Humans experience many relationships in life, such as relationships with friends, parents, spouses, jobs, and money. The psychology of money examines the relationship between people and money. Helping improve people’s feelings and relationships with money requires expertise in the field of money psychology. In this article, we explain what the psychology of money is and examine the emotions related to money. We also discuss mental health and its effect on people’s relationships with money, and the effect of self-awareness and money psychology on curbing money-related emotions.
What is the psychology of money?
Now we will explain in detail what is the psychology of money. No one is completely rational when it comes to money. Every time we get paid, we believe it is in our best interest to save, but we don’t. We know we need a financial plan but we put it off; We spend too much money out of recklessness or abundance, or too little out of guilt. Our financial behavior often causes us embarrassment. These behaviors and feelings can be well examined and corrected with the help of money psychology.
It is better to think of money as something with which we have a complex relationship. Money psychology examines your relationship with money. Your money (and more broadly your personal possessions) is not a fixed asset, but a complex collection of data, challenges, and opportunities that you have gathered around you and that you interact with and feel about. You make money-related decisions that affect your financial situation, and these effects, in turn, affect your future emotions and behaviors in a two-way interaction. It is a relationship that evolves over a lifetime.
Three key things to know about the psychology of money analysis are:
Emotions play a huge role;
Anxiety and avoidance create a vicious cycle;
From a psychological point of view, you cannot escape from your family and your past.
Investigating emotions and money in the psychology of money
The most important emotions related to money are fear, guilt, shame and jealousy. It’s worth making some effort to become aware of the particular emotions that are associated with money for you with the help of money psychology, because without awareness, they can override rational thinking and guide your actions.
What causes fear? The possible answers are as varied as people’s experiences. But according to research done in the field of money psychology, common fears related to money are: not having enough money, fear of looking stupid, fear of arousing jealousy, and fear of being exposed or humiliated. Those who work in the field of money psychology can provide solutions to curb and improve this fear.
Psychologically, it can be said that guilt and shame are not the same. Guilt is about feeling bad about the negative impact you have had on others. Whereas shame is triggered when you let yourself down or don’t go along with your sense of what’s right and act accordingly. The psychology of money suggests that you feel guilty because you have more money than your friends, or because you didn’t do a particularly good deed, or because you simply earned money. Contextualizing these feelings with the help of money psychology can help you find the cause and improve your feelings about money.
Shame is one of the most common and powerful emotions related to money and finances in money psychology. This feeling is the main reason people avoid doing what they know they should do. It is natural that when you are ashamed of something, you try to avoid facing it.
Here are just a few possible models of embarrassing money-related feelings in the psychology of money:
I do not have enough money;
I have avoided thinking about finances;
I’ve been avoiding doing what I’m supposed to do with my finances (creating a safety net, planning for retirement, budgeting sensibly);
I’m really clueless about all this;
I spend a lot;
I shop when I’m sad.
With the help of money psychology, various feelings related to money can be discovered and improved. Shame in interaction with avoidance of action creates a vicious cycle. When you’re very shy, the natural tendency is to avoid dealing with anything that makes you feel uncomfortable. This avoidance itself leads to more shame and avoidance. From the psychology of money, what happens next is that your taxes fall behind, and it’s been six years since you decided to make an appointment to see a financial planner and it still hasn’t happened. Of course, the solution to this case can also be well examined in the psychology of money.
People who avoid addressing financial needs are often labeled procrastinators and assumed to be lazy or undisciplined. This view is offensive, judgmental and ineffective. The psychological triggers of avoidance underlie what we call procrastination. People who are experts in the field of money psychology can also help people who are involved in procrastination in financial matters. We naturally employ various types of avoidance measures when faced with something that is anxiety provoking or distressing. The trick is that in the short term, avoidance works to reduce anxiety. Because of this, you tend to repeat it again under similar circumstances.
And the problem is revealed in this way. Let’s examine it further with the help of money psychology. You’re thinking about sitting down and looking at your finances and creating a realistic financial plan. But just thinking about it will increase your anxiety level because you fear that you won’t be able to face the fact that, for example, you don’t have enough money saved for your children’s education. From the point of view of money psychology, it can be said that this anxiety leads to avoidance. You procrastinate and distract yourself. At that moment, your anxiety level will immediately decrease, giving you positive energy to avoid. From the point of view of money psychology, we must say that you repeat this cycle over and over again. But any immediate relief from anxiety doesn’t completely return you to your original level of distress. As a result, over time, your overall level of anxiety increases more and more.
Compare the pattern above, explored with the help of the psychology of money, with the pattern of dealing with daunting tasks. When faced with the facts, your anxiety temporarily increases. However, if you tolerate it, the overall level of anxiety will steadily decrease. You have to endure that short-term increase in distress in order to benefit from the long-term reduction in anxiety afterward. In the end, the lesson to be learned is that reality is always your friend.
Other money-related emotions that have been studied in the psychology of money include jealousy, greed, over-excitement, and a social psychological phenomenon called “crowding.” Some of these are more relevant to the realm of professional investing than personal finance. In the following, we discuss other matters related to monetary feelings and the psychology of money.
Mental health and mental illness
Other things that are investigated in the psychology of money to find the root of financial problems are people’s mental health issues. One in three Americans is likely to experience one of the following mental health problems in their lifetime: alcohol use disorder, major depression, bipolar disorder, and ADHD/ADD. Any of these can have a significant impact on personal finances. In the following, we will examine these disorders from the perspective of financial issues and the field of money psychology.
Excessive use of alcohol or other substances can lead to poor judgment, neglect of finances, job endangerment, and secrecy.
Depression can cause disability or even unemployment. Depressed people are often unable to face financial responsibilities due to lack of energy or lack of purpose.
But in the meantime, bipolar disorder is particularly dangerous and should be examined more closely from the perspective of money psychology in order to improve financial relationships. Current prevalence estimates suggest that 2.4% of the population with this disorder is genetically bipolar. It’s also possible that there are many more people who have sub-threshold versions of bipolar or who have the disease in a very mild form and whose problem is never diagnosed. People with mild bipolar disorder genes can experience mild, hard-to-diagnose states of insanity. Energy in this category of people is increased, their inhibitions are reduced and they have many exciting plans. Therefore, they are easily overstimulated and increase their costs. For this reason, from the point of view of the psychology of money, it is a good idea to avoid traveling in this situation, lest you return home with excessive spending on yourself. However, many creative and successful people work very well in these mental states and are successful.
Although this section has little to do with the field of psychology of money, it is necessary to know that we often do not understand the problems and abilities of adults with attention deficit disorder (ADHD/ADD) correctly because the name of this disease is misleading. These people actually do not lack attention. Incidentally, they often have the ability to hyper-focus or hyper-focus, but only on tasks that really interest them. They are able to let go of the boring or mundane. This category of people easily overlooks details and repetitive tasks (think bills piling up, envelopes left unopened, etc.). The solution that money psychology offers to these people is to entrust the daily financial management to someone else. But these can be great for large-scale programming and other tasks. In the following, we will examine other things that make our relationship with money from the point of view of money psychology.
Family and childhood influences never end
Psychological analysis of money from one family to another is special and unique. In this regard, issues such as the following should be analyzed with the help of money psychology:
Which financial issue can be discussed?
Who should have control over revenues and expenses;
What financial responsibilities are assigned to which gender;
How important or unimportant is money in a family?
In addition, there are always stories surrounding money, which is part of a family’s identity. For example, perhaps an entrepreneurial grandfather lost the family fortune and caused excessive conservatism in later generations. Or that privileged parents have been deprived of inheritance. Many things like this can be explored in the psychology of money.
You may experience subtle pressures to right the wrongs committed or suffered by previous generations. Or you may feel an internal pressure to deal with the money mentality in the family. Also, if you are the first person in your family to become successful, you may want to help the rest of the family and ignore your financial needs. In the following, we will explain how to manage money emotions with the help of money psychology.
How to control money emotions with the help of money psychology?
We said earlier that the field of money psychology helps a lot to examine and improve people’s relationships with money, of course, you should also know that emotions are not always bad. They tell you what you’re passionate about and what’s really important to you. They make you feel alive. Anxiety is not always bad. Mild to moderate levels of anxiety motivate you. Harness them to deal with what you need and know that you will feel better when you do.
Self-awareness is the key. Most of our emotional world is unconscious. But if you know what to look for and have a map of the kinds of emotions and family stories that can affect your personal relationship with money, it’s not that hard to find the key. Money psychology can help you to some extent in improving and controlling your relationship with money.
Summary
Few people are familiar with the field of money psychology. Money psychology can help us a lot in examining and improving our relationships with money and financial issues. In this article, we explained what is the psychology of money and we investigated the feelings of people towards money. Likewise, we discussed the effect of family and mental health on people’s relationship with money and curbing money emotions with the help of self-awareness and money psychology. What do you think about the psychology of money and its effect on improving people’s relationships with money? If you have any questions or comments about the psychology of money, let us know.
