March 1, 2024

Wealth Matters: Net Worth, Self-Worth and How We Look at Money

This is one of the findings of a new academic study, “Money Beliefs and Financial Behaviors: Development of the Klontz Money Script Inventory,” published in the current issue of The Journal of Financial Therapy.

The study, conducted mainly by Brad Klontz, a research associate professor at Kansas State University, and Sonya L. Britt, an assistant professor there, comes at a time of high financial anxiety among most Americans. The jobless rate continues to be high. And houses, the asset that made so many people feel rich before the recession, have yet to regain their value. In fact, according to the Standard Poor’s Case-Shiller Home Price Index, home prices in 20 metropolitan areas, after some modest gains, fell again in February. For those whose net worth is largely tied to the value of their houses, it could take a long time for their nest eggs to rebound, even if jobs do come back.

Amid this financial unease, Mr. Klontz said he set out to test observations he had been gathering in his practice as a clinical psychologist in Kapaa, Hawaii, for over a decade. He found that some people were under stress about having too little money while others were anxious about losing what they had or felt guilty for having so much. Some people immediately disliked anyone with money, while others would spend their money immediately without regard to the future.

The Klontz study asked 422 people about 72 money-related beliefs and then analyzed correlations among the answers. This produced four broad categories that Mr. Klontz called “money scripts”: money avoidance, money worship, money status and money vigilance. How does he define them?

Those who are in the money avoidance camp share beliefs that make them distance themselves from money. Mr. Klontz said this group may be worried about abusing credit cards. They may believe that they do not deserve to have money and may sabotage their own financial well-being. People in this group tend to have low incomes and net worth. They also tend to be younger.

People who fall into the money worship camp would seem to be the opposite, but their behaviors are equally destructive. They believe that an increase in income or a windfall will make everything better and love the status derived from the things that money can buy. This belief also lands people in debt because they use whatever credit they have to buy things that will impress others.

“They believe money will solve all of your problems,” Mr. Klontz said. “This is the money belief pattern that afflicts the majority of Americans.”

Anxiety about money status occurs when people’s self-worth is linked to their net worth. These people often take bigger financial risks because they want to have the stories of big gains to impress their friends. (Don’t expect them to tell you when those big bets do not pay off.)

The only affliction that did not have an overwhelmingly negative impact on people’s financial future was money vigilance. People with this disorder do not like to share information about their income or wealth, but they also do not spend foolishly. Still, excessive wariness about spending can keep these people from enjoying the benefits of what money can buy. On the other hand, while they did not necessarily have higher incomes, they paid off their credit card bills each month.

“Maybe some anxiety and vigilance around money is good for your bottom line,” Mr. Klontz said.

Not surprisingly, the four money scripts illustrate problems that have less to do with money than with what money represents. But what may be surprising is that the study found few links between who held what belief and their family background, race, gender, education level or income.

The majority of the people rated their highest level of education as either a college or graduate degree. Their income was equally divided into four categories, from less than $30,000 a year to more than $100,000. And their childhood economic status was generally middle class, with only a few reporting that they grew up poor or wealthy. In fact, the only link to family background came from the group that fixated on money as a way to gain status: mostly, they grew up poor.

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