No one is entirely rational when it comes to money. We don’t create and follow a budget or save something every paycheck though we believe it would be in our best interest. We know we need a financial plan but put off the work involved; somehow it never happens. We spend too much out of recklessness or exuberance, or too little out of guilt. Our money behavior often causes shame.
It’s worth thinking about money as something with which you have a complex relationship. Your money (and more broadly your personal finances) is not a fixed entity, but rather a complex of data points, challenges and opportunities you circle around, interact with and have feelings about. You make decisions about money that impact your financial situation and these impacts in turn reciprocally affect your feelings and future behaviors. And it’s a relationship that evolves over a lifetime.
Here are three key things to know about the psychology behind our personal relationships with money:
Emotion plays a huge role.
Anxiety and avoidance create a vicious cycle.
Psychologically, you can’t entirely escape your family and your past.