How stories shape our financial responses

By Larissa Fernand |  23-11-20 | 

Here’s a question: Would you pay for your child’s higher education abroad, even if it means dipping into your retirement kitty or taking on debt?

A lot of parents would say yes. For many, it is an investment into their child’s future, and by extension their own. Or, they believe that that is what a good parent would do.

Here’s another: Would you pay for your child’s wedding, even if it means dipping into your retirement kitty or taking on debt?

Again, there is a narrative at play here. Those who believe that it is their duty and obligation to have a lavish wedding and follow the traditions will answer in the affirmative. Because they believe that that is what a good parent would do.

So the numbers on the spreadsheet are pointless. It is the story they tell themselves that matters.

A man is always a teller of tales, he lives surrounded by his stories and the stories of others, he sees everything that happens to him through them. -  Jean-Paul Sartre

What is your story behind your financial strategy? If you want the strategy to change, you have to change the story. It all begins by listening to the story you are telling yourself.

Our stories our shaped by nationality, religious beliefs, age, income, education, social status, and parental attitudes. Having said that, two people in the absolutely identical situation can have very different stories.

Two siblings may spin very different narratives despite being brought up in the same household with the same family. Because they each focused on different aspects and made a story out of their experiences. They assigned different meanings to identical economic stimuli. Each had their own unique set of experiences with rejection and opportunities and barriers.

My grandmother would tell us that money must be spent on excellent footwear, even at the cost of wearing old or outdated clothes. Her logic was that she walked a lot, and it was a worthy investment to have comfortable footwear that was sturdy and lasting. While it was not surprising that my mother spent a lot on footwear, her sister (my aunt) did not. My cousin, on the other hand, spends lavishly on shoes, simply because it gives her confidence. She believes that people judge your status by looking at your footwear.

No one’s story is superior to the other. Each story is meaningful and unique and deeply embedded in our personal narrative. It begins in our childhood with how we see the economic world and our place in it.

These story lines affect everything. Our attitude towards debt. Our attitude towards credit cards. Our attitude towards spending and saving.

Until you make the unconscious conscious, it will direct your life and you will call it fate. ― Carl Jung

The stories we tell ourselves help us navigate the world. But some of us may be driving ourselves in a direction we don’t want to go. While we may blame fate and destiny, it is the unconscious story line that is being played out that has a large influence on our decisions.

Take some common adages:

  • Money is power.
  • Money makes the world go round.
  • He who has the gold makes the rules.
  • Money doesn’t grow on trees.
  • If you take care of your money, it will take care of you.
  • Money is an excellent servant and a terrible master.
  • Money can’t buy love.
  • Whoever said money can’t buy happiness did not know where to shop.
  • When poverty comes in at the door, love flies out of the window.

These tend to catch on in our subconscious mind. The one who believes that money can’t buy love will have a different relationship with money than the one who believes that when poverty comes in at the door, love flies out of the window.

These statements of money often are disguised as statements of life. They even contradict each other. But if we have bought into them, we internalise it. The one that we adopt, even though it is subconscious, has a lot to do with the decisions we make.

The human species thinks in metaphors and learns through stories. - Mary Catherine Bateson

Morningstar’s director of behavioural finance, SARAH NEWCOMB, has three practical suggestions.

  • Do some reflection.

Think of the person who cared for you most of the time when you were a child. If they were to finish this sentence: “Money is……”, how would you complete it for them? It could be luxury, security, peace of mind, stress, the root of evil, the root of inequality, and so on and so forth.

Even if you struggle to verbalise it, you will have some sense or feeling or attitude of theirs towards money.

Think about how their attitude towards money affected your life back then. And how it affects your current perspective. How would you finish that sentence? Our personal history has a profound influence on how we handle or mishandle money. This is where our relationship with money is rooted, and this is where sound money management begins.

  • It’s only a story, and a story can be changed.

Once we're conscious of the stories we’re working with, we’re in a better position to question, and if necessary, rewrite them.

Think of the classic Hare and the Tortoise. We were always told that the moral of the story is that “slow and steady wins the race”. But is it written in stone? That was Aesop’s moral. It need not be yours. The tortoise won only because the hare took a nap. So maybe the moral of the story could be not to underestimate the competition. Or, finish the job first and then relax.

You can do the same with the stories of your financial victories and mistakes. You can turn the narrative into something new. Do not change it into a lie that is easily digestible. But draw a healthier rule of thumb, draw a more productive learning that is relevant to you.

  • New chapter – New habit.

If you need to break a bad financial habit or create a new one, it helps to use a temporal landmark that implies a new beginning. It could be the start of the month, the start of a quarter, the start of the year, a birthday, an anniversary, or even a festival.

It feels like the crossing of a threshold and has a “fresh start” psychological effect. Use this to create a fresh narrative.

The stories we tell literally make the world. If you want to change the world, you need to change your story. - Michael Margolis

Investment Involves Risk of Loss.

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Shaji Abraham
Nov 24 2020 05:17 AM
 Appreciate if there can be an article on how to manage child education decision with regards to financial planning and avoiding parents to dip into retirement kitty or extending financial Independence timeframe.
Som Mukherjee
Nov 23 2020 07:53 PM
 ..... dont'n know but story seems a bit incoherent in comparison to earlier articles. In-fact it seems to be a short of moral story in a financial magazine. A forceful and objective recommendation of author is missing in article .... or may be im missing something here ...
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