Moisés Naím, a well known journalist, once wrote, “A fast-changing world economy makes financial ignorance more dangerous than ever before”. Our personal psychology in how we perceive our financial situation thereby impacting our ability to make sound financial decisions. Although there is no easy way to distil with each person’s unique financial situation, we have narrowed the areas which help people think, feel, communicate, and behave differently with money to improve overall well-being.
We call it the 4 languages of money:
Practical | Cultural | Spiritual | Emotional
While the practical language focuses on the what, such as our daily needs of paying rent and bills, or saving for retirement; the emotional language of money speaks to our wants. It is important to highlight, that both the logical and emotional parts of our brain are required to work in unison in order to contribute to the inner money dialogue. An additional language of personal finance is one culture, which becomes a source of many of our beliefs and values about money. You can probably think of a few stories dating back to your childhood that speak to cultural norms around money. Stemming from our culture and compounded with religion, the spiritual language vitally affects our ability to make decisions that are truthful to ourselves. Keeping track of these four dynamic aspects of life can help us navigate to financial health and wellness.
For example, amygdala hijack is an incident where stress takes over your emotions, feeling like you are no longer in control of them. Neuroanatomically, the amygdala is located in the midbrain and is known to be the emotion center. Most commonly it is known for being responsible for our fight or flight response. In order to execute critical judgements, we need to employ our wise mind, a stable middle ground of practical and rational thinking, also known as the wise mind. The critical analysis of our current state not only aids in making a judgement that is less emotionally driven, it also allows for emotional neutrality throughout the decision making process.
Now, you might be asking yourself, “what is the actual benefit of knowing how to speak all these languages?”. Akin to fluency in multiple languages, the more you understand, the easier it becomes to understand the syntax and learn even more. This can be applied to the language of money as well.
Let’s do little experiment. Imagine that you were asked to sit down and watch a movie (Wolf of wall street, or Big Short) How soon into the movie would you become bored, or frustrated?
Now Imagine that the same move is dubbed in another language (Russian or Chinese). How soon into the same movie will you become disinterested, bored, or frustrated?
Let’s say that despite your frustration and angst, you are being asked to continue to watch the movie. How long before you start pulling out your phone or looking out the window and avoiding watching the movie? Let’s suppose that despite you pulling out your phone and looking out the window, you are STILL asked to watch the movie! At what point will you become outright angry, and this will become a conflict?
This is how many people feel having to deal with money on a daily basis without being financially literate. It feels like they don’t speak that language.
Hence, what is the power of language you may ask? When we do not understand what is being communicated to us, we become disinterested, we avoid it, and it can also boil over into a conflict. Literacy implies a gradual understanding by initially learning the alphabet, then putting together a word, then sentences, and finally forming full paragraphs. The inevitability of money problems may come at times where you and your family are most vulnerable, produce significant psychological burden but allow you to seek for further clarity. The solution to solving the personal finance puzzle lies in the integration of the 4 languages of money and our fluency in each.