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Money Has a Funny Effect on People

money controls us
❝Fish could not live without water, but they are hardly students of it. Similarly, most of us show no gratitude to money.❞ -Richard Wagner

Driving my car down the freeway I notice there are some big white dots on the road. I kill the time by trying to figure out what these do. I'm driving an hour to visit a friend of mine who just moved to a new place in the country. We used to live five minutes from each other, but now I have to commute to see him.

I notice a sign up ahead explaining what these big dots are for. Apparently, I am supposed to try and keep two big dots between me and the car in front of me. There must be a problem with people following one another too closely. Well, this is unfortunate. Now that I know what these dots are for I don't get to spend my time trying to figure it out. Now what am I supposed to do?

I guess I'll try to figure out why my friend moved an hour away. He says it's because the rent is far cheaper out there. That's true, I suppose, but I don't think he's considering the cost of gas, his time, and the negative drain commutes have on our lives. I'll ask him about it when I get there in a half-hour.


The short version here is that he claims to have considered all of the aspects of this decision and this move made sense considering everything. I don't believe him, because he didn't last a year there.

He moved an hour away because he made a financial decision without considering the effect on his life. It's not just him. I've known people to get married because their accountant told them they could save a little money on their taxes. I've known people make buying decisions by figuring out what monthly payment they can handle instead of focusing on the total cost. I know people who spent the night in their garage in the winter because the heat in the garage wasn't part of their electricity bill. I know people who spent through a financial windfall in less than a year by telling themselves they have their whole life to save for the future. I know others who live miserly lives because they don't want to spend their money even though they will never run out.

If these seem like exaggerations, or if you find humor in these stories, it might help to understand that we're all a little weird when it comes to money. Perhaps you don't believe you would ever do any of the things I've described above, but I'll bet you've done something in your past that you look back and wonder why you thought that was a good idea.

Money does funny things to us...all of us.

It's Not Just You

One of the most common questions I get asked when people talk to me about money is something to the effect of, "Am I the only one with this problem?"

There's a good chance that there is some element of money that gives you stress. This could be not wanting to think about it, not being able to save, fighting about it, spending too much, trying to fit it, or anything else. You are not alone. What you're feeling (and probably trying to hide), is normal and happens to many other people.

You might be asking how that might be the case. After all, you've never heard anyone else talking about the things that worry you. But, that's only because talking about money is frowned upon in our culture.

As a result, it's very easy to believe that everyone else has their stuff together and we're weird. This is an illusion.

we believe money stress only happens to us

Money is the top stressor for most Americans. Money ranks high as the cause of marital strain. If you think you are the only one with stress and anxiety around money it's only because everyone else is hiding it from you.

we all experience financial stress

Water to a Fish

In a great commencement speech, writer and professor David Foster Wallace opens with a short story about fish.

There are these two young fish swimming along, and they happen to meet an older fish swimming the other way who nods at them and says, "Good morning, boys. How's the water?" The two young fish swim on for a bit and eventually one of them looks over at the other and goes, "What the hell is water?"

The idea is that water is all around fish, and it's necessary for their survival. Yet it's such a part of them that they don't understand what it is or why they need it.

water to a fish

Wallace goes on to say that the point of the fish story is that the most important realities are often the ones that are the hardest to see and talk about. What if we applied this idea to money's role in our culture, and in our lives?

fish don't understand water

Money to a Human

Water to a fish is like money to us. Money is all around us and impacts nearly every area of our lives. Money skills are necessary for survival, but most of us never really learned money skills.

One way you may have heard people learn how to swim is to simply get tossed in the water and have to figure it out. That's kind of how most of us learn about money. We get tossed in and have to figure it out.

Swimming comes more naturally to us than managing money, though. Unfortunately, we are not wired for money.

money skills are necessary because money is all around us

We Are Not Wired for Money

Financial Psychology Institute cofounder Ted Klontz talks about our brains not getting a software update for 150,000 years. The idea is that technology has advanced - and continues to advance - much faster than our brains.

Money has no equivalent in nature. We made it up. Therefore, money skills aren't in our genes. Other survival skills are hardwired in, but not money skills. We have to learn those on our own.

We are wired to get ourselves out of stressful situations the same way we would in nature. But, since there is no money in nature our strategies don't make sense, especially when viewed from the outside in today's world.

Let's look at why this might be the case. Our brains developed in different stages. The reptilian part of our brain is responsible for instincts. The mammal part of our brain is responsible for feelings and emotions. Finally, the scientist, or rational part of our brain, develops last and is responsible for thoughts and reason. The lizard and the monkey form what author and researcher Daniel Kahneman calls the Fast brain. This can be thought of as the subconscious part of our brain, but I call it our animal brain. The scientist, or rational part of our brain, is the Slow brain. It takes longer to make decisions because it's taming the impulses of the animal brain, weighing costs and benefits, and analyzing information.

triune brain

In normal times, the rational brain and the animal brain work together. In times of high stress, that is, when the animal brain perceives a threat, it shuts off the rational brain. The scientist takes too long and the animal brain needs to get out out of the situation we are in.

The animal brain has three tools; fight, flight, and freeze. Fighting is getting aggressive. Flight means getting as far away from the source of the stress as possible. Freeze means not doing anything.

The important takeaway is that when we are highly stressed, our rational brain is not involved in what happens next.

emotional flooding

The animal brain acts alone in these conditions. It's only after the stressful situation is gone that the rational brain comes back in and has to figure out what just happened. I'm sure there are times when you've thought to yourself after a fight or confrontation, "What did I just do?" We say and do things we don't mean when our animal brain calls the shots. We act, quite literally, like children.

When we don't have money, think we might not have money, or otherwise have to think about money, we act as though we are in danger. In today's world, this response looks totally irrational from the outside. But our animal brain can't differentiate between a real threat and a perceived threat caused by money.

Let Go of Your Shame

Don't beat yourself up. I'm giving you permission to let go of your shame associated with money. When you combine the fact that money doesn't exist in nature, we don't learn about it, and we aren't allowed to talk about it, we get the situation that we're in. None of that is your fault.

You've come on a journey. You've seen things. You've experienced things. And this part is important; you behave exactly like someone who was on your journey, saw what you've seen, and experienced what you've experienced, is likely to behave.

we all have a financial journey

Awareness of money's effect on you is your first step toward unwinding any beliefs or behaviors you may need to address. This first step is made easier by understanding that we're all a little weird when it comes to money.

You only have one life. Live intentionally.

Related Money Health Reading:

Blair Enns: Pricing Creativity

Daniel Kahneman: Thinking Fast and Slow

Brad Klontz, Ted Klontz: Mind Over Money

Sarah Newcomb: Loaded

Richard Wagner: Financial Planning 3.0

Note: Above is a list of references that I intentionally looked at while writing this post. It is not meant to be a definitive list of everything that influenced by thinking and writing. It's very likely that I left something out. If you notice something that you think I left out, please let me know; I will be happy to update the list.



About the Author

Derek Hagen, CFA, CFP, FBS, CFT-I, CIPM is a speaker, writer, and coach specializing in financial psychology, meaning and valued living, resilience, and mindfulness.


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