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Why do I make bad financial decisions?

15 September 2015
3 minute read

making bad financial decisions

Do you pay off your credit card, only to pull out the plastic on your next shopping spree and spend with abandon? Do you swear after each payday that you’ll save a little money… but never get around to it? Or, are you at the other extreme, where you are so concerned with saving money that you never have any fun at all?

Research has shown that people make the same financial mistakes over and over again because their relationships with money are governed by their deeply held beliefs about it. Because of this, a group of psychologists from Kansas State University have developed the Klonz Money Script Inventory, to help us to identify our beliefs and understand how they are preventing us from making the best decisions about our financial futures.

In this blog post, part 1 of our series on money psychology, we look at the different money beliefs we hold and how they affect our behaviour. In part 2, we will look at what we can do to change these beliefs and behaviours.

See if you recognise your beliefs in any or a combination of the four money types defined by the Klonz Money Script Inventory:

Money avoidance


  • I do not deserve a lot of money when others have less than me.
  • People get rich by taking advantage of others.
  • Good people should not care about money.
  • Money corrupts people.

The behaviour:
People with money avoidance beliefs have negative associations with having and spending money. They worry about abusing credit cards or going into overdraft on their bank accounts. At the same time, they sabotage their own financial success by not saving or investing intelligently, and can avoid spending money even on reasonable or necessary purchases. On the other hand, they may spend or give money away in an unconscious effort to have as little as possible in their control.

Money worship


  • Things would get better if I had more money.
  • Money makes you happier.
  • It’s hard to be poor and happy.
  • Money is power.
  • Money is love.
  • I will never be able to afford the things I really want in life.

The behaviour:
Money worshipers believe that an increase in income or a financial windfall would solve their problems. They are known to hoard their money, take unreasonable financial risks or possibly develop gambling problems. They can also become workaholics, over spenders and compulsive buyers.

Money status


  • Money is what gives life meaning.
  • It’s OK to keep secrets from your partner around money.
  • If somebody asked me how much I earn, I would probably tell them I earn more than I do.

The behaviour:
Those with money status beliefs are concerned with the link between self-worth and net worth. They are competitive about acquiring more money than those around them, but they also enjoy owning the things that display their wealth.

Money status people might have low self-esteem and may spend more than they can afford on these outward displays of wealth to create the impression of status. They may also feel anxious or unhappy, or even suffer from health complaints because of their concerns about money and creating an affluent impression.

Money vigilance


  • You shouldn’t tell people how much money you have or make.
  • It’s wrong to ask others how much money they have or make.
  • Money should be saved, not spent.
  • People should work for their money and not be given financial handouts.
  • You should always look for the best deal before buying something, even if it takes more time.
  • I would be a nervous wreck if I did not have money saved for an emergency.
  • It is extravagant to spend money on yourself.

The behaviour:
For those with money vigilance beliefs, money is a deep source of shame and secrecy, no matter how much they earn. These people often lie to their spouses about the cost of a purchase or their overall financial situation. Their hypervigilance about money could lead them to hoard their income rather than investing it so that they don’t earn a decent return on their savings. Even if they have money, their wariness or anxiety can prevent them from enjoying the security that they do have.

Did you see yourself?It is always said that the first step to recovery is admitting you have a problem. If you looked at any of these beliefs and their results and recognised yourself, take heart that you are making progress towards having a healthier relationship with money.

Of course, there are many steps after that first one, and in part 2 of our money psychology series, we will show you how you can modify your behaviour and thinking to have a more fruitful and happier coexistence with money.

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