How to rewrite 3 ‘money scripts’ hurting personal finances

When it comes to clients implementing the action steps needed to move toward their financial and life goals, more is at play than just needing the knowledge and resources to take action. Whether or not we know it, we all run “money scripts” in the background, basing decisions both small and large on these underlying rules. And when these scripts run unchecked, they can hold our clients back from acting in their own best interest, no matter how good the numbers look.

According to financial therapy experts, money scripts are beliefs we hold about money, typically subconsciously, that are formed from our life experiences, often in our childhood. Our money scripts can help us to navigate life, particularly as we are just starting out as independent adults. But as time goes by and we mature and, hopefully, improve our financial situations, the scripts we carry may no longer serve us, if they ever did. While money scripts are typically based on some type of truth, we need to pay conscious attention to updating them over time. We may find them holding us and our clients back from living the life we intend.

Here are three common money scripts that practitioners may encounter in their work with clients. Identifying and addressing them may be the ticket to assisting clients with implementing financial planning suggestions and achieving all of their goals.

Common money script: ‘You must always be saving money’

This script supports most financial best practices such as avoiding high-interest debt, maintaining adequate cash savings, and setting aside enough to retire comfortably. It would not be surprising for most clients who seek out a financial planner to be running some version of this script. The issue arises when it’s held as a never-ending life rule that can keep clients from enjoying the fruits of their labor. At its extreme, we see people with millions of dollars still living like paupers because spending their savings is so psychologically painful.

How to identify this money script in clients. A reluctance to make any type of savings withdrawal is the most common sign that a client is running this money script unchecked. The client may have even reached the goal they were saving for, whether that’s booking their dream vacation or transitioning to retirement. When working with clients who are already in retirement, you may see this expressed through clients with ample savings trying to fit their spending solely within guaranteed income sources such as Social Security, even if calculations show they can safely afford to withdraw from savings.

How to help clients find balance. Practitioners may find it challenging to work with clients on overcoming this script because they may be running it as well. Many clients with a moderately high net worth likely got that way because they have lived frugally, and they probably find some enjoyment in exercising thrift. Convincing them that it is now safe to spend the money that they’ve worked so hard for and sacrificed to save can feel like an uphill battle.

Besides just crunching the numbers to show clients that the math supports the ability to withdraw from savings, consider working with them to create safe spending guidelines. This will help them feel more comfortable making withdrawals without worrying about going overboard. One suggestion would be to establish monthly, fixed withdrawals from retirement savings into their checking account to cover day-to-day spending plus a little extra that can be set aside into a separate savings account to create the feeling of saving. This essentially just moves savings from one bucket to another, but the psychological soothing of still “saving” can give your client the license they need to enjoy more of their money.

Another strategy would be to help clients establish a single premium immediate income annuity with a lifetime payment in the amount that will cover their basic lifestyle expenses, factoring in any other sources of guaranteed income such as Social Security or a pension. Then help them create spending rules that can flex with market conditions to fulfill discretionary spending.

During years when their accounts perform well, they can take out a little more and use it for bigger expenses such as a family vacation or a home improvement. In years when markets are more volatile or their values are down, they can avoid any withdrawals, simply using their fixed income to pay their bills. This can help overcome the fear of running out of money too soon due to a sequence of returns, because they won’t need to make withdrawals during down years.

Common money script: ‘I’m bad with money’

While anyone can run this script, my experience has shown that practitioners are more likely to find it expressed by female clients or by clients who have experienced some type of financial shock such as a bankruptcy or an unexpected job loss. Whether it’s based on a modicum of truth because clients haven’t yet mastered the skill of money management or it comes from a cultural message that still pervades much of our modern society, a lot of women just assume they are bad with money because they don’t engage in behaviors such as budgeting or investing that society tells them are needed in order to be good with money.

How to identify this money script in clients. This is an easy one to identify because most clients will state upfront that they are bad with money. Whether or not that is true, however, may be debatable. In this author’s experience, many of the clients who say they are bad with money aren’t necessarily doing anything wrong with their finances. They simply haven’t had validation that they are doing things well, or they really just need a little bit of education and guidance to gain the confidence to make the money moves necessary to secure their financial futures.

The bigger issue with clients who identify as being bad with money is that this often leads them to self-sabotage their savings goals and/or carry excessive debt due to perceived helplessness. Perhaps the reason they think they are bad with money in the first place is that they have credit card debt. A closer look, however, often reveals the debt came about due to something that was out of the client’s control.

How to help clients find balance. The reality is that there is no perfect way to manage money. Clients who think they are bad with money often just need to realize that there isn’t some magical money management technique that they need to master to feel like they are good. This can be key to helping them move from feeling shame and self-doubt to feeling empowered and confident in their ability to care for their finances. At that point, coaching clients on strategies to help them work toward paying off debt or begin investing is mostly just a matter of education and encouragement.

Common money script: ‘Paying attention to money makes me a greedy/bad/shallow person’

This money script is usually the result of experiences in childhood where an adult either experienced or inflicted emotional pain and money was involved. For example, a parent may have been taken advantage of by a wealthy boss, leading the client to believe that the person’s wealth is what made them selfish or inconsiderate. This is also a script that can originate in faith-based environments if a person is confused about what greed as a sin really looks like.

The issue with this money script is that it can lead to clients avoiding taking even the most logical steps to achieve goals or save on taxes because they think that paying any attention at all to money must mean they are too focused on it. This script can also lead to excessive financial stress, which may be avoided with a little bit of attention.

How to identify this money script in clients. Practitioners are less likely to encounter this attitude in clients or prospective clients simply because the act of engaging a financial planner would run counter to this belief. However, they may see it when working with a couple where the second partner avoids engaging in financial planning or in next-generation clients, which can be a challenge when trying to retain family members as clients upon the death of the primary client.

Signs that a person is running this money script include intentional disregard for money, expressions of derision or judgment toward people who show outward signs of wealth, or an avoidance of the topic altogether.

How to help clients find balance. This script, like all money scripts, is rooted in some truth that practitioners need to acknowledge. It’s true that a sole focus on money for the sake of just getting more can lead to an unfulfilling life, as we witness with Ebenezer Scrooge in the classic Charles Dickens story A Christmas Carol. However, some attention to finances is necessary to live a life without significant financial stress in today’s society. CPAs can help clients overcome this avoidance by validating the script’s foundation while also offering simple examples of financial self-care that don’t require the client to be overly focused on money. This can alleviate some of the stress they probably don’t even realize they are causing themselves.

Examples include helping clients automate bill paying to avoid late fees or credit issues but without a requirement of daily attention to money. Helping them create an automatic investing plan that runs in the background of their lives is another simple solution. This may require a financial adviser who is willing to help select investments that support the client’s values, such as ESG-based mutual funds (environmental, social, and governance) rather than broader index-based funds.

While most clients don’t come to financial planners expecting to work through their psychological barriers to financial success, helping them to identify and overcome any that are getting in the way can be an important and validating way for CPAs to help clients make the most of their finances. Working through their own money scripts and addressing any that need to be changed may be the first step in assisting clients with this work as well.

On a related topic, listen to the AICPA PFP Section podcast episode “How Emotions Affect Financial Decisions.”

— Kelley C. Long, CPA/PFS, CFP, is a personal financial coach and consultant in Arizona. To comment on this article or to suggest an idea for another article, contact Dave Strausfeld at David.Strausfeld@aicpa-cima.com.