Episode Transcript
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(00:50):
Aloha inspired Money Maker. Thanks for joining me
today. If this is your first time here, welcome. If you're a
returning viewer or listener, welcome back. I'm so excited
that you're here with us. Money is emotional. We
like to think that we make financial decisions based on logic. But
in reality, biases, emotions and subconscious beliefs
(01:12):
often drive our choices, sometimes in ways that work against
us. It's not just about what you know, it's about
how you behave. And behavior is hard to change even for
really intelligent people. Most of us
don't make money decisions on spreadsheets all the time. We tend
to make them at the dinner table, in stressful moments and under the weight
(01:34):
of past experiences. So today we're going to dig into
the psychology of money, exploring the emotions
and behaviors that influence financial decisions. Our expert
panel, Saundra Davis, Martha Menard and
Mariko Gordon are going to break down cognitive
biases, money scripts and emotional spending,
(01:56):
among other things. I hope that we're going to answer questions
like why do we hold on to losing investments? Why do
we spend money that we don't have? And how can we align our money with
our values? So stay tuned. This conversation might just change the way
that you think about money forever. Before we jump in, this episode
is brought to you by my financial advisory firm, Runnymede Capital
(02:19):
Management. I want to invite you to take advantage of our three
minute financial plan. You can go to
InspiredMoney.fm/GetPlan, answer a few
questions. It just takes three minutes and you'll get a personalized
snapshot to help kickstart your financial
journey. So don't miss the opportunity. Let's welcome
(02:40):
in our expert panel. I'll start with
Sandra Davis. And you're going to see that our panelists
today are a lot of things. Saundra is a good example
of that. She's a master certified coach, Master's in Financial
planning. She has a coach training program of accredited
personal financial coaches. She's a financial behavior
(03:02):
specialist. She's a U.S. navy veteran, financial coach,
educator, consultant, and she's nationally recognized for her
expertise in financial coaching, financial therapy and addressing
the racial wealth gap. She's founder of Sage
Financial Solutions, a training organization
and she serves as the director of Financial planning programs at
(03:24):
Golden Gate University where she develops and facilitates financial
capability programs and coaching certifications to
promote equitable access to high quality financial guidance
for all. Welcome. And I have to
mention, you're also a mindfulness practitioner and
certified teacher. Yes, Andy,
(03:46):
I've lived many years, Many years. I mean, you know,
I've become all of these things over decades. So, yes, thank you.
It's really great to be here with you. I love it. And you're sitting
at a winery today. I'm actually, I'm actually at a winery.
The. The disruptions to my home today made it
impossible for me to do this conversation with y'all from my
(04:09):
home. So I got in the car and I came up to the winery
that my son manages in Rode,
California. Yes. There is a little town called Rodeo,
California, and that's where I am. There's a little winery up here.
I love it. Our next panelist, Martha Menard,
PhD. She's a behavioral scientist, financial
(04:30):
coach and researcher. Her background is in
clinical psychology and behavioral medicine. As a principal
consultant at Cascadia Financial Health and an
adjunct professor at Golden Gate University. She helps people to
build healthier relationships with money through coaching, education,
and evidence based financial strategies. And with this theme
(04:52):
of being a lot of things. You're also a licensed massage
therapist, Martha, welcome. I
am. I actually have a lifetime achievement
award for that from the American Massage Therapy
association, but I don't currently practice
this anymore except on my husband.
(05:14):
Very cool. Very cool. And Mariko Gordon
is back on the show. CFA barely
recently minted a certified financial planner. She's the
CEO of Uzume LLC where she provides
financial planning and consulting services to individuals and
families. She previously founded and built Daruma Capital
(05:36):
management into a $2.5 billion firm with a
distinctive and non traditional approach to investing. With over 30
years of experience as a small cap stock picker, she now helps
clients navigate personal finance, entrepreneurship, and life
transitions, drawing from her expertise in
business investing and her multicultural heritage.
(05:58):
Rico, you've been on the show before. Welcome back. You're also a
poet, hypnotist, and hula dancer. Yeah, that's
right. It's great to be back. It's much fun.
Do you use hypnosis.
Martha? I'm sorry? You asked a question. Oh, I just
(06:21):
said we're a very talented group here. Oh, yes, yes. Yeah, no, I do
use hypnosis and also just understanding some of the
neuroscience that support which explains why hypnosis
works can also help with figuring out the psychology
of our money stuff, so. So
there's actually a lot more of an overlap than one may think.
(06:45):
I'm so excited to have all of you here. I'm your host, financial advisor,
and Hawaiian musician. We are all multifaceted,
which I think is going to bring lots of perspectives and richness
to this discussion about money and psychology. Let's go straight
into segment one. Cognitive biases
significantly impact financial decisions, often leading to
(07:06):
misjudgments. Common biases like confirmation bias,
overconfidence, loss aversion, and anchoring shape how we
interpret financial information and act upon it. For
example, confirmation bias leads investors to focus on
data that aligns with their beliefs, ignoring contradictory
evidence. Overconfidence bias results in frequent high
(07:29):
risk trading, often with negative outcomes. Loss
aversion keeps investors holding onto losing stocks too long,
hoping for a rebound, while anchoring bias skews value
perception based on initial prices. Awareness is the first
step in counteracting these biases. By recognizing
patterns, diversifying investments, consulting outside
(07:50):
perspectives, and applying structured decision making methods,
individuals can make more rational financial choices.
Techniques such as dollar cost averaging and engaging with
advisors and help counter the emotional influence on
decisions, paving the way toward better investment outcomes and
financial stability.
(08:14):
Martha, why do so many of us make irrational
decisions when it comes to money? And why are cognitive biases
so difficult to overcome?
Because I think financial decisions you
mentioned earlier, fundamentally decisions we
make about money are really emotional decisions.
(08:36):
And we just use
reason and logic as the window dressing to rationalize
the emotional decision we've already made.
And they're
very immediate, very rapid.
Hmm. Saundra, your thoughts like these cognitive
(08:58):
biases, do they also contribute to the racial wealth
gap that we see? Yeah, absolutely. And to
build on what Dr. M is saying is that so often
we don't even know that we have them. I think that's the biggest factor
and the deepest awareness for me. So often we don't
even know that we have the bias, and so we're not looking out for
(09:20):
it. I noticed in your intro you said that, you know, sometimes very intelligent
people still struggle with the psychology of money.
Because, you know, I would say the more intelligent
you are, the more you can actually fall victim to some
of the biases. Because we think we know, we think we've got
it. And usually that's based on our past
(09:42):
beliefs that, you know, we might not even, might not even know are
there. So we think about it in the context of the racial wealth gap. You
know, black people, black people in the diaspora, literally all
over the world, experience a different
relationship with resources because of the
history of the African diaspora. And so
(10:05):
when we have an embedded struggle with
self worth based on what other people have put upon
us, it can certainly cause us to feel it shows up in ways
like we have to do twice as much to get half as much. We have
to be twice as good to have half the opportunities. So those
types of things become Part of our DNA, if you
(10:26):
will. And then we behave in ways that maybe are
harmful by believing something and having a bias that
isn't necessarily not only the actual truth, but
isn't even really our truth. So where do we start? We have to
identify what potential biases are so that we
can identify where we are right now.
(10:52):
So I think Martha was going to jump in with something but I
was going to leave it to Martha and Mariko to say a little bit more
about that. I'd love to hear
what Mariko has to say about that. So I have
actually nodes the grand. No,
I just, you gave me the opportunity and I just leapt at it. So
(11:13):
I'll let me, I'll. I will say my piece quickly and, and
get out of the way. I have a very practical suggestion, Andy, because
that is, is Morgan Housel's book the Psychology of Money. I
think that's a great way to understand things and to also
create the kind of gap in self awareness that allows you to maybe catch
yourself before you, you, you fall into something. But I think it's a really accessible
(11:36):
book and it's a great combination of both
explaining the psychology and our, you know, our brains are wired
for our, the evolution of our brains has trailed the
evolution of our society and technology with also
just practical investment takes on it.
So your, your assignment is to go read the book. Yes. A
(11:59):
good Martha, your thoughts. And I just
wanted to point out that one of the things that also
can make
people kind of fall back on cognitive biases when they're
making financial decisions is when they're under
stress. If you are a person
(12:21):
who is under resourced,
not only the, the cognitive
biases that you might hold, but just,
just the way that stress affects our
brains can make
us, can make
(12:44):
us make
poor financial decisions. There
is a really well known psychology
study involving children, the
marshmallow test. Are you familiar with that?
Basically.
(13:05):
So basically the researchers gave children
one marshmallow, told them that they were going to leave the room for
a few minutes, they could resist eating the
marshmallow, that they would get a second one if they
waited. And it was a study about delayed
gratification. And then they followed up with
(13:28):
those kids later in life. And the kids who
could delay gratification and
you know, sit on their hands instead of eating the marshmallow right away
did better kind of across the board.
There were some issues from a research perspective with that.
But one of the things about that study
(13:52):
as people have looked at it a little more critically, there is a
tendency to Blame people
for not being able to delay gratification.
But if you've grown up with financial instability,
it can make a lot of sense to go ahead and eat the
(14:12):
marshmallow that's in front of you instead of, you know,
hoping that there's going to be a second one there. When your experience has been
that, well, maybe it will, maybe it won't.
So, you know, we just,
I think as, as financial
professionals, we want to be careful about labeling
(14:33):
people. And sometimes what seem like poor financial
decisions are actually quite rational given somebody's
circumstances or history. So this
very individualistic based on your own
experiences. I want to ask everybody the same question.
What's one cognitive bias that you've personally
(14:55):
encountered in your financial journey and how are you able
to overcome it? Saundra? Yeah,
so mine is, there's a list of them, right. I'm going to go with the
recency bias, right. And so the thing that just happened
most recently is the thing that I
anchor to. Right. And there's also the anchoring bias. But the
(15:16):
recency bias is that things that have just happened are
likely to continue to happen. I know Dr. Martha has a much better way of
saying that. That's how I understand it. And so how that
affects me is that I was raised with a mother who was
entrenched in deep poverty. She was one of 12.
And so every time she made money, she
(15:38):
rapidly spent it. And that's how I was raised. And her philosophy
was there will always be more money, right. So she could always get a second
job, she could get a third job or a fourth job to do whatever she
had to do. I did the exact same thing. So
I had to make a different choice to, you
know, as Dr. M pointed out earlier that about that emergency fund,
(15:59):
I had to. So there's that thoughts behave.
Thoughts, beliefs, behavior triangle, right? That
those three things kind of perpetuate our
beliefs, our behaviors, and how we think about money. Sometimes we're
able to change how we think about it. Sometimes we're able to change
what we believe about it. And sometimes we have to focus on the behavior.
(16:21):
In this situation, I had to focus on behavior, so I had to
force myself to save. Even with a master's in financial
planning, I had to force myself to save because it wasn't part
of my belief system system and it wasn't part of my bias
and how I operated. How about you, Mariko?
Wow, so many biases. I'm probably guilty of all of
(16:44):
them. I would say as
an investor, you know, and a more value
oriented investor Right. You have
to. One of the things you had to learn is, and is,
you know, it's very easy to let your winners, you know, to
(17:04):
be trimming your winners and reallocating to your losers, which, but
you also have to make sure that your losers are not going to be lost
forever. And so it's not that thing where you wait for
it to get back and break even and then sell it. Because usually by then
if it's actually sort of, if you're, if you have a dead cat bounce, fundamentally
that moment, you know, the company's doing better, it will continue to do better. So
(17:26):
it's not about just getting out, but it's just interesting to be
able to have to overcome those
knee jerk instincts and really look at what's going
on fundamentally in, with the company. And you know, and
I had very long holding periods. I've held stock, our average holding period was three
years. That seems really long now. I've held stock as long as 10 years.
(17:48):
So that those, those were the things that, that the,
the itch is, is
to, to, to, to, you know, take risks to, to
trim winners and, and put money towards losers. And one of the ways I
overcame that is actually to, to have a whole study done and data to look
at and see that and then we could actually measure when
(18:11):
we were falling prey to those biases.
Follow the data. How about you, Dr. M?
Definitely anchoring bias. I
mean this is like a well known marketing trick.
I have to always remind myself when I see something
(18:32):
that's, oh, it's on sale this week for
$149. That
9 gets me every time. I have to remind myself
we're really talking about $150 here. So
just kind of reminding myself to, to, to round
up. It's a good one. Yeah, I have a hard time
(18:53):
passing up a sale even when I don't need it, but
that's me. All right, let's go to segment two.
Money scripts are subconscious beliefs about money usually
formed in childhood. Financial psychologist Brad
Klontz coined the term to describe how these ingrained beliefs
impact financial behavior. For instance, people with a money
(19:14):
avoidance script often see money as negative or stressful,
leading them to neglect finances or avoid discussions about
money. Money worship, another common script, leads
individuals to believe money can solve all problems, often resulting
in compulsive spending or hoarding money. Status scripts tie
self worth to net worth, pushing individuals toward excessive
(19:36):
spending to signal wealth. In contrast, money vigilance
centers on frugality and saving, sometimes creating anxiety
around financial decisions. Techniques for reshaping these
scripts include self reflection, mindfulness and
reframing beliefs. By recognizing and modifying
unhelpful money scripts, individuals can build healthier
(19:58):
financial habits that align with their goals and values,
promoting financial well being and stability.
If you all don't mind me getting a little bit personal, Saundra, when you were
15, your mom could no longer afford your family
home. How did that influence your financial behavior as an
(20:22):
adult? Well, let's be very, very specific.
My mother sold our home and
we moved from a very comfortable living
in San Francisco, California, in what's known as the Sunset District, one of
the premier districts in the area, into a studio.
(20:42):
And it was very challenging. What it did for me
is the lack of security. So for
me, security was not real. So it didn't exist and money
certainly didn't buy it. So having money didn't associate, didn't
connect to security for me because I didn't believe security was even
possible. So what that meant is that as I got older and
(21:04):
was managing my own financial life, I didn't think
about saving for the future. I took care of myself
now. I took care of my family now. So even when I made a lot
of money, I wasn't keeping the money that I made. So that was the biggest
thing. But the most, the most dominant thing that it impacted was
going from being a very secure, stable and quite
(21:25):
sheltered young person to actually being
an unhoused teenager because I was at 16
years old, unhoused. When my
grandchildren got to that age, I actually
bought a house. I never wanted my grandchildren
to be, to be moved out of their home. And so granted
(21:47):
they pay the mortgage, my son pays the mortgage and all that, but
the impulse for me to buy the home was
very, a dominant part of what was going on for me. I really
didn't realize it at the time that I was actually
housing my 15, 16 year old self right along
with providing for my extended family as well. Thank you
(22:08):
for that very real example. Dr.
M. You also experienced financial instability
as a kid. I've heard you talk about there were times when you were
eating bologna sandwiches. Can you talk about your
experience? Sure. I would
say the, the money script for me, how that affected
(22:30):
me was that I tended to be
money avoidant when I was younger. Money was just,
money just kind of happened.
I didn't feel that I have any over that.
And
(22:51):
definitely, definitely learning
how to save money was really something that I had to learn,
not something that my parents modeled for me at all.
And I would say
again, very similar to Saundra, even When
and I was making good money, I wasn't
(23:14):
holding on to it, didn't always have a lot to, to
show for it. And so
you know, part of becoming a financial coach was
really pursuing my own passion to be better with money
and, and personal finance. And
(23:35):
it's part of what I love about coaching is basically
being a resource for other people who are also
on that journey. With regard to these money scripts,
are we trying to completely reprogram ourselves or is
it more identifying
so that we understand how they influence our decisions and then
(23:58):
can make little micro adjustments? I think it's important
to understand your money lineage. That's one of
the things that I do with my clients is there's a questionnaire we kind of
map out the family tree and the money stories and memories
associated with them. But I, I think that's really important
to understand where you come from and just to take the time
(24:20):
to do that can help you see how that has
influenced it. It's really an eye opening exercise. And
just to share my story. I grew up first 10 years in the
French Caribbean. My, my parents had a rental car business. I grew up in the
business business. My dad blew up the business and growing up I
had this thing where you know, I'm not, I'm, I have to be hyper independent,
(24:42):
completely self sufficient. I'm not gonna, you know, not rely on, I wasn't
one of the, you know, I didn't self raise myself to be like, oh, you
know, your husband. Will take care of you or your. Dad will take care of
you. It was like nah, I gotta take care of myself. Right.
So when you understand that where the scripts come from and
why it helps you see your decisions in a larger
(25:03):
context. And I think it's really helpful to take that time and just map
out the family history. Can you do that with your
clients? What does that look like?
It's literally a questionnaire just going through the money
stories and the money memories and then we go through it together. And
(25:26):
oftentimes as we're working on things we can connect the dots
about like certain decisions or certain, certain looking
at how, how the world is viewed and how that
informs that. And because people can have very different
family come from very different
money belief systems and which, which
(25:47):
often leads to conflict in the, you know, between the parents that the kids
live with. So you know, things like that are very, can be very hard helpful
to see. I think Dr. M was going to say something.
I was just going to say that
bringing these subconscious
(26:09):
emotions and scripts and beliefs bringing them
into conscious awareness. And allowing yourself to be curious
about them, I think
reduces their emotional power over of
us. So you can kind of take a step back and
be able to, to, to make a decision that's a little
(26:32):
more grounded in reality, in your current reality,
instead of, you know, your past.
And I'd also like to add, when we talk about the money
scripts and the money types from the, the,
the, the inventory that the Clonces and Rick Kaler
did, I think that it's really important to
(26:56):
recognize that for instance, in the
black community, if someone doesn't dress
wealthy and try to enter through the front door,
there's often, you know, coming through the back door. So
I think it's important to recognize that something that we might call a
script is actually a coping mechanism.
(27:18):
So while it might create, you know,
an anchoring bias, it might create a money script. It may
not be that individual's belief,
but living being a system within a system within a
system. And often when it's a system that thrives on the
oppression of people of color and people who have experienced poverty.
(27:40):
You know, Dr. M talked earlier about the marshmallow test.
You know, since we're dropping books, I'm gonna follow Mariko on this
Scarcity. The book Scarcity talks about how difficult it is
to make good financial decisions when you are in financial
distress. And he even goes as far to say it's, it's, it's often
impossible. So when we judge people and say, oh well, just delay
(28:03):
gratification, just, you know, it's very easy to say those things when
you're not the person but who's grappling with day to day
survival or lack or scarcity. So I just think
anytime we apply biases, anytime we apply
these surveys that have a
(28:23):
certain way, like money habitudes is another one that does a really
good job of helping us to explore what we believe.
But when we start to label ourselves as like avoidant
or status or all of those things, that we
recognize that it's our system within
a system within another system. So as
(28:45):
a coach and as someone who trains coaches, one of the things that we really
focus on is how do we do that with the curiosity that, you know, we
heard Dr. M bring up. And then also in a judgment free,
shame free zone.
Anybody else where there's. Insightful, happy curiosity,
right? So that's the first thing is dealing with shame, which is, you know,
(29:08):
the judgment, self judgment. And in order to be able to
open up and
be curious and when you can open up and be
Curious. The information that you're able to see
is so empowering because then you can make decisions from a grounded place
and from a place of knowing, like a reality based place.
(29:30):
And, and that is always step one.
I love it. Let's go to segment three.
Emotional spending often arises from triggers like stress,
boredom, and social pressures pushing individuals toward
impulsive purchases. Stress and anxiety can lead people to
spend for temporary relief, while boredom often drives shopping
(29:54):
as a form of entertainment. Social pressures, including peer
influence and social media, also play a role.
On platforms where idealized lifestyles are constantly
showcased. Comparison often leads to emotional spending as
people aim to match perceived social standards. Targeted
advertising heightens these impulses. Algorithms customize
(30:16):
ads based on user behavior, presenting appealing offers that
align with personal interests. Strategies to manage emotional
spending include establishing a budget to prioritize essential
needs, implementing cooling off periods to reduce impulsive
bias, and practicing mindfulness to understand spending
triggers. By developing mindful consumer habits and
(30:37):
avoiding the financial pitfalls of emotional spending, people
can gain greater control over their finances.
Martha, how does behavioral science explain the dopamine
driven satisfaction we get from spending
money? Oh my gosh.
(31:01):
Well, there
can be, there can be a lot of, a lot of
pathways to that. It can
be, you know, buying something
new, posting your outfit of the day on Instagram
for the, the likes and the shares. It can
(31:24):
be the satisfaction of finding a
bargain. You know, if you're a thrifter, a thrift
store shopper like me, there
can be, there can be a lot of different, a lot of different
pathways there. Saundra, you
have stories, working with clients to share, I think.
(31:46):
Yeah, absolutely. One of my very first clients.
I've been in this field for 20 years now. I was a career changer into
this field and one of my very first clients. It literally took us
20 years to get the budget. I mean, sorry, not 20 years. I was in
the field for 20. It took us a full year to get the budget. And
the reason it took us full year to get the budget is because she kept
(32:07):
having emergencies in Ann Taylor. And every
time we get, she said, oh, well, that month isn't a normal
month. That month, we can't, we can't count that month. So we were trying to
find a baseline, right? Using the month, picking a month, using that month
as the baseline, she said, oh, no, no, no, that wasn't a normal month. Some
things happen. And so finally, after we did all of this work and
(32:28):
it was a lot of internal work. Personal finance.
Tim Mara has one of my favorite quotes. Personal finance is more
personal than Finance. And the way that I describe that is
that, you know, our goals are
not financial goals. Our goals are fine. Our life goals with a
price tag, life goals with a dollar amount attached. Right. And
(32:51):
so when we got to what was really important to her, what her
status was in, in her family, in her community, those
were the things that drove a lot of her choices. And she wasn't living
out what she thought, thought her life should look like. So once we
got through all of that, we got to the point where not only did she
have an emergency fund, she purchased a home, she had a baby,
(33:13):
she did all of the things that she wanted to do, but we had to
start with what really matters most. And so it's very easy
to trivialize it. Say you got to know your why, you got to think about
your money mindset. Those things are very frustrating for me because
it trivializes what people actually go through
in navigating the system that
(33:34):
they're in. Right. Personally, within their family and in the larger
society. And right now, my most requested speaking
topic is freeing your financial firefighters. And
it's a concept of internal family systems that firefighters are
protectors that run in when they're trying to block
the pain that an exiled part of us is
(33:56):
experiencing, that traumatized young part of ourself.
So it might look like shopping, it might look like hoarding, it might look
like over saving. We often, you know, demonize the spender
and elevate the saver when saving can be
just as drastic and
counterproductive if. If done from this
(34:17):
same place, this wounded place. And so I just think that it's important,
important for us to recognize what the patterns are. And this is where the
mindfulness comes in. And we'll talk about that later.
Marika, Whether it's investing. Oh, go
ahead, Go ahead, Martha. Saving is just
(34:38):
spending and what you're saying,
Saundra. I see that a lot with people
who are newly retired or sometimes even
later in retirement, you know, the,
the message that they've been heeding all this time has been
to, like, save, save, save. And now that they're in the
(35:00):
place where, you know, they've reached the, the.
They've reached the, the goal post, you know, that
they were saving for. They have trouble spending the money that
they've been saving all this time for exactly this thing, you
know, so. Yep, I, I like to
tell people that saving is just deferred spending.
(35:23):
I like that. Mariko, whether it's
shopping or investing, how do you approach financial
decision making to remove emotional
biases? I don't think you
can and I don't think you should. I think our
emotions and our body
(35:45):
wisdom are an important part of the decision making. And
if you take it out and because what
can your subconscious mind also just takes
in and is more aware of just what your analytical conscious mind can, can take
in. But I think, you know, if you just strip out
emotions, you end up with a lot of bad decisions. I think that's
(36:07):
been key. So, you know, and I
think in our world that is very quantitative and
very, you know, very stemy, right? There
is a sort of false precision
that can come through calculations when all the
inputs and the outputs of the, you know, we live in a very uncertain, very
(36:29):
dynamic world. We have to get comfortable with ambiguity and uncertainty because that's the
only thing we can be sure of. So by definition,
any of our decisions, at least investing,
you know, are based on very imperfect, ever
changing situations. But I really think you have
to have an emotional and
(36:51):
body piece embedded in your
decision maker for it, for it to be healthy. In terms of spending though, because
I do sort of feel the psychologies around both of those anymore are all different.
I have a friend who's a weight loss coach and we, we, we did a,
a podcast talking about how similar the thought patterns
are. You know, you eat that brown, you're in a scarcity mode. You're
(37:14):
not going to be eating, you're only eating kale three times a day, right?
You see the brownie, you break down because you had a shitty day and boom,
you're like, that's it. Then you, then you eat the whole box of Oreos because
you've already blown your, you know, your, your thing, right? So it takes
up so much cognitive
energy to, to sort of, you know, discipline yourself to only
(37:35):
eat kale. And then when you blow it, it's like a damn blowing. And it's
the same thing with, with, with spending. So part of it is just kind of
really learning how to, how to see whether you're, you know, scarcity
mindsets and, and you know, just, just
what, what does that look like? But anyway, there's hu.
(37:55):
Between, between eating our eating stuff and
our money stuff. And I think we would see the same, whatever our
patterns, our baggage, we'd see the same things in our relationship with stuff. It's all
a fractal of, you know, kind of the, the filters. That's
as Saundra has put it, you know, of what we've grown up with in the
system within the system within the system. And we're also operate in A
(38:18):
society that just really wants us to consume, you know, all the message
we get. Same way like, you know, with all the messages we get about ultra
processed foods and we get this thing about
consumption and buying. So it's hard. It's
hard. Which is why you also need to know how to be
grounded. Really good. Seeing the parallel between the money
(38:40):
and the eating, I mean, I suspect that emotional spending,
there's an intersection between emotional spending and
financial trauma. Saundra, any
tips on helping people to heal from past
financial wounds? Yeah, so I have
gone all in on internal family
(39:02):
systems. And having been a consumer of
many different types of therapy, this has been
the single most impactful
model that I have experienced both
as a practitioner
and as someone who is using it just in my own life.
(39:23):
And what I'm finding is that now that
I'm recognizing that I have this multiplicity of
parts and that's really the bottom line. There's a self, right? There's
a self energy and then there's different parts. So I
have a people pleaser part and I have a perfectionist part
part, and I have a part
(39:46):
that doom scrolls on the telephone when I need to
distract myself. And so I have all of these
different parts. And the thing that I like best
about this philosophy is that the self, who we
are, our core, our wisest essence,
cannot be damaged or destroyed. So
(40:08):
they got me when they said that, right? Because at our core
we cannot be damaged. And I spend a lot of my
life feeling like there was something wrong with me.
And now I understand this distinction between
what's called a manager or a protector part that kind
of zooms in and says, hey, I'm not going to let you think about that.
(40:30):
We're going to have a Reese's peanut butter cup, or we're going to get on
the web shopping thing, or we're going to hit one of those food
ordering places where they will drop off a pizza at your door,
baby, you don't even have to put on clothes, right? And so
I know that these things exist and that those
things can pull me away from the trauma or the
(40:52):
pain or whatever it is that I'm on the verge
of experiencing. And so now that I understand that
I actually can self soothe, right? And
self is the operative word, it's treated as a capital S, right?
So that wisest part of me, rather than as a coach, we
hear things like, oh, you got to push down the saboteur. You've got to, you
(41:15):
know, step away from that. You've got to elevate and you know, this
philosophy is very different where it is more like
a mindfulness practice where you recognize that that part
exists and you investigate and
acknowledge, just allow it to be there,
investigate it and understand what is its job, what are you,
(41:37):
what are you there to do, and then nurture that part.
And so your, your wisest part is,
your wisest self is nurturing those hurt
parts of you. And so that's really, I mean, I know it's not a tip
per se, but it is an awareness that
we might be broke, but we're not broken. Right. We might be struggling, but
(42:00):
that doesn't make us bad people. We might be anywhere along
the financial str. Structure.
What is the, the, what is the word I'm looking for? The
continuum. Right, thank you. That's what I was going for, doc. You know, we
could be anywhere along that continuum
from extreme poverty to extreme wealth and still not
(42:22):
be at peace. And so when we
navigate what it means to have peace
and how do we facilitate, facilitate that piece with the
choices, how we take care of ourselves, how we feed
ourselves, how we use our resources and money being one
of those resources, I think that's the, the tip that
(42:44):
I would offer. She
just drops the mic. Anybody else?
That was fantastic. Let's move on. Oh, go ahead.
I was just going to say I don't believe in
judging people or shaming people for the financial
(43:07):
decisions they've made. In my experience,
everybody is making the best decision that
they can at the time with the information and the
resources that they have available to them.
So basically, you know, everybody deserves grace.
(43:28):
We're all just doing the best we can with what we have.
Andy, I just want to point out what Mariko said earlier that I think is
so poignant. People have, I mean, who knew
that discipline fatigue is a thing? I mean, you know, we do
the right things and we've got so many right things to do
and we work so hard to be compliant in all the ways.
(43:51):
And I think, you know, for financial professionals often, actually the way
my business got started was so many financial professionals would say,
I'm going to fire my non compliant client. And I would always ask,
well, are they better off with you or without you? Is it worth
it for you to understand, number one for yourself? Right.
Where does your perfectionist part live? Right? And then to be
(44:14):
able to extend some grace, you know, to Dr. M's point,
extend some grace to them as they're grappling with
it. And that doesn't mean people have to become therapists.
They can learn Therapeutic approaches stay in our
lane as financial professions. I'm professionals, I'm not a therapist and I don't
play one on tv, but we can use these techniques to
(44:36):
really help people thrive and help them stay with you as
a financial professional and you understand
really what's going on, not just, oh, the client doesn't want to implement the
plan, the client won't do what I said. We can hold them with more
grace and we do that by holding ourselves with
more grace. If we're really tough on ourselves, it'll be
(44:59):
very difficult to extend compassion to other people. As one
of my cfp, financial decisions. Always make emotional
sense to the client.
One of my CFP teachers said, you know, with all the changes in technology and
AI and everything, you know, you can't outsource
(45:19):
empathy. And you know, you
can know the inside and out, but what, what
your clients need is, is empathy and,
and the human, you know, the human interaction, asset allocation,
computers can do that. Empathy, not so much.
So, and I love the grace because no matter where you are, you
(45:41):
can always do better. And we're bound to be making mistakes all,
all the time. So give yourself the grace. Let's
move to segment four. Financial literacy is a key
component of financial well being, encompassing knowledge of money
management, financial principles and the skills to make sound
financial choices. Studies show that individuals with strong
(46:03):
financial literacy are better prepared to manage challenges,
save for retirement and avoid unnecessary debt.
Self awareness also plays a crucial role. Reflecting on
personal financial habits can reveal patterns and motivations behind
spending and saving decisions. Tracking income and expenses
provide insight into areas needing improvement while setting
(46:25):
financial goals help maintain focus on achieving stability and
growth. To improve financial literacy, online courses
and financial advisors may offer structured guidance.
Books like youe Money or you Life provide strategies for
financial independence and courses on budgeting or
investing. Deepen understanding. Consulting a financial
(46:47):
advisor can further tailor financial plans to personal
needs. Together, financial literacy and self
awareness empower individuals to build healthier financial habits and
reach long term goals.
Saundra, I've heard you say something to the effect of
(47:09):
knowing well doesn't lead to doing
well. Can you talk a little bit about how do
we emphasize equitable access to financial guidance? How
can financial literacy initiatives be made more inclusive?
Yeah, yeah. So mother Maya Angelou said,
when you, you, you. When you, when
(47:31):
you know better, you then do better. And often people
translate that to say, when you know better, know better, you do better.
I will say not always. You can know better and not do better.
Right? It's possible to know better. I do things all I know when I'm not
supposed to eat the second part of that Reese's peanut butter cup. Right. I know
that having one. I know better. I know better. And
(47:53):
yet. Right. And so the same thing happens with money.
And so what I would contend is that financial education
that is first focused on where the person
is number one. I believe that as soon as a child can say I
want, they're ready to start to learn about money. I think it's a
mistake to think that it only happens in the classroom or
(48:15):
it only happens in a professional's office. I think that we
can start early. The rub that I'm seeing where I kind of have a different
perspective where what I'm seeing across the country right now, now we've
decided that having a financial literacy
exam for to graduate is a good idea.
I don't think that that's the best approach. That's the approach that we tend to
(48:36):
use as a country in the U.S. but I think that helping young
people understand what money means to them and
all of these things we've talked about young people, teenagers have money
scripts, right? They already do. Children as young
as 8, 9, 10 years old have money scripts as young as
they are. And so I think that the earlier we can just
(48:59):
have safe, nonjudgmental financial
conversations, the more likely will be to deal with
things like the racial wealth gap and the gender wealth
gap, the gender income gap, all of these things that are
very dominant the United States society early
and often. You know, really making sure. The same way
(49:20):
we teach young people how to brush their teeth and make their beds and tie
their shoes, we can teach them that, you know, having things
cost money, money is earned. This is how we do it. This is how we
spend it. And we can do that very young. And we don't have to do
it by making it their burden. We can do it by making sure that we're
elevating the conversation in the household. I think it's good for the
(49:43):
primary provider, whether it's parents, family,
relatives, and for the young people as well.
I have a client who she's allowed me to share this
story. She grew up with a
piggy bank that was a little devil. It was a very
cute devil. She was a ceramic devil. And it said root of all
(50:06):
evil on it, right? And she had completely forgotten about
this. And I, I googled it. I was able to find this thing and it
is very cute, but she had completely forgotten about this. But she
was literally. I mean, think about it, right? A piggy
bank to save Money that is the root of all
evil. And you know, she does have some money stuff that we're
(50:27):
working through. But that's the kind of thing that you
see. The other thing that I would also say about messages is the
messages that in families that daughters get versus sons about
money and you know, about saving,
about investing, about like you know, business,
you know, if there's a family business, the business talk and
(50:49):
you know, families need to be very aware of what they're
doing there I think would be, would be huge in my
book. Girls are encouraged
to save while boys are encouraged to invest.
Yep. And women actually are
financially disadvantaged. So women need to invest
(51:11):
more than. Men do and they tend to be better
investors. There's a number of research, research shows
that as well. You know, I have, yeah, I have
a storage unit and my, my guy.
Which is, you know, a money waste. Right. So this, that's another thing right
there. You know, paying, paying out to
(51:34):
have too much stuff. But, and he's a, he's a day
trader. So I was asking about the day trading community and what the demographics and
the, you know, look like and everything and he said well, you know, women are
too emotional to be good investors.
And I, well, let's just say I read them the right
act. I think
(51:55):
when it comes to money, we often know what we should do. It's just like
the Reese's peanut butter cup. We know what we should do, but
then we don't necessarily do it. Dr. M. Are there
some behavioral nudges that can help people to
stick to their financial plans more effectively?
Sure, some really well known
(52:17):
ones. So for example, if you can, if you can
automate something so that you reduce the decision fatigue and
you don't have to think about it, I mean that is the
logic behind most 401k
plans now so that you can save for retirement through
your workplace. The
(52:40):
participation rate went way, way up
when they automatically opted
everybody into it and you actually had to
make an effort to not participate.
You know, that's one way to automate savings.
(53:00):
The same thing you can do on an
individual level. You can, if you're looking to build an
emergency fund, you can automatically take X number of
dollars out of every paycheck that you get
so that you're not having to stop and think about it. It's just
automatic and your,
(53:23):
you're basically making it more likely
that it's, that it's going to happen by doing that.
Interesting. So as we study and discuss psychology of money, there
is a benefit to automating and thinking
less, think less, do more. Yes,
yes, I like it. And let's bring it home. Following up on
(53:45):
what Rico was saying, there's a
well known study, I think Fidelity did
this and they looked at what demographics
had the best investment results and it
was people who had forgotten they had
an account or had died. So
(54:08):
basically it's like that old adage, a
portfolio is like a bar of soap. The less you handle it, you know, the
better. Love it.
Let's bring it home and go to segment five. Ethical
considerations in financial decision making ensure that actions are not
only profitable, but also socially responsible.
(54:29):
Principles like integrity, transparency and responsibility
help guide decisions that benefit all stakeholders, not just the
individual or organization involved. Responsible investing,
such as incorporating environmental, social and governance criteria or
impact investing supports sustainable growth by promoting
social and environmental well being. For example, ESG
(54:51):
focused investments prioritize companies with strong environmental
practices while impact investing channels funds into renewable
energy, affordable housing and education.
Socially responsible consumption also plays a role as
consumers influence corporate behavior by choosing brands committed to fair
labor, environmental stewardship and ethical
(55:12):
practices. To align financial choices with values,
individuals should clarify their core beliefs, recognize and address
biases and review past decisions to refine future
choices. Continuous education can further enhance
responsible decision making, allowing individuals to make
choices that reflect personal values and foster
(55:35):
positive societal impact.
Maro, how do you think about balancing profitability
with ethical or values based financial
decision making? Well,
so at the company level I think the
(55:58):
cult of everything should be driven for shareholder
value is just led to.
It's just not a great way to run a business because your business
is an ecosystem. You've got vendors, you've got customers, you have
employees and the good stewards are the ones that maintain
the health of the entire ecosystem and don't try to sort of extract
(56:21):
from all the other, you know,
from, to just allocate
the benefits to, to shareholders. I think
what from an individual perspective so on the other side of it, so I think
if you're a good company, you know the,
you'll be. It's run for less, not just from quarter to
(56:42):
quarter. Compensation is more fair and not
extractive and the long term health of the goose is what's
being supported, not the short term
output in golden eggs because then that will kill the
goose over the long haul. So it really, you know, is a, is a
perspective issue. And I think being a good corporate
(57:03):
citizen is those companies that seem to have a good
compass, you know, over the long haul
perform better. I think that's been, you know, there's, there's research that supports
that. As an investor, though, as an individual investor, trying
to figure out how, how to, how to invest your
money. Right. I find sometimes that people bring an
(57:26):
orthorexia to their investments
about, about, you know, investing
in accordance to certain values that is much stricter than the way
they actually live their lives. Right. So
you may have a car, you may use a car, you may, you know,
shop a temu and shine. Right. But at the other end, but you want
(57:48):
your investments to be like Caesar's wife. Right.
And, and so sometimes part of the conversation is really
talking about again, what we've said all little for the last
hour. You know, you do the best you can. You meet people where you are
and you do the best that you can in the moment. And your, your investments
can certainly reflect those values, but you don't want to
(58:10):
hold your investments to a higher bar. Then
you are willing to be personally inconvenienced or live your life with.
I see Saundra smiling. I'm pretty sure that was the
mic drop right there. I'm pretty sure. I'm pretty
sure I'm gonna say it one more time, Mariko, rescue me if I
(58:31):
misspeak. What I heard was
don't hold your portfolio to a standard that you are
not willing to live up to in your personal life. That's what I heard.
Yes.
Dr. M. If you're investing in any
kind of index fund, unless you've
(58:54):
personally gone through and looked at, you know, however
many dozens of different
companies that fund is invested in,
you know, do you. Do you really even know where your money is
invested? From a
behavioral standpoint, do people feel more
(59:16):
financially satisfied when their money aligns with their
values? I'd like to jump in here. I
believe they do. That's my experience.
I believe that people have a bit
of cognitive dissonance when they're doing one thing
while saying another. And that's why Mariko's comment was so
(59:38):
poignant for me, because I've experienced that where
I'm investing in the right thing for my portfolio,
but it doesn't feel right in my humanity. And
so I did have to make some of those decisions. And I was told, oh,
well, you know, it's, you know, it's not going to be great for your portfolio.
It doesn't perform as well, all of those things. Right. But. But I do think
(59:59):
in my experience, in the one on ones that I do with people
there, there is an alignment not only with
what you invest in, but also just how you spend. That's why you See things
like boycott this store that does this thing or does not
do this thing. And I think the, the last thing that I want to say
about that is that I think we should also
(01:00:21):
just be aware that sometimes our values
might be incongruent with our financial well being.
If family is a very core value for me and supporting family
and being connected with community, I then have to be mindful
that I don't cause my self detriment
by caring for family members, that I don't harm
(01:00:44):
myself in the caring for others if giving is a core
value. And so that's a balancing act because I personally
have harmed myself in giving to others. And so I
always have to make that choice. And so sometimes our
values and our financial choices can bump up against each other and
then it's a process that you go through to land wherever it
(01:01:06):
is most satisfying for you. Absolutely. I see that
I have a client who's just super generous
and I have to be the designated jerk
in the room saying that's beautiful and you need to be
able to, to survive. You know, you need that emergency
fund too. You know, put your oxygen mask on first. I
(01:01:29):
also feel like it's easier to express your values as a consumer
in terms of, you know, not buying this brand or that brand and for what
they stand for than it is for to, to do it from
an investment side. I had clients who,
who had restrictions and there were services
that they, you know, subscribe to and that would then say we couldn't buy
(01:01:51):
xyz. We knew our company so well that sometimes there's be
something that wasn't on the list but should have been and I would flag that,
you know, for the client. So. And also there, there are funds that
create funds because it's a marketing opportunity and not because
that they're really doing that. I think it's really
hard to just our, you know, capitalism
(01:02:14):
and markets are so complex and so hard to extricate into a
pure,
you know, into, into a pure expression. So I think there's certain things if
you're like, well I don't do, you know, I don't do weapons.
And there's certainly index funds that, that will get, you know, that will
move certain things. But it's like I just find sometimes
(01:02:37):
that's an easy place to, to, to. To
be to, to hold an impossible standards
and you know, so sorry about that. That was round labor
on Robinson Barnes. I think it's just easier to sort of not buy
fascist brands. Oh, that was great to avoid
fascist stocks. Sadly Although some of them are pretty obvious.
(01:03:01):
I would just say I see examples of that
with what Saundra was talking about, about
trying to find a balance. You see this a
lot with parents helping adult children
and not saving for their own retirement. Well,
(01:03:23):
you know, kids can, can take out a loan for
college, for buying a house,
you know, for doing lots of things, but you can't take out a loan for
retirement. So sometimes you do have to put your own
oxygen mask on first. And I just think that's a good
example of that. That is
(01:03:45):
great. Well, I want to thank the panelists and I want to thank everybody
for joining today. Inspired Money Maker. This has been
a really powerful conversation. If there's a big
takeaway from me from today's discussion, it's that
money isn't just about the numbers. It's also about behavior.
Even with the many complexities of the financial
(01:04:08):
system, our brain is also
extremely complex. So we need the financial knowledge and
literacy. But we also have to understand our biases,
our emotions and our money scripts. Without understanding
psychology and behavior, we keep making the same mistakes.
So the good news is once we recognize how we think about
(01:04:30):
money money scripts and better understand these
patterns, we can start making more intentional values
aligned financial choices. So I want to give everybody a
challenge this week. Take one step toward improving your
relationship with money. Spend five minutes writing down
your biggest financial fear or belief.
(01:04:52):
And where do you think that comes from? Is it serving you or is it
holding you back? Awareness. One of the many things
we talked about today is the first step towards change.
So let me know in the comments. Send me a message. What did you
discover? And if you found today's discussion
valuable, please share this episode with a friend. A big thank you to
(01:05:13):
our amazing panelists. Be sure to follow them and learn
more from them. You can find Saundra Davis,
founder of Sage Financial Solutions and director of Financial Planning
programs at Golden Gate University. You can find her at
sagefinancialsolutions.org or
ggu.edu. Martha
(01:05:34):
Menard, PhD. You can find her.
I've heard her many times say LinkedIn is the best place you can find
her. So search for Martha Menard. Martha anywhere else you
want to send people. You can.
I write a free personal finance newsletter on
Substack. Let's talk money with Martha. You can find
(01:05:57):
me at substack.com Martha Menard.
Great. And Mariko Gordon, you can find her at
marikogordon.com. You can find her at
uzumellc.com. Mariko.
You also do lots of writing. You do a lot of fun things
like Feng Shui, your Financial House.
(01:06:19):
Where can, where can people get your writings? Yeah.
So if you go to
marikogordon.com there's an easy newsletter sign up. I
do a weekly newsletter. I try to make it
funny and helpful and try to keep it.
And then I, I have, yeah. Series like Feng Shui or Financial House, which was
(01:06:40):
like for 30 days, just a teeny little task.
So. And it's just, it's just fun. It's just
really fun to share. You know, there's
a. There is. That's the nice thing about being, you know, in your
wisdom years. Right. You can, you can be the Baba
Yaga in the forest, dispensing
(01:07:02):
wisdom years. Funny and fun. And I always
hear, you know, I see your posts and I read them, but I
also get indirectly from my wife, my
wife will tell me, have you read Mariko's latest thing? If you haven't,
you need to read it. So that's the call to
action for everybody. Thank you, Saundra. Thank you, Martha. Thank you,
(01:07:24):
Mariko. The next inspired Money episode
will be Financial Education for Kids. Teaching children about
money and building a strong financial foundation. I think it'll be
a great follow up to this episode.
That will be next week, February 12th at 1pm
until next time, do something that scares you because that's where the magic
(01:07:47):
happens. Thanks, everyone.