believe me – look it up!

    Dr. Zaphar


  2. On Money Scripts

    Making sound money decisions is fundamental to financial and emotional wellness. One component of that decision-making is applying logic and rationality to a set of known facts.

    Easy, right? Not necessarily.

    Take, for example, the recent dramatic drops in the market. Suppose you have read the research and listened to financial experts who say the worst thing investors can do is to sell their stocks in a market panic. They advise developing a philosophy and stickingto it in times of turbulence. They say skip the TV financial news and don’t look at your monthly statements.

    If you apply logic and rationality, you do just that. You already have created a well-diversified portfolio. You promise yourself not to panic when the markets turn down, reminding yourself that you are a long-term investor. You vow not to look at your brokeragestatements and to ignore the financial press until the crisis is over.

    This works well, as long as our emotional and logical brains are in sync with one another. The problem is that, when it comes to money, they rarely are. Research shows that 90% of money decisions are made strictly emotionally. To be clear, the odds suggestthat not every emotional money decision is a poor one. However, the most consistently successful money decisions have both emotional and logical components.

    While I don’t have research on what percent of all money decisions probably don’t serve us well, we do know that 75% of Americans would need to sell something to come up with $1,000. Most of us live hand to mouth, having no significant emergency reserve, muchless a nest egg of investments saved for retirement. This strongly suggests that the majority of our money decisions are made emotionally, with the rational mind off-line. The logical process described above for creating investment health is hard for mostpeople and almost impossible for some.

    How can we make better money decisions? Decades of learning about the brain and money psychology has taught me that it requires a transformative process that integrates our rational thinking and our emotions. One of the strongest metaphors for that processis the transformationof Ebenezer Scrooge that Charles Dickens describes in A Christmas Carol.

    The ghosts who led Scrooge to explore his past, present, and future helped him become aware of his emotions, separating them from his thoughts. This freed him to be fully present in the here and now. Only in this state could he absorb the knowledge of how hisactions were affecting him and those around him.

    To apply this to times when markets are plummeting, an important first step is to acknowledge any feelings you are experiencing, rather than ignore them as if they don’t exist. Disregarding them can bottle them up and set the stage for an explosion later. Thatoverwhelming emotional flood may result in panicking and selling out your well designed portfolio at precisely the wrong time.

    Feelings are sensations that can be expressed in one word like, fear, desperation, or hopelessness. Thoughts are statements about feelings, like “I feel like the markets are going to go to zero and I will lose everything.”

    To make sound investment decisions we really need to become present, to be aware of our emotions but not controlled by them. This allows us to make decisions more objectively, with logic and rationality that respect and acknowledge our emotional as well aspractical needs.

    That integration isn’t easy; it may need support from a counselor or financial therapist. Achieving it helps our emotions support strong financial decisions rather than sabotage them. It is the key that unlocks the door to financial wellness.

    Rick Kahler CFP®



    “Save more, spend less, and don’t do anything stupid.” According to the late Dick Wagner, CFP, this sentence summed up financial planning. Simplistic? Certainly. But it also contains a great deal of truth.

    A. Save more. Accumulating wealth depends on your ability to save and invest money. The old axiom of letting your money make money relies heavily on putting away some initial seed money and leaving it to grow.

    B. Spend less. To have money to invest, you need to live on less than your total income. A majority of Americans find this incredibly difficult. We are famous for living hand to mouth. Over 7 out of every 10 of us would have to sell something or borrowto come up with $1,000.

    A strong recent example is the enormous disruption and hardship the government shutdown caused 800,000 federal workers. When they missed two paychecks, many had to take out short-term loans, file for food stamps, or secure second jobs to get by. Obviously mostdidn’t even have even a rudimentary emergency reserve.

    So it’s reasonable to contend that 70% of Americans have grave problems accomplishing “save more and spend less.” The 30% who can do those two things still face the next hurdle.

    C. Don’t do anything stupid. While “saving more” and “spending less” are measurable and quantifiable, “not doing anything stupid” is highly subjective.

    Here are a few behaviors that might qualify.

    1. Not having an emergency fund. An emergency reserve is primarily to support you and your dependents if you lose your job. It is not to be used for ordinary periodic expenses like car repairs, insurance deductibles, or income taxes.

    2. Not understanding that retirement is not optional and it’s the most expensive of all financial goals.

    3. Not maximizing your retirement plan contributions. Anyone can open an IRA that lets you invest up to $6,000 annually. Many employers offer 401(k) or 403(b) plans where you can invest up to $19,000 a year, plus receive an additional employer contributionof 3% or more of your salary. Those who are self-employed can invest up to $59,000 a year and more. All traditional retirement plan contributions are tax deductible, which makes them even better investments.

    4. Measuring your time horizon in years rather than decades. Taking a short-term view of the market by getting out when the stock market takes a dive is the number-one fatal investing mistake.

    5. Not understanding the difference between saving—putting money away for short-term future needs—and investing—putting money into stocks, bonds, and other asset classes to build wealth over the long term.

    6. Not diversifying your investments. “Don’t put all your eggs in one basket” is still good advice. You need five or more asset classes in your portfolio. Take the time to Google “asset classes” and learn all you can.

    7. Thinking you can beat the market. According to Dalbar, Inc., 97% of all investors, advisors, and mutual fund managers don’t beat the market over the long term. Neither will you.

    8. Paying attention to salespersons’ promises instead of the fees, expenses, and taxes on their investment products. Too many people who save successfully end up throwing their hard-earned dollars away by investing in high fee and commission productslike annuities and cash value, whole life, or permanent life insurance policies. These are rarely good investments.

    9. Worrying about dying early in retirement rather than living longer than you imagine.

    Finally, perhaps the ultimate “something stupid” is failing to use your accumulated nest egg to take care of yourself and support your heart’s desires. Building financial security is not a goal, but a tool for living a rich, full life.

    Rick Kahler CFP®



    Suppose you earn $45,000 at a job in Rapid City, SD, and you learn that someone doing the same job in Redwood City, CA, earns $60,000. Your instant conclusion is likely to be that they enjoy a higher standard of living than you do.

    That assumption would be a money script. It is neither completely true nor completely false. While it may be true if the person earning more lives in the same location you do, it starts losing all relevancy if they live somewhere else. Even if the other person earns more dollars than you do, you can’t accurately compare lifestyles without factoring in the local cost of living.

    If you only looked at the dollars earned, you might be inclined to complain about the low wages in Rapid City. You might even take action to raise awareness of this apparent inequity and urge legislators and community leaders to make local wages more livable.

    Your energy around this issue might be fueled by a second money script you wouldn’t even be aware of. We often perceive that the higher someone’s salary, the smarter and more successful they are. Tucked away deep within the inner folds of our emotional brain, we might believe that if someone else doing the same job is earning more money, then we must be less smart or valuable. We must be worth less.

    This phenomena was driven home to me recently as I researched the average salaries of various positions in financial planning firms. I looked at several annual surveys of wage ranges. I also surveyed a dozen of my financial planning peers located all over the US, from Florida to California and Minnesota to Texas. Surprisingly, I discovered that the range of salaries was very tight. Senior financial planners with 10 years or more of experience earned $130,000 to $150,000 and operation managers $83,000 to $90,000.

    What shocked me was that location was irrelevant to the wage, despite large variations in the cost of living. That cost was over three times as much in Redwood City, CA, as in Minneapolis, MN. A planner earning $140,000 in Redwood City had the equivalent lifestyle of one earning $46,666 in Minneapolis. One of the biggest factors is housing. According to Zillow, the median home value in Minneapolis is around $263,000; in Redwood City it’s $1.675 million.

    I pay a starting financial planner with a undergraduate degree in financial planning $45,000 a year, plus benefits. My California colleagues pay $65,000—less than half of the $140,000 it would take in California to match the lifestyle that $45,000 provides in Rapid City. Yet my California colleagues have no problems hiring staff, while my firm struggles to even get applicants for open positions.

    Why, I asked a colleague in Redwood City, do people want to live in California with a lifestyle a third of what they could enjoy in Minneapolis or Rapid City? She wrote, “We have to assume that people are not crazy…. that the markets accurately reflect value at some level.”

    It stands to reason that people must see value in things other than monetary. She suggested those non-monetary draws were greater perceived employment and entertainment opportunities, specialized communities, and no snow.

    Her “no snow” comment was enlightening. Apparently, for many people, a 67% reduction in lifestyle is the tangible value of living in a snowflake-free location. Personally, I would rather bear a few weeks of snow each year and effectively earn three times more. Many people must prefer to bear bumper-to-bumper traffic on snowless freeways.

    Maybe, as well as giving job applicants a cost-of-living comparison, my firm should add snow removal services to our benefits package.

    Rick Kahler CFP®


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: