A Financial Psychotherapist On Why You’re Bad With Money

I first became aware of the field of financial psychology after a friend recommended Gabe Dunn’s Bad With Money podcast to me in 2016. In one of the early episodes, the trans activist speaks with a financial therapist about the psychology of spending and the money scripts — those unconscious beliefs that shape our behaviours around money — he had inherited from his parents. The entire podcast was a perfect recommendation for someone who had only ever known paycheck-to-paycheck living, and this episode, in particular, resonated deeply with me.

I’d suffered ongoing money-related anxieties for years, yet had never interrogated the reasons why I spent money as if I were allergic to it. I was no stranger to work, having earned my keep doing paper rounds and serving scalding hot cappuccinos to mostly octogenarian patrons at a café in my hometown as a teenager. I worked side jobs and held down magazine internships throughout my university degree, then entered the world of full-time employment straight after graduating. I should have known the value of a pound. And yet.

I liked to spend. Liked to sweetie treat myself. Never wanted to miss out on anything as a result of the very boring issue of not having enough money to do so. I applied warped logic to ridiculous purchases and performed quite impressive mental gymnastics to justify lengthy overseas trips, something we’d now deem as ‘Girl Maths’. I never saw a financial psychotherapist to dig deep into my problematic spending habits, yet I had my suspicions. At the time, I was working in fashion magazines — for those of us not from a trust fund family or betrothed to a finance guy, the industry is a constant exercise in ‘Keeping Up With The Joneses’, on barely liveable salaries no less. Perhaps I was rebelling a bit against my parents’ money scripts, in particular their ‘asset rich, cash poor’ mindset. When I was young, any conceptions about what my life would look like as an adult started to go grey and fuzzy around age 30, so a shortsighted, yolo mindset could also have been at fault. Why save when you could get hit by a bus tomorrow? 

Thankfully, those grey, fuzzy years arrived without my being hit by a bus. While I have matured out of my truly reckless financial ways, money can still be a source of undue stress, and my brain is still quite hardwired to be spendy for reasons of convenience, instant gratification, and indulgence. Not a New Year’s Resolution list has passed by without vague and unmet promises to save more, either.

I turned to UK-based financial psychotherapist and author of the award-winning book Money on Your Mind: The Psychology Behind Your Financial Habits, Vicky Reynal, to explore the psychology behind our spending. Vicky runs her own private practice in London and works with clients who have concerns ranging from excessive greed and generosity to family conflicts over money. We spoke about the way our parents shape our relationship to money (for better or worse), how financial literacy plays into overall wellbeing, and why challenging negative self-beliefs around money is important. This way, we’re not all fated to spend the rest of our lives using questionable mental accounting to rationalise unnecessary purchases, with the exchanging of reductive Girl Math memes being the only salve to our mounting financial anxieties. Because let’s be real, the maths ain’t mathing…

A financial psychotherapist is a psychotherapist who works with people whose emotions are getting in the way of a healthy relationship with money. I see clients who struggle with everything from overspending and excessive greed and generosity to conflict around money in families and couples, as well as worries around succession planning. There are so many different ways in which people use and misuse money to act out emotional issues.

My academic background includes a psychology degree and a postgraduate qualification in psychotherapy. In between the two, I also completed a masters degree in Business. I was fascinated by their intersection. It was no surprise that during the MBA we took a course that incorporated psychology (e.g. behavioural finance). I was surprised, however, to find so few papers about our relationship with money in my psychotherapy degree, apart from a handful of articles that spoke about the therapy fee and what it represented. But money is ubiquitous, and we all have a different and unique relationship with it. It felt like a gap worth addressing because psychotherapists have the right tools to help someone unpack why they are being irrational — so why not apply it to money?

I have a personal reason for pursuing this path as well: my family had its own difficult relationship with money, and I benefited greatly from addressing it in my personal therapy.

I don’t think it’s for everyone. Some people express deep-seated longings, fears, and desires through money, and a course of therapy can help them unpack that and hopefully access some of the drivers of their financial choices.

But others do have a relatively healthy relationship with it. My book, Money On Your Mind, can help anyone become more mindful about the small money choices they make, like: Why did I just buy that? Was I feeling bored/lonely, or maybe wanting to impress my friend? Why did I buy such a cheap gift for that relative this year, and what am I trying to communicate? Why do I become so petty about money with this one particular person? Being curious about our money choices and what’s driving them is beneficial for people, and my book, I hope, helps people do that. And it’s much cheaper than therapy!

Around half of the adult population in the UK says they are anxious about money. But actually, what makes a real difference to anxiety levels isn’t so much the amount of money people have, but how in control they feel of their financial choices. A huge part of that is how much they understand finances. As people’s financial literacy increases, their anxiety about money decreases. Of course, this applies once the “basics” are covered. If we are in a financially precarious situation, that can trigger very primal fears because money is linked to our survival. Its absence (or the threat of it) will understandably bring people to very dark places in their minds and trigger existential fears.

In my experience, when people have tried to change their money behaviour and fail to — despite having tried different strategies or gone to financial coaches and planners telling them what to do — there may be a psychological driver to the behaviour. For example, they might keep digging themselves into a financial hole because they are afraid of becoming independent and separating from their parents, or they might be afraid of abandonment and create dynamics of repeated financial rescues because that reassures them that the other person does in fact ‘care’ about them. Unhelpful, unchanging financial behaviour could be serving a psychological purpose that needs to be understood before the behaviour can change.

The complex web of psychological factors that could be keeping someone stuck often stems from experiences in the past, like childhood experiences that have left an emotional imprint that we struggle to move on from. Being bullied in school could have left us with a desire to fit in as a grown-up — the reason why we often overspend. An early abandonment could have left us feeling robbed, and we find ourselves occasionally shoplifting because we are acting out our deep desire to claim something back. Or overly critical parents could have left us feeling so undeserving that we can’t spend money without feeling guilty.

Our relationship with money is shaped by our parents both directly and indirectly. Directly, because the money lessons they teach us will inevitably have an impact on our future relationship with money (whether we adopt them or rebel against them). But our parents teach us a lot more than that. They teach us about how worthy we are, how relationships are set up, and what we should value or not value in life. So if you have learnt that in relationships you always give more than you receive, you become a people pleaser, and maybe you act that out with money too by being overly generous or putting other people’s preferences above yours. Similarly, if the way your parents raised you left you with a sense that your requests are most likely to be rejected, and you are ineffective, then your low sense of agency might make it difficult to approach your boss and ask for a salary raise. A part of you will be thinking “they’ll say no anyway”. So yes, parents will shape how we are in the world and what we expect from it, and that will play out in our relationship with money.

Money scripts indeed can be changed. Often as we mature as adults, commonly in our twenties and thirties, we go through a process of questioning some of the lessons we have learnt at home and coming up with our own version of them. But this doesn’t always happen, and some people need therapy and a lot of conscious and hard mental work to let go of some of the beliefs they carry from ‘back then.’

We should! We should! We should! For the wellbeing of the individual, and for the benefit of society. Financially literate adults not only feel better about their finances, but they also make better financial choices, and that helps everyone.

There are cognitive biases we can all fall into that distort our rational thinking. Cognitive dissonance is one such bias, when there is a conflict in our minds — a part of us wants something, but another part knows that we can’t afford it — so we feel discomfort. In order to eliminate this feeling, we create justifications that would align our beliefs with our actions, like, “it’s a good deal”. But there are other biases that can get in the way of thinking rationally about indulgent purchases, like our need for immediate gratification. Or, there’s the ‘anchoring effect’, which essentially means that we rely on the first piece of information that we see, like that a dress is priced at £100, so when it’s marked down to £60, we feel we are getting a bargain. This can actually release chemicals in the brain that make us feel good, and we therefore tend to ignore the fact that we didn’t need, nor can we afford, a £60 dress at the moment.

It is an awful term that denigrates women and perpetuates the stereotype of women being bad or irrational with money, or ‘too emotional’. In my experience as a financial psychotherapist, I can tell you that both men and women can fall into the trap of letting their emotions influence their financial decisions.

Don’t be complicit in the stereotype. If you hear a voice in your mind saying  “I can’t do it”, challenge it. What is it that you feel you can’t do? Be specific. Is it that you don’t feel you know enough about finances? Well, then, what stops you from learning more about it? Are there areas you want to learn and understand more about? What have you done about it? Is there a friend who you admire with their finances who you can ask? Have you told your partner or parent, “teach me about investing,” rather than by default delegating that responsibility to them or avoiding the topic and letting your money sit uninvested?

Most adults — both male and female — are ashamed about their finances. Everyone I speak to feels they ‘should’ be better with money, and maybe we can all learn and understand more about finances, but no one is inherently unable to be good with money. We just need more practice and knowledge to get better. And sometimes, we need to be a bit braver and take the first step.

Lifestyle creep describes a situation in which your spending increases as your income increases. This may compromise your ability to save, repay debt, or work towards other financial goals. People who ‘move up’ the financial ladder face a choice. They either increase their spending and use the new financial freedom to indulge in what they always desired and couldn’t afford, or continue with the present lifestyle and use the extra income to fulfil any other financial objectives, like saving to buy a house or repaying loans. People make all sorts of choices when it comes to this: some manage to limit the indulgence to a few extra evenings out or an extra star in their hotel booking for holidays, but for some, lifestyle creep can reach a point in which they end up in a worse financial situation than they started in. They don’t just stop saving but compromise their existing savings. These individual judgements are based on personal goals and preferences, but also on what we grew up valuing and dreaming of, or fearing.

We can regard lifestyle creep as a form of overspending when either the inflation — the extra money we spend to upgrade our lifestyle as our earnings grow — is deteriorating our financial circumstances, or when it isn’t a conscious choice that we are at peace with, but rather the result of one of many emotional drivers, like a pressure to conform, insecurities that have roots in the past, or desires that we haven’t fully understood. Even if it’s not financially threatening. So, we need to take a step back as our income increases and make choices from a more conscious place. Stop and think: are we just spending more because we can, or is it because it’s aligned with what we want for now and aligned with our objectives for the future?

It’s often about a balance. I don’t advocate never indulging. As long as it’s done in a mindful way and we can actually afford it. It’s important to be aware of our long-term goals, but hopefully, we still have a bit of money to simply enjoy. Money that can enable happy moments and experiences.