How We Develop Our Beliefs About Money

Michael QuanBeliefs, Habits, How to, Misc19 Comments

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What does money mean to you?  This is a question I often poised to my coaching clients.

And, there’s one striking consistency in their answers… they’re all different!

So, who’s right then?  Is money really the root of all evil?  Or, is money an awesome tool that can change the world for the better?

The Psychology of Money

The answer to the question really boils down to our beliefs about money.  If you think about it, it’s our beliefs that shape our view of the world and thus lead us to take actions based on those beliefs.

A belief is nothing more than a strong feeling of certainty, usually backed up (at least in our own minds) with reference points.

Mom 068c

As a young child, I grew up in a loving middle-class family in the suburbs of Los Angeles.  We lived a comfortable lifestyle, but nothing too lavish.

When I was in 6th grade, my Father’s CPA practice was doing well and my mother wanted us to buy a new home in order for us to have access to the “better” schools in the neighborhood.  It was exciting.

We were moving to a bigger home that sat on a large plot of land with fruit trees, had a huge swimming pool, a satellite dish, etc.  Little did I know though, my world would come crashing down the following year.

Some New Reference Points About Money

On a hot August evening, I can clearly remember the dreaded words, “Your Dad and I are getting a divorce,” my mother stated.  “We love you and your sisters very much, but we cannot live together any longer.”

I was in shock, “What the heck just happened!?”  Over the course of the next year, I felt my world unravel at the seams.

After living in our big house for a little under a year, we suddenly had to move into a smaller house about half the size with my Mom and two sisters.  Money instantly became tight, and the financial worry began to set in.

My father had handled all the finances before, so my mother had to figure things out for herself and did the best she could.

The “squeeze” was on.  I can remember some of my clothes having holes, not getting a haircut for months, and having to make my own lunches every day with the simplest of ingredients.  I was poor all of a sudden!*

Developing New Beliefs

It’s funny how your experiences impact your beliefs.  I got to experience both the good side to money, as well as the bad side.

I also observed some other uncles who had done really well with money, and I wanted to be just like them.  So, I made a decision believing that I too could “figure out” money.

That day I made a life-impacting decision – I decided that I would have a net worth of a million dollars before 30.

Million, or Bust

*Here’s the fascinating thing though.  We were actually never poor (in a textbook sense).  We always had enough to eat, shelter, and no outstanding debt.  I just didn’t know.  In my own skewed reality, we had become poor.  (Ever notice it’s much tougher to lose something once you’ve had it, vs. not having it and never having it all?)

Beliefs About Money Drive Our Actions

The beauty of this epiphany is that our reality is simply based on our perception.  Our perceptions are filters that can be created for us unconsciously, or consciously to drive a belief.  I prefer the latter because it allows us to take control of our destiny.

We may not be able to change events that happen to us, but we attach meaning to them.

These emotional meanings shape our attitudes which then evoke actions to better our lives (i.e. striving for early financial independence).

Although my perception wasn’t a conscious choice back then, my burning desire to eliminate all the pain, embarrassment, and frustration of being “poor” was enough.  It created a lasting decision for more than a decade…  I finally achieved my $1M NW goal at age 29.

Everyone Has An Empowering Story

Although your situations may be different, you can still benefit from the power of your beliefs.

  • How do you feel about money in general?  
  • Do you have any strong beliefs about money?  
  • How did you arrive at your feelings?  
  • When, where, & how were you most influenced?

If you find out that you don’t like them, consider how to change them.  This process of introspection is a way to identify how financially conscious you are today which I will discuss in more depth later… we’ve only scratched the surface here!

brain feelings

For now, consider the possibility that your beliefs about money are not hard-wired.  Consider that being able to change your core beliefs will affect everything… your internal drive to save, invest, and share money with those you love.  This is your starting point.

For more thoughts on the psychology of money, check out these other articles:

Mistaken Beliefs About Money

The Psychology of Money

Final Thoughts

The study of the human mind is fascinating to me.  It’s a fantastic way to learn about ourselves and understand the most efficient paths to getting what we want.

When it comes to money, it’s much easier to be in control once you can face the reality of your beliefs.

And, it’s never too late to reconsider them or find others to help you challenge an old or unproductive belief.

Readers, what are some impactful moments in your life when you formed beliefs about money?

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19 Comments on “How We Develop Our Beliefs About Money”

  1. I also was influenced greatly by my parents actions. We never moved up, but always had enough until a large unanticipated expense arrived. Then it would be fighting and complaining for weeks. I didn’t want my kids to live like that so I decided to become really good at a valued skill. Now we have enough to get through any money issue that pops up.

    1. Glad to see you shifted the narrative for your own family. It’s interesting to see people follow their parents actions, or get fed up and carve their own path. The choice is ultimately ours.

  2. Sorry that your parents went through a divorce. My parents went through a divorce too. I always thought we were poor too (we lived in a ramshackle kind of house in a nice neighbourhood) but didn’t realize we were actually middle class. Adversity does motivate individuals to achieve more in life so it’s good you reached your goal at 29!! Often the most successful people are those that have had adversity in their lives and know how to respond to it to their advantage.

    1. Thank you. It’s unfortunate that so many children have similar fates. However, as you said, that adversity can work on their favor of the embrace it. Education is a great start! ?

  3. The only truth I find in this limiting belief is when it becomes a self-fulfilling prophecy. If you truly believe you will never be rich because of your circumstances, then you will never try. You will always be a victim to a vicious system that favors the “rich”.

  4. Money used to be what motivated me, but then I smartened up. I remember asking my daughter who was around 8 at the time, would she rather spend more time with me and have little money, or see me less because I was working but be able to do more things because we had the money. She choose to want to see me more. At that point in time, my life was about making memories not making more money. It’s been many years, I’ve cut back and was able to enjoy the time not only with my daughter but enjoy life itself.

    1. That’s awesome, Dan. It’s nice that you took the time to ask, and even better – you listened! Money only supports so much, but kids need a ton of emotional support which requires presence.

  5. I still remember when I learned my parents lived paycheck to paycheck. The fear of if something happened. I swore my family would never experience that. We are the product of our experiences.

  6. We were really frugal growing up, but I never felt poor. We probably were living on less than our neighbors, but my parents were great at stretching things and finding deals. It almost was a game to do things like go to the grocery and each one of us go in separately to get the free chicken with the coupon that says you need to buy just one other item. I remember that as a kid. So my psychology is that money can be hacked. It lead me to early retirement. Great post.

    1. That’s great that you never felt poor, Susan. It sounds like your parents instilled some awesome money values in your family early on. Kids can teach us a lot about ourselves as adults. They don’t need any money to be happy! 🙂

  7. Hi Michael, Great and interesting post. It’s funny you sent this out today as I’m currently working on our Sunday School lesson involving Debt and Contentment. I’ve learned a lot through the years and one of the things that really helped me was learning that contentment is NOT something that’s found, it is an ATTITUDE.

  8. I too went through that whole, nice middle class life to poor real quick because of divorce, shaped many of my own money attitudes, but also led to a different peer group(big influencer), different life expectations, different life lessons.
    for some things, going through struggle can be advantageous. I like to think having a mix of perspectives did me good. thanks for sharing.

    1. YES! Our primary peer group is a huge factor in how we ultimately “turn out”. Expectations from those we care about are so powerful.

      I’m with you on the advantages of a mixed perspective.

  9. Often it’s adversity or negative experiences early in life that motivates us to be successful. There’s a study that says about one-third of people who had difficult childhoods eventually go on to be successful. The common factor is the support of at least one person who’s emotionally competent, and that person can be anyone the child is close to.

    “Rags to riches to rags in three generations” is a saying in Asia. Motivating your kids to work hard and value money when they grow up with wealth is sometimes harder than being successful yourself.

    1. Yes, adversity can definitely be a catalyst for change. People don’t typically change unless they have enough leverage to move them to a new reality.

      My kids are young, but I suspect what you say about motivating them to value money could be true!

  10. Pingback: Freedom Fighter Interview #19 – Michael @ Financially Alert - Gen Y Finance Guy

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