The Psychology of Money: What You Need To Know To Have A (Relatively) Fearless Financial Life

The most important emotions in relation to money are fear, guilt, shame, and envy.

• Common fears include the fear of not having enough, the fear of looking stupid, the fear of provoking envy, and the fear of being exposed or humiliated.
• You might feel guilty because you have more than your friends, or you haven’t been particularly charitable, or you’ve had money come too easily.
• Shame is one of the most common and powerful emotions associated with money and personal finance. It is a prime reason people avoid doing what they know they should. It's natural to want to avoid exposure in relation to something you're ashamed about.

• I don’t have enough money.
• I’ve avoided thinking about finances.
• I’ve avoided doing what I’m supposed to do about finances (creating a safety net, planning for retirement, sensible budgeting).
• I’m really ignorant about all of this.
• I spend too much.
• I buy stuff when I’m unhappy.

When you’re filled with shame the natural tendency is to avoid facing whatever is making you uncomfortable. That avoidance itself leads to additional shame and more avoidance.

• Excessive use of alcohol or other substances leads to poor judgment, inattentiveness to finances, employment jeopardy, and secretiveness.
• Depression can cause careers to stall or even job disability. Depressed people are often unable to face financial responsibilities because of a lack of energy or sense of purpose.
• Adults with Attention Deficit Disorder (ADD or ADHD) are usually misunderstood. They have the ability to screen out what’s tedious or mundane. Details and repetitive tasks are easily overlooked (think bills piling up, envelopes unopened). For these individuals, delegating day-to-day financial management is often the best course. 

What can be talked about, who should be in control, what money responsibilities are assigned to what gender, how important money is or is not.

Additionally, there are always stories about money that are part of a family’s identity.

Maybe a serial entrepreneur grandfather lost the family fortune, sparking excessive conservatism in subsequent generations. Or a brilliant parent was seen to have been cheated out of her proper destiny.

• Emotion isn’t all bad. It tells you what you’re passionate about, and what really matters to you. It makes you feel alive.
• Anxiety isn’t all bad either. Mild to moderate levels of anxiety are motivating. Harness them to tackle what you need to face and know that you will feel better when you’ve done so.

The key is self-awareness. Much of our emotional world is unconscious. But it’s not that hard to access if you know what to look for and have a blueprint for the kinds of emotions and family stories that can influence your personal relationship with money.