How to Break the Bad Money Habits You Learned From Your Parents
Maggie McCombs, 26, a content marketer and social media consultant based in Lexington, Kentucky, grew up believing her family was struggling.
This post was originally published on LearnVest .
Her housewife managed household finances and kept a very limited budget, allowing almost no money to be spent on anything other than housing and food. For fun, the family went to parks, went to an amusement park once a month, and ate at a budget restaurant three times a year.
It wasn’t until McCombs graduated from college that she found out that her father, a software engineer, was actually earning a decent annual salary. So why was her mother so mean? This was due to her poor childhood on a farm with her father who was a sharecropper and had many children to feed. This sense of lack clung to her – and she, in turn, turned over her monetary concerns to her daughter.
“I have a tight budget,” McCombs says. She can afford to change her lifestyle, but the idea of spending more than the minimum makes her “this manic feeling mixed with fear and arousal,” she explains. She lives on $ 2 frozen dinners, can’t bring herself to replace old clothes, and has set aside investments in expensive essentials like a laptop.
The DNA of your money
McCombs has internalized her mom’s extreme frugality and is now acting out the same model she grew up with. Many of us do this without even realizing it. “Our research shows that the money patterns we see as children are a major source of influence in our financial decisions later in life,” says Edward Horwitz , Ph.D., CFP®, Assistant Professor in the Department of Behavioral Finance at the University of Haider College Creighton. Business.
This childhood imprint of how to handle money works both ways. If you have solid financial habits – for example, spending within your means or paying off small debts in the bud – you can explain this with the smart money lessons you learned from your parents. However, if you tend to make financial mistakes or bury your head in the sand to avoid budgeting and bank statements, Mom and Dad might be the cause.
“Children learn primarily from modeling, and we all tend to pick up on our parents’ behavior,” says Brad Klontz, Psy.D., CFP®, Founder of the Institute of Financial Psychology and Assistant Professor of Psychology at Creighton University. “The attitude towards money can be insidious in the sense that we cannot remember something in particular, but on a subconscious level, children are very sensitive to this and catch this simulation.”
While the environment is the number one engine in the development of our financial habits, genetics also plays an important role. A 2015 study published in the Journal of Finance found that people with a variant of one particular gene, as well as those with a higher degree of financial literacy, make better money decisions than other people. Another 2015 study published in the Journal of Political Economy concluded that about a third of our approach to saving stems from genetics. DNA also predisposes us to more or less self-control, according to a study from the University of Edinburgh . This could be the key to determining our likelihood of spending money without delay.
Leaving your family legacy behind
While you cannot change your genes, you can learn to recognize and stop repeating bad money habits that your parents passed on to you. Here’s your three-step plan to get rid of your legacy of financial mismanagement.
Step 1. Make connections
To cope with the negative financial imprint of your childhood, remember how your parents influenced your monetary beliefs. Ask yourself a few questions: What three things your mom and dad taught you about money? What is your earliest memory of money and most painful memory of money? What are you most afraid of these days?
“Addressing them can reveal deeply rooted patterns,” says Klontz. “For example, if your parents never talked about finances, you could interpret that to mean money doesn’t matter. Whereas people who grew up with wasteful parents who model overshooting risk inheriting the belief that the more things they get, the better. They will probably use the money as an emotional patch. “
Connecting the dots between the habits of family members and your own is a powerful step towards catalyzing positive change. “The realization that you are enacting a scenario based on your experiences with your parents and grandparents can be cathartic,” says Klontz. “Many people blame themselves for not living within their means and saving for the future, which leads to shame. They tell themselves they have money problems because they are crazy, lazy or stupid. ” Knowing that your habits are about parenting and not some kind of inner flaw gives you permission to forgive yourself and develop better habits.
Step 2: dig deeper
Once you’ve identified where your own money problems are coming from, do a detective investigation to find out why your parents had those financial habits that they passed on to you. Talk to them about their own childhood and what their grandparents taught them about money. “Many of us are enacting money scenarios that our family has struggled with for generations,” says Klontz. “Realizing that you are just the next actor in a dysfunctional play provides an opportunity to write a new story for yourself and for future generations.”
Klontz did this after he tackled the monetary problem early in his career, took on large investment risks and subsequently lost a lot in the 2000 dot-com bubble. His mother was always careful and did not want to take risks with money, so he asked her about the family’s money habits to find out where his risky behavior came from.
During their discussion, he discovered that his grandfather had lost all his money during the Great Depression and has never put it in the bank since then, instead hiding the cash in a safe in the attic. “It helped me understand my mom’s concerns about money,” says Klontz. As well as his own behavior. “I came to the conclusion that my family’s fear of investing led to poverty, so I went to the opposite extreme, which led to the loss of everything.” Realizing this, Klontz says he was able to invest more prudently.
Step 3. Update your money habits
Let’s say your parents instilled in the idea that rich people are greedy, and as a result, you engage in self-destructive behavior that undermines your ability to make or keep money. First, ask why you developed this concept. Perhaps you grew up in poverty, and judging wealth was your parents’ way of explaining that it is okay to be disadvantaged.
“Then check the accuracy of that position,” suggests Klontz. For example: some rich people are greedy, while others do incredible things to make the world a better place. I want to be one of those people. I will use my money to give my family a positive experience and to do charity work. It’s okay when I have more money than I need to achieve these goals. Repeat this truth or write it down whenever you find yourself slipping into old habits. Over time, it will replace the thinking that led to destructive behavior.
Just keep in mind that while some people can kick their bad habits on their own, many need professional guidance. “There is a strong emotional connection that holds beliefs in place,” says Klontz. “Because they are so ingrained, working with a therapist can be very rewarding.” Visit theFinancial Therapy Association to find psychologists who can help people change money-related behavior.
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