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Your relationship with money may seem random, but one expert says it holds clues about your childhood — and understanding it can help overcome toxic spending habits.
Vicki 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 growing up will shape who we become,” she said.
For example, someone who felt secure as a child may feel that they deserve good things and are more likely to negotiate a higher salary or enjoy the money they have later in life, Reynal said. Whereas someone who experienced neglect as a child may grow up with low self-esteem and express it through behavior with money.
This can include feeling guilty when they spend money because they don’t feel they deserve nice things, or splashing the cash to impress because they feel unworthy.
“A young child coming up to their parents to show them their doodles — how they react to them will give them a message about how the world will react to them,” Raynal added.
Lack or abundance
Reynal said that “the money lessons we learn growing up” depend largely on whether we grew up in an environment of scarcity or abundance.
“For example, growing up in an environment of scarcity, people who have managed to break out of that economic reality and perhaps in their adult life have managed to accumulate quite a bit of wealth, it’s quite common for them to struggle with what they call a scarcity mindset,” Reynal said.
It’s a thought pattern that fixates on the idea that you lack something, like money. A scarcity mindset means it can be difficult for someone to enjoy the money they earn and worry about spending it, Reynal added.
Alternatively, there are people who grew up with little money but became rich and are now very careless with money.
“They give themselves everything they wanted when they were little, 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 the self-sabotage
According to Raynal, the key to overcoming toxic spending habits is to stop self-sabotaging habitual behavior.
“There are often deep emotional reasons behind a pattern of financial self-sabotage, and these can range from feelings of anger, feelings of unworthiness to perhaps 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 feeling are you perhaps trying to solve by overspending?” she said.
“It already gives you a clue as to what you could do differently. So if it’s boring, what can you replace that terrible financial habit with?”
Reynal said she had a young client who always ran out of money within the first two weeks of the month. She asked them, “What if you were financially responsible?”
The client said they were afraid to risk their relationship with their mother because every time they ran out of money, they would call their mother to ask for more.
“Their parents divorced a long time ago, and the only time they spoke to their mother was to ask for money,” Reynal said. “They were interested in bad money management, because if they started to be good money management, they would have a problem: ‘I can no longer have an excuse to call my mother, and I don’t know how to do this relationship again.’
A financial psychotherapist recommended being “curious and non-judgmental” when looking at the cause of bad spending.
“So sometimes we ask ourselves, ‘How would I feel if I hadn’t actually sabotaged myself financially or if I hadn’t been so generous with my friends?’ It can start to reveal the reason you’re doing it,” she added.
