Today I would like to explain about the interesting paper published in the year 2011 in Journal of Financial Therapy, Volume 2, Issue 1, authored by Brad Klontz, Sonya L. Britt, Jennifer Mentzer, and Ted Klontz.
This paper
has considered original list of 72 commonly heard money scripts, the factor
analysis revealed four distinct money belief subscales: (a) Money status, (b) Money
worship, (c) Money avoidance, and (d) Money vigilance; these are known as the
Klontz-Money Script Inventory (Klontz-MSI).
In the simple term, these above-mentioned Money Scripts actually explain approach of investors towards Wealth and categorize them in 4 broad categories.
(a) Money Status
This belief links a person’s self-worth to their net worth.
People with this script often feel that having more money makes them more
valuable or respected.
Impact: People who tie self-worth to wealth may
overspend to maintain appearances. This can lead to debt, poor savings habits,
and risky investments. They might also avoid financial help out of pride,
worsening their financial health.
(b) Money Worship
Money worshipers believe that more wealth will solve all
their problems and bring happiness. They often think that having more money
will lead to better relationships, less stress, and more freedom.
Impact: Believing money solves everything can drive
compulsive earning and spending. These individuals may chase wealth at the cost
of relationships or health, and still feel unsatisfied. They’re prone to
financial stress and poor long-term planning.
(c) Money Avoidance
This script reflects a negative view of money. People with
this belief may think money is bad or that rich people are greedy. They might
feel guilty about having money or avoid dealing with financial matters
altogether.
Impact: Viewing money as bad or shameful often leads to neglecting financial responsibilities. These individuals may under-earn, avoid budgeting, or fail to invest. Their finances can suffer due to lack of engagement or avoidance of financial literacy.
(d) Money Vigilance
Money vigilance is about being cautious and alert with
finances. People with this belief value saving, budgeting, and financial
security. They may be secretive about money and feel uncomfortable spending it,
even when it’s necessary. While this script can lead to financial stability, it
may also cause some uncomforted feeling to enjoy the wealth.
Impact: While this belief promotes saving and caution, it can also lead to excessive frugality or anxiety around spending. People may miss out on opportunities or struggle to enjoy their money. However, they’re usually better at budgeting and long-term planning.
Conclusion: Each of these beliefs is shaped by early experiences and can influence financial behavior in powerful ways. These frameworks, like the money script theory, challenge the idea that we as an investor are always rational.
Understanding our own money script can help us make better financial decisions and improve our overall financial well-being. In short, these beliefs act like invisible scripts that guide financial behavior. Recognizing our dominant script can help us break unhealthy patterns and build a more balanced relationship with money.
These factors strengthen my earlier article explaining
importance of choosing right wealth advisor is a critical factor to consider
for balancing our dominant money script and helping us to grow better with less
biased approach.
