They're also about beliefs.
In a recent company strategy meeting, one of my associates expressed interest in our firm engaging in some type of pro bono work. This is something I enthusiastically embraced. Who wouldn’t be excited about lending a helping hand to those struggling financially?
A short time later, attending the annual Financial Therapy Association meeting, I heard a talk by Louis Barajas, CFP, a noted author and expert on giving financial advice to people who are poor.
“All the financial literacy in the world,” said Barajas, “is not going to help the poor.”
Born into a poor Hispanic family in East Los Angeles, Barajas managed to become a certified financial planner and pull himself out of poverty. After a successful career, he returned to the barrio to live his passion of helping his community transcend poverty. It turned out to be far more challenging than he ever dreamed.
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Barajas discovered, as he said in his talk, “Most people in poverty are unaware that their cultural beliefs hold them back.” He described some of those beliefs, which I would call money scripts. Here are a few:
- A sense of fatalism, that “this is just how things will be.”
- An assumption that working for someone else is the only option.
- A group dynamic where anyone who reaches for too much success is pulled back down into the community’s financial comfort zone.
- A victim mentality of blaming and feeling powerless to change.
- Relying for financial advice on the wealthiest or most successful person in the neighborhood, without the knowledge to evaluate the validity of that advice.
Barajas has found that telling someone about a better way doesn’t work. He had to find a way to experientially expose them to it. As he said, “If you don’t see a brighter future, you won’t plan.” But even before that, an adviser has to help people take care of their urgent needs first before they can even consider that a future exists.
Hearing Barajas’s talk only confirmed for me how important it is for advisers to consider people’s beliefs and emotions about money in everything we do with clients. We need to do the same if, through pro bono work or some other means, we want to extend our knowledge and services to people who are poor.
Like many other financial planners I know, from time to time I have offered community classes on basic financial skills like managing money or the fundamentals of investing. I’ve also tried offering classes focused on money scripts or other aspects of money psychology. Guess which classes fill and which ones don’t?
People tend to shy away from looking at the relationship between money and emotions. There seems to be a widespread money script of, “More financial knowledge is all I need in order to have more money.” Yet I’ve seen time and time again over the years that this simply is not true.
The easiest way for many financial planners to share the wealth of our financial knowledge is to focus on the mechanics of investing and money management. Yet if we really want to make a difference for people who are struggling financially, we need to find ways to help them look deeper. People earning barely enough for basic necessities and people with wealth have one important thing in common: Their challenges around money are not just about the money.
Rick Kahler, ChFC, is president of Kahler Financial Group, a fee-only financial planning firm. His work and research regarding the integration of financial planning and psychology has been featured or cited in scores of broadcast media, periodicals and books. He is a co-author of four books on financial planning and therapy. He is a faculty member at Golden Gate University and the former president of the Financial Therapy Association.