"Bad with money" is a fixed mindset
After writing my post about why I don’t think there’s any such thing as being “bad with money” I was curious what other people thought.
I didn’t want to have to explain my whole blog post on social media, so I thought I’d just do a quick LinkedIn poll and see what came back.
Image shows a screenshot of a LinkedIn post and poll by Martha Lawton.
The post says:
“I'm getting increasingly annoyed with the phrase "bad with money". So many people say about themselves "I'm bad with money" and just shrug, as if that's all there is to it.
I don't blame individuals, because this is a common idea, but I think it's super unhelpful.
We can all grow and the label "bad with money" cuts people off from that growth.
What do you think?”
The poll question is “Are some people just “bad with money”?”
The answers are:
“Some people are bad with money” 23% of the votes
“Everyone can improve” 72% of the votes
“Other (please comment)” 5% of the votes
In my previous post I talked about how saying someone is “bad with money” or “good with money” is simplistic and disguises all the many different skills needed to manage money well.
This poll highlights another damaging part of the “bad with money” label. As with almost all labels, it promotes a fixed mindset. For those of you who aren’t familiar with fixed/growth mindsets, I’ll give a quick explanation.
A person with a fixed mindset believes that our skills and abilities have inherent limits beyond which no amount of practice, study and effort can take us. A person with a growth mindset believes we have infinite capacity to develop our skills and abilities as long as we practice, study and work.
A fixed mindset says that talent is everything, you’ve either got it or you haven’t. A growth mindset says that we all start from different places, but where we end up is a combination of our own efforts and the resources available to support us.
It’s worth noting that a growth mindset doesn’t say anything about the rate of progress, only that progress is always possible. Slow improvement still counts. It also makes it very clear that resourcing is important, this isn’t a viewpoint that says the world is a pure meritocracy and there are no structural advantages or disadvantages.
If you say that some people are just “good with money” and others are just “bad with money” and that’s all there is to it, you’re expressing a fixed mindset position about money. The trouble is that it’s a self-fulfilling prophesy. If someone is just “bad with money” why should they try to manage it? They are doomed to failure and might as well give up. Similarly there’s no point is trying to teach or coach anyone to get better with money if it’s just in their nature to be “bad with money”.
One of the people who commented on my post said something similar.
Image shows comment from Penny Delve
“The danger with labelling yourself is that you become that label. Our language is very powerful and our subconscious is always listening 👂.
We all create our own experience so there is a choice. So I voted ‘everyone can improve’ because we always have that choice to change Martha Lawton 🙌”
Not only that, but even people whose fixed mindset puts them in the “good with money” category, can end up very anxious about their money skills. This is because if your ability with money is fixed and you make a mistake or have a financial setback then a fixed mindset says that’s because you’ve reached the limits of your money ability. There’s no way to correct for the mistake in future. A fixed mindset may even tell you that you’re not as ”good with money” as you thought, perhaps even “bad with money” after all.
Worse yet, because in a fixed mindset every skill or behaviour is a fundamental unchanging characteristic of who you are, any time things go wrong that’s a sign you’re a lesser person than you thought. This means that a person with a fixed mindset who gets into debt will either see themselves as a helpless victim and expect someone else to fix the problem for them, or will be too ashamed to ask for help because it feels like exposing their fatal flaw.
It’s an insecure position to be in.
On the other hand, a person with a growth mindset around their financial skills will be actively seeking to improve and will perceive a setback or loss as a chance to learn. They can think clearly about whether they made a mistake or whether they just had bad luck. Neither answer is a threat to their sense of their own value as a person. If something goes wrong with their finances, even a serious debt issue, they will be ok asking for help and will hope that their adviser can help them understand how to fix things now and avoid similar problems in the future. People with a growth mindset tend to be open about their shortcomings because they see themselves as a perpetual work in progress. Today’s failing is tomorrow’s strength.
As you might guess from all of this, people who have a growth mindset about an activity, whether it’s money management, acrobatics or playing the bassoon, tend to achieve more in the long run, because they will usually be more persistent and creative in their approach to developing their skills.
The good news is a fixed mindset can grow into a growth mindset, it’s just a matter of talking about yourself and others slightly differently. Instead of saying “I’m bad with money” or “I’m good with money” (fixed permanent personal traits) you can say “I’m making a habit of tracking my spending, but I don’t do it every day yet” or “I’ve made a plan for my financial future and I’m happy with how well I’m sticking to the plan” (actions and outcomes).
You’ll find you feel more in control with a growth mindset and it will help you to a more secure financial and emotional future.
You can learn more about fixed and growth mindsets and Dr Carol Dweck who did the research around them in this episode of my podcast, Squanderlust.
How to be more optimistic about money
It’s Mental Health Awareness Month and one feature of poor mental health is a skewed sense of optimism, so this post is about that.
Optimism is a funny thing.
Too much and you don’t prepare for the worst. I’ve been vocal about how often people don’t buy insurance or save for emergencies because they assume bad things happen to other people.
On the other hand, if you’re too pessimistic, you won’t take the action you need to improve your situation, because, well… what’s the point?
So we want to build a Goldilocks mindset around money and get amount of optimism just right.
Thankfully, there’s some great evidence about what can help us to think more positively without losing sight of reality. Positive Psychology is the study of happy, mentally healthy people with the aim of learning how everyone else can be more like them.
The founder of positive psychology, Martin Seligman, identified three key attitudes towards life’s challenges that lead to either a more optimistic or a more pessimistic viewpoint, with the optimistic view generally leading to better outcomes overall. These are called the “three Ps” of pessimism.
People who are pessimistic tend to see setbacks through the lens of Personalisation, Permanence and Pervasiveness. What do these mean and how do they play out in terms of our finances?
Personalisation
“It’s all my fault!”
Personalisation means assuming that bad events happen to you because of something about yourself. It means assuming all the blame, whether that’s realistic or not.
Financial examples:
At the less harmful end of the scale, this might look like a homeowner who engages a builder and finds the final bill is higher than expected. The builder may have been unclear about their costings or have inflated a price somewhere, but if the homeowner tends to personalise they will feel angry at themselves for not having checked the costs more thoroughly sooner.
At its most harmful, this could look like a person who feels cursed with bad luck on some level so that they blame themselves when things happen that are completely outside of their control. For example, their chosen retirement date may happen to coincide with a small fall in the stock market (leaving them with a smaller pension pot than they had expected) and they feel in some secret part of their heart that the stock market fall happened because they were due to retire that day.
The optimistic view
A person with an optimistic viewpoint understands that the must take responsibility for their actions, but only in proportion to their potential effects. They do not automatically assume that they are at fault if things go wrong and they certainly don’t blame themselves when the outcome is largely or entirely due to chance.
Advice
If you tend to assume that setbacks are always your fault, try to challenge this by thinking about who else influenced events and what role chance played in the outcome.
Permanence
“It’s never going to get any better.”
Permanence assumes that any change for the worse is going to last forever. It says that once something goes wrong, this is just how things are now.
Financial examples:
A person asks for a pay rise and is refused. They assume that their employer will never agree to pay them more or promote them in future. They become discouraged and underperform or look for a new job.
Another example, a person accidentally misses a bill payment and it shows up on their credit record causing their credit score to fall. They assume that this means they could never get a good deal on a personal loan, let alone a mortgage.
The optimistic view
Things change all the time and there are often solutions to issues, even if you don’t know what they are when the problem first arises. Just because things are difficult now doesn’t mean they can’t improve.
Advice
Think of a time when you faced difficulties in the past that no longer affect you. Things may have seemed bad then but now you' barely remember it happened. Whether through resourcefulness, hard work, luck, or just letting time pass so that an issue became less relevant, you have overcome and moved on. Times always change, and nothing is permanent, including your troubles.
Pervasiveness
“One thing went wrong - everything is terrible!”
In this mindset, a small difficulty or embarrassment is a sign of a much larger problem. Specific issues that could be fixed with specific actions are generalised into fundamental flaws or failings to big and all-consuming to solve.
Financial examples:
A person whose card is declined declares themselves “hopeless with money”, even though with a bit of practice at planning and avoiding overspending they could avoid this happening in future.
A person makes a failed insurance claim and says “all insurance is a scam”, even though the problem is just with this single claim and they have many steps they could take next including: checking their policy terms to make sure they claimed under the correct part of the cover; submitting more evidence to the insurer; or making a complaint.
The optimistic view
The optimistic person gives life a second chance and waits for a clear pattern to emerge before generalising. The take each issue as it comes and try to find solutions to each one.
Advice
Listen to how you speak and identify when you’re using words like “everything”, “nothing”, “always” and “never”. These are often a sign of Pervasiveness in your thinking. Other signs are using generalising/labelling phrases like “I’m so…” or “Banks are…”.
When you catch yourself using this language try to replace it with the specifics of this incident. That will give you a more realistic viewpoint and potentially help you identify solutions to the issue at hand.
Learning to drop the three Ps will help you keep negatives in perspective so you will feel more in control of your money.
Did you find this useful? Comment below if there’s a mental habit you’re going to change.
To learn more about money mindsets listen to my podcast Squanderlust.