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A child saves money in a glass jar at home
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Your relationship with money may seem random, but one expert says it offers clues about your childhood — and understanding it can help overcome toxic spending habits.
Vicky Reynal, a financial psychotherapist and author of “Money on Your Mind,” told CNBC Make It that there are psychological reasons behind our spending habits, and many of these attitudes stem from childhood experiences.
“Our emotional experiences as we grow up will shape who we become,” she said.
For example, someone who felt secure in childhood may feel they deserve good things, and later in life may be more likely to negotiate a higher salary or enjoy the money they have, Reynal said . Whereas someone who suffered neglect in childhood may grow up with low self-esteem and act through the behavior of money.
This can include feeling guilty when they spend money because they feel they don’t deserve nice things, or splashing the cash to impress because they feel unworthy of attention.
“The little toddler going to their parents to show them their scribbles — how they’re going to be responded to is going to give them a message about how the world is going to respond to them,” Reynal added.
Scarcity or wealth
Reynal said the “money lessons we learn as we grow up” are largely shaped by whether we grew up in an environment of scarcity or wealth.
“To give you an example, growing up underprivileged, people who manage to break out of that economic reality and maybe in their own adult lives manage to amass quite a bit of wealth, it’s quite common for them to struggle with what call it a scarcity mindset,” Reynal said.
It’s a thought pattern that fixates on the idea that you’re lacking something, like money. A scarcity mindset means someone may struggle to enjoy the money they’ve earned and worry about spending it, Reynal added.
Alternatively, there are people who grew up with little but became rich and are now very careless with money.
“They give themselves everything they longed for as children, only to go to the other extreme and start spending it quite recklessly, because now they want to give their children everything their parents couldn’t give them,” Reynal added.
Stop sabotaging yourself
The key to overcoming toxic spending habits is to stop self-sabotaging — a common behavior — according to Reynal.
“There are often deep-seated emotional reasons behind a pattern of financial self-sabotage, and it can range from feelings of anger, feelings of undeservingness to perhaps a fear of independence and autonomy,” she said.
To identify them, you first need to determine what your financial habits and inconsistencies are, Reynal said, giving the example of someone who might overspend in the evenings.
“Is it boredom? Is it loneliness? What is the feeling that you might be trying to overcome by overspending?” she said.
“It already tells you what you could do differently. So if it’s boring, what can you replace this terrible financial habit with?’
Reynal said she had a young client who always ran out of money in the first two weeks of the month. She asked them, “What would happen if you were financially responsible?”
The client revealed that they were afraid to risk their relationship with their mother because every time they ran out of money, they called their mother to ask for more.
“Their parents had divorced a long time ago and the only time they spoke to their mother was to ask for money,” Reynal said. “They had a vested interest in being bad with money, because if they were to become good with money, then they had the problem of, ‘I may no longer have an excuse to call mom, and I don’t know how to build that relationship again.’
The financial psychotherapist recommended being “curious and non-judgmental” when considering the root of bad spending.
“So sometimes we ask ourselves, ‘How would I feel if I didn’t actually self-sabotage financially or if I wasn’t so generous with my friends?'” That can start to reveal why you might be doing it, she added.
