Your Money Matters By Barry Feigenbaum: Your Money Psychology

Welcome to Your Money Matters, a commentary on our financial lives. My name is Barry Feigenbaum. I am a retired corporate banker who got interested in personal finance about 15 years ago when I was working with insurance companies and asset managers as clients. I retooled myself with education and certifications in the financial literacy space. In semi-retirement, I give lectures to groups about understanding and improving our financial lives. I neither sell nor recommend any products. I describe the financial world in which we live, identify common risks we all may confront, and define the potential solutions to mitigate these risks. I work through my company, Feigenbaum Associates, and you can find my website at: https://feigenbaumassociates.financialeducatorscouncil.org 

I have always been surprised by how little emphasis we put on financial literacy in this country. We talk about our physical health; many of us walk, hike, jog, or exercise and measure the results on a gadget on our wrist or phone. We take ourselves to the doctor once a year for a physical. We go to the dentist once or twice a year to clean our teeth. We see the eye doctor annually to protect our vision. We talk about our mental health and create routines to relieve stress.

We take the car in for a check-up. We take the dog to the vet. But when it comes to our financial health, most of us stick our heads in the sand. Ultimately, everyone needs some form of advice from a financial advisor, either to help us understand our big financial picture or to purchase a product solution that reduces a risk we don’t want to bear.

Money is a funny thing. Economists tell us that it is just a storer of value. That means that we use money to maintain value so we can buy things over time. That’s all it is – a placeholder for what it can buy. Unfortunately, however, money seems to have a psychological component that impacts how we relate to it. It may make us anxious or fearful; some of us aren’t able to hold on to our money – as soon as we get it, we spend it.  

We are conditioned by our past experiences with money. Maybe we grew up with limited financial resources, and other kids appeared to have more. Maybe our families had wealth but lost it over time, and our circumstances changed. People experience all kinds of life journeys that have had an impact on how they see and feel about their financial situations.

So before we can address our finances, before we talk about budgets or savings, we should look at our money personality and ask ourselves, “How do we relate to money?” How do our emotions impact our financial decisions?  

Here’s your homework: Use your favorite search engine and search “Questionnaire on my relationship with money.” There are many questionnaires online. Find some free questionnaires (in which you do NOT have to provide any personal information, your name, or any financial information). It doesn’t matter which ones you complete. The goal is to think about how you relate to money. Complete two or three questionnaires. Be honest with your answers. There are no right or wrong responses. You should stand back and think about how you react in money situations. Look at your money self in the face. And then ask yourself, “How do my emotions and life experiences prevent me from making choices that help me reach my goals? How do my emotions block me from making choices that I know are in my best interest?”

Here are two questionnaires I have used in classes for several years:

• https://fullbalance.co.nz/money-quiz-saving-money-feelings-about

( When completed, just click the red “check my results” box.  There is NO reason to provide your user details. )

• https://www.nerdwallet.com/article/finance/money-personality

(These quizzes are for your personal interest and education alone and should not be used for legal, tax, or investment advice.)

I often describe a person who is momentarily consumed by their anxieties or emotions and then heads to the mall to buy a new pair of sneakers or a new outfit. The person experiences a momentary high when the purchase is made. But when our shopper gets home, the issues causing the anxiety are still there. In the meantime, they have exchanged cash for stuff they really didn’t need and reduced the available resources for their priority goals.

Knowledge is power. Once we understand how we make these money decisions, maybe we will be able to push the emotions aside and make more analytical choices. Because we are human, that may not happen all the time. That’s ok. Don’t be angry with yourself. Keep trying until a more objective decision process becomes your norm when it comes to money. Sometimes, it is perfectly fine to make a frivolous on-the-spot decision; without some fun, life would be boring. But be disciplined in your process. Be aware of your choices. Every time you reach into your wallet, ask yourself, “Why am I making this purchase?” As you focus spending on necessities and goal-driven expenses, you are likely to free up resources for the things that matter most to you.

So, to better understand your own money psychology, complete some questionnaires as I described above. What did you learn? Tell us how you reacted to the results. Please complete our anonymous survey below so that we can get your thoughts and feedback. It will only take a moment and will be very helpful in allowing us to craft relevant future guest blog posts. Thank you!

(This presentation should not be used as a basis for legal, tax, or investment advice. In any specific case, the parties involved should seek the guidance and advice of their own legal and tax counsel and financial advisor.) 

Barry Feigenbaum is a Certified Financial Education Instructor® with more than 40 years of financial services experience who has taught thousands of students in educational, corporate, and not-for-profit settings how to take control of their financial lives.