February 5, 2021 by Tim Mauer, CFP

I’ve got some good news. You’re not crazy.

That’s the message of one of my favorite books of 2020, “The Psychology of Money,” written by Morgan Housel and inspired by a popular blog post he wrote in 2018. It’s a compelling read and the book offers many great lessons, but I thought this particular encouragement was worthy of the fresh slate afforded us all by the start of a new year:

“We all do crazy stuff with money, because we’re all relatively new to this game and what looks like crazy to you might make sense to me. But no one is crazy—we all make decisions based on our own unique experiences that seem to make sense to use in a given moment.”

Author and financial planner Rick Kahler echoes this sentiment, suggesting that “every behavior around money, no matter how illogical it seems to you or others, makes perfect sense when we understand the underlying thoughts, feelings, and beliefs.”

What difference does it make if we just keep screwing up? Can we increase our accountability to ourselves? Here are four steps you can take to help you understand these insights—and screw up less:

1. Grace is always a good place to start.

When the predominant voices in personal finance are known more for schtick-driven judgement and condescension than evidence-based wisdom, the first step in better financial management is actually to demonstrate a little grace—first to yourself, then to others.

Understanding how our financial decision-making is informed, it seems, “might make you feel better about what you do with your money, and less judgmental about what other people do with theirs,” Housel says.

2. Invest in self-knowledge.

A little self-knowledge goes a long way. Simply knowing more about how our brains work around money can help us recognize our own patterns, enabling us to better amplify our good habits and muffle our bad. And because our thinking—conscious, subconscious and unconscious—is driven by our life experiences, a simple walk down money memory lane can do wonders.

Our early experiences in life have an especially indelible impact, says neuropsychologist Dr. Mylea Charvat. “Are we taught anything about how to have a relationship with our finances or do our parents let us simply learn by observing what they do? To that end how secure is our financial situation as a child, growing up in poverty narrows the focus around survival and that can impact how money is viewed even if that person grows up to be financially successful, creating life-long fears about things like homelessness which are now no longer real but feel real due to those early experiences.”

Enter the Personal Money Story. This isn’t psychotherapy, but a simple exercise I created to illuminate those experiences with or around money that have had the biggest impact on you. Start by recalling your earliest money memory. What was it? Whether it was receiving money for your birthday, the first time you got an allowance, or got paid for odd jobs around the house, it’s shocking how fast this memory often comes.

You can download the Personal Money Story worksheet in Excel, type the age of that memory in the top left corner, followed by a short description of the memory. Then, in the far-right column, rate the experience on a scale from -10 (worst possible) to 10 (best possible). As you complete the exercise, you’ll see a line graph populate in the bottom half of the spreadsheet demonstrating the volatility—or lack thereof—that has marked your experiences with money.

Pro Tip: This exercise is extremely valuable for a single individual, but it verges on vital for anyone in a marriage or partnership. This is because financial disagreements are the number one source of marital discontent and the top reason listed for the more than 50% of marriages that end in divorce. I recommend doing the exercise individually, and then sharing your money story with your loved ones (spouses, partners, and yes, teenage or older kids, too). It helps us see the reductive and sometimes demonizing view that may form—“You’re a miser!” “No, you’re a spendthrift!”—and more as we are: the collection of experiences we’ve had throughout life.

3. Identify the Money Scripts working in your life.

Having reflected on your Personal Money Story, what are the “Money Scripts” that have arisen from it? Money scripts, as described by Dr. Brad Klontz, are the unconscious beliefs about money that we learn in childhood that are generational partial-truths that tend to drive all of our financial behaviors, even unbeknownst to us!

The four primary categories of Money Scripts (with accompanying examples) are:

  • Money Avoidance – “Rich people are greedy.”
  • Money Worship – “The key to all my problems is more money.”
  • Money Status – “My self-worth is tied to my net worth.”
  • Money Vigilance – “I’ve got to save for the future.”

As you can probably imagine, of these categories, the first three have a tendency to lead to bad financial decisions and poor outcomes (pun intended). To learn more—and even take a Money Script Assessment—watch this five-minute video from Dr. Klontz.

4. Engage an outside sounding board.

The final step in this process is to take a bold and vulnerable leap beyond your own self-analysis to invite someone else’s insight. Because personal finance is more personal than finance, we have inherent blind spots and scripts that we’re unwilling or incapable of seeing. That’s why, despite the fact that I’ve logged over 20 years in the business and education of financial planning, I still have my own financial planner.

Of course, the challenge then becomes who you choose as a financial planner—because a lot of people go by some similar title while engaging more in the business of sales than advice. In short, I recommend you only work with someone who is educated, credentialed (the CFP®/Certified Financial Planner™ mark is the minimum standard), experienced (10-15 or more years), and most importantly, someone who commits to only ever acting in your best interest as a full-time fiduciary.

Isn’t it nice to know that there’s a perfectly good explanation for your less-than-optimal financial decisions? And now you can do something about it.

This commentary originally appeared January 10 on Forbes.com.

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