Gordon Powers

When tough times hit and people start to worry more about what's going on with their money, their thoughts often run much deeper than simply what is in their portfolios.

Layoffs, shrinking incomes or poor investment results can often be a gateway into unresolved family histories and insecurities, explains Brad Klontz, a Hawaii-based psychologist, co-author of Mind Over Money and CEO of YourMentalWealth.com.

His research suggests that while many people worry about having too little money, the same amount of people are equally anxious about losing what they have or who feel uncomfortable for having so much.

These feelings are all due to what he calls "money scripts" — strong emotions and typically unconscious beliefs that many of us learned when young and that drive our behaviour.

Most of these beliefs have an element of truth in them, but are incomplete.

For example, while the script "flying can be dangerous" is true, it's not the whole story. What's missing is that flying is still likely safer than being a pedestrian in a major city, or travelling just about anywhere by car.

Money scripts work the same way. While they represent the way you feel about money, they typically don't paint the whole picture.

Operating as if they are the complete and absolute truth, without regard to context, can be disastrous, Klontz maintains. And ignoring them altogether can be even worse.

Klontz has identified four broad categories related to beliefs about money: money avoidance, money worship, money status and money vigilance.

"Money avoidance" is a set of beliefs that include anti-wealth statements such as "rich people are greedy" or "money corrupts people."

Not surprisingly, those who fall into this category tend to have low incomes and net worth. They also tend to be younger, which may reflect their inexperience.

Often, Klontz maintains, such beliefs are rooted in low self-esteem and childhood experiences in which money was misused or misunderstood.

"Money worship" beliefs are centred on the idea that more money or more possessions will make a person complete, even though there's little research to support this view.

Money worshippers often connect greater wealth with happiness. Related beliefs include "more money will make you happier" and "it's hard to be poor and happy."

At the extreme, worshippers tend to become compulsive hoarders, pathological gamblers and workaholics.

"Money status" beliefs include "your self-worth equals your net worth" and "money is what gives life meaning." According to Klontz, when individuals equate acquiring material things with their value as human beings they tend to overspend and get heavily into debt.

They may take excessive risks to acquire that status and slip into despair and panic when they fail to do so.

Then, there is "money vigilance." People in this category pay their bills at the end of each month and don't live beyond their means. They tend to be extremely wary, however.

Spouses may hide spending from each other and be too conservative when it comes to investing. But they don't tend to lose their house or their self-worth.

Interestingly, Klontz has found few links between who held what belief and their race, gender, education level or income.

What does this mean for you and the people you turn to for advice? First off, you need to remember that emotions — not logic — drive most of our financial decisions.

As clients typically come to planning sessions with ambivalent feelings about really wanting to save for the future or invest, even well-intentioned questions from an advisor can be a catalyst for inner conflict, Klontz warns.

That's why, even though you may have agreed to it, so many of us have trouble sticking to a financial plan.

And it's tough to adjust our thinking. Most people will treat financial change the same way they do lifestyle changes after heart surgery, Klontz notes. Only about 10 per cent maintain healthier lifestyles two years after their surgery.

One of the goals of his work is to use what he has found to create a quiz that advisors cam use to understand their clients' attitudes toward money, particularly for those just starting out.

Younger individuals are most likely to hold potentially destructive beliefs about money, Klontz maintains. By examining their feelings in this way, both parties can get a better sense of what may be holding them back.

Such an exercise could be particularly useful with younger couples, for whom identifying divergent money scripts can help resolve money-related conflicts.

Try it sometime, either between yourselves or with a facilitator.