Identify your Financial Behaviors and Money Scripts to improve your Budget

Our financial behaviors are the daily actions and decisions that shape our financial health. Understanding these behaviors can help us make better financial choices and build a stronger financial future. These behaviors are often influenced by deeply ingrained money scripts—unconscious beliefs about money that we learn in early childhood. Sometimes when we are not connected with our Financial Behaviors they can also bring us feelings of shame and lead to other behaviors that are not becoming. We must be willing, to be honest with ourselves and those around us about our Financial Behaviors to truly be in tune with our Behaviors. Let's explore some different Habits and Money Scripts together!

Spending Habits:

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Action items move away from Impulsive Spending and move toward Conscious Spending.

Tracking Expenses: Use apps like your bank or credit union app, Monarch Money, Every Dollar, or YNAB to track every expense. This will help identify unnecessary spending. You can also do this by downloading your weekly transactions or statements and going line by line to identify them.

None of these options are going to be a set-it-and-forget-it solution. You will need to take the time to set up these apps and check in on them to make sure they are tracking the information correctly and that you are connecting with the data it is giving you.

If this sounds daunting it can be and you can reach out to a professional and have them help you set it up and build a plan. I include Monarch Money with my Picnic and Full Course plans. I also offer this service with my Small plates if your only goal is to set up a tracking and spending plan that works for you.

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Identifying Triggers: Recognize what triggers impulsive spending—boredom, stress, etc., and find healthier alternatives. That sounds a lot easier said than done. Actionable items to work on – Be loud with your budgeting – What does that mean?

• Tell people how you're managing your money, what has been working, and what has not been working, tell people your financial goals and be accountable to them.

• Be specific in what you share.

• If you are asked to go out window shopping as an outing and you know that it might trigger your impulse shopping suggest an alternative. Or leave your wallet and credit cards at home and go out with a small amount of cash.

Creating a Spending Plan: Allocate money for necessities, savings, and leisure. Stick to this plan to avoid overspending. But you can’t just create it you have to review the plan regularly which means reviewing your expense tracking as well. Make adjustments as needed your first Spending plan might not be realistic and by a year into your intentional connection with your finances, you might find that you have more to save or pay down debt with and adjustments are needed.

Saving Practices:

Consistent Saving: Regularly setting aside a portion of income for future needs, emergencies, and goals. This behavior reflects a proactive approach to financial security.

Irregular Saving: Saving sporadically or only when convenient, which can lead to insufficient funds in times of need. This behavior often stems from a lack of planning or financial discipline.

Actionable ways to move toward consistent Savings

Automate Savings: Set up automatic transfers to your savings account right after payday. Or if you are worried that it would be too easy to stop those transfers or move the money right back, then talk to your HR and see if you can set up within your Direct Deposit to have a second account. Consider setting up a savings account at a separate institution.

Set Savings Goals: Define clear goals such as an emergency fund, vacation, or down payment for a house. In this clear goal have a number you need to save each month defined.

Live Below Your Means: Adopt a frugal lifestyle where possible to increase your savings rate. Look into Ratio budgeting to help determine how much of your income to allocate to overall savings some of these ratios might look like this – You take your after-tax income and divide it into these percentages based on categories.

70 / 20 / 10 – 70% of income on daily living so needs and wants, 20% on debt repayment to pay off debt faster, 10% to savings.

50 / 30 / 20 – 50% of income to needs, 30% to wants, 20% to debt and savings.

If you want to make a budget for yourself—in your stage of life, with your income and money goals in mind, my suggestion is Start budgeting and review your plan regularly until you find what works for you.

Debt Management:

Responsible Debt Use: Utilizing credit for strategic purposes, such as building credit history or taking advantage of low-interest rates, and paying off balances promptly.

Irresponsible Debt Use: Accumulating high-interest debt without a clear repayment plan, often leads to financial strain and reduced creditworthiness.

Action items to move toward responsible debt use

 I can tell you this works because I have been in Irresponsible debt use and I have firmly been in responsible debt use for the last 15 years-

List Your Debts: Make a list of all your debts, including interest rates and minimum payments.

Debt Snowball vs. Debt Avalanche: Choose a repayment strategy that suits you—paying off the smallest debts first (snowball) or highest interest debts first (avalanche). If you need help to determine what repayment strategy will work for you there are people out there in this world (like me) who will help you to figure this out.

Avoid New Debt: Resist the urge to take on new debt while paying off existing ones.

Investment Decisions:

Informed Investing: Making investment choices based on thorough research, risk assessment, and alignment with long-term goals. This involves a careful evaluation of opportunities and diversification of assets.

Speculative Investing: Engaging in high-risk investments without adequate knowledge or consideration of potential losses. This behavior is often driven by the desire for quick profits.

Action items to become an Informed Investor

Educate Yourself: Read books, attend workshops, or take online courses to understand investment basics. Check out the Consumer Financial Protection Bureau and FINRA Foundation for educational opportunities. Check with your local library system and see if they offer access to Morning Star at no cost to you.

Diversify Investments: Spread your investments across different asset classes to minimize risk.

Regular Contributions: Make regular contributions to your investment accounts, even if they are small.

Money Scripts: The Foundation of Financial Behaviors:

Money scripts are the unconscious beliefs about money that we learn from our parents, family, and early experiences. These scripts significantly influence our financial behaviors. Understanding and reshaping these scripts can lead to healthier financial habits.

Common Money Scripts:

1.     Money Avoidance:

Script: "Money is bad," "Rich people are greedy," or "I don't deserve money."

Behavior: Avoiding money-related tasks like budgeting or saving, often resulting in financial instability.

How to Change: Recognize the value of money management and its role in achieving financial security. Educate yourself on financial literacy to overcome negative associations with money.

2.     Money Worship:

Script: "More money will solve all my problems," or "You can never have enough money."

Behavior: Constantly striving for more money, often at the expense of other important aspects of life such as relationships and health.

How to Change: Shift focus from accumulating wealth to finding balance and contentment. Set realistic financial goals that align with your values and overall well-being.

3.     Money Status:

Script: "My self-worth is determined by my net worth," or "I must keep up with the Joneses."

Behavior: Overspending to maintain a certain social status or to impress others, leading to debt and financial stress.

How to Change: Develop self-awareness and self-esteem independent of financial status. Prioritize financial health over societal expectations.

4.    Money Vigilance:

Script: "You must save for a rainy day," or "You can't trust others with your money."

Behavior: Excessive saving and frugality, often accompanied by anxiety about financial security.

How to Change: Find a balance between saving and enjoying life. Trust in your financial plan and allow for occasional indulgences without guilt.

Take the Money Scripts Quiz: Understanding your personal money scripts can provide valuable insights into your financial behaviors. Dr. Brad Klontz, CFP, has developed a Money Scripts Quiz that helps identify your dominant money scripts. By taking this quiz, you can better understand your unconscious beliefs about money and learn how to reshape them for a healthier financial life.

Action Step: Take the Money Scripts Quiz at www.bradklontz.com/moneyscriptstest. This quiz will help you uncover your core money scripts and provide guidance on how to address any limiting beliefs you may have.

Actionable Tips if you remember nothing else:

• Identify Your Money Scripts: Reflect on your early experiences with money and how they influence your current financial behaviors.

• Challenge Negative Beliefs: Replace harmful money scripts with positive affirmations and factual financial knowledge.

• Adopt Healthy Financial Behaviors: Implement strategies for conscious spending, consistent saving, responsible debt use, and informed investing.

• Seek Professional Guidance: Consider working with a financial coach or therapist to address deep-seated money scripts and develop healthier financial habits.

• Track your spending: for a month and analyze the data.

• Set up automatic savings.

• Create a detailed debt repayment plan.

• Educate yourself about investments- Make a plan to start small and gradually increase your contributions as you learn more.

By understanding the types of financial behaviors and the underlying money scripts that influence them, you can take proactive steps to improve your financial health. Recognizing and reshaping these behaviors will empower you to make better financial decisions and achieve your financial goals. Stay tuned for our next blog where we'll explore common financial pitfalls and how to avoid them. If you are not already signed up for our monthly resource list then drop your info and I will send out our most recent resource with my Money Script Worksheet to help identify some of your money beliefs.