3108: How to Overcome Your Money Mindset Issues If You Grew Up Poor by Emily Guy Birken with PT Money

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[00:01:19] Everyone loves a great rags to riches story. But there's also a feeling among many of us that those stories are nothing but myths. You might think, yes, it may be possible for anyone to become rich, powerful, and famous in America. But it's certainly not going to happen to me or anyone I know. As it turns out, there's a clear psychological reason for that skepticism. According to a recent study published by the American Psychological Association,

[00:01:49] Growing up poor, Growing up poor, Growing up wealthy, on the other hand, means that you tend to feel a greater sense of control when dealing with uncertainty. And feeling out of control can lead to detrimental behavior patterns, such as opting for immediate gratification. Basically, feeling as though you have control over your life is a big factor in making good financial decisions.

[00:02:18] Whether you grew up like a Rothschild or like a Dickensian orphan, it's important to learn to foster your sense of control. Here's what you need to know about how your childhood socioeconomic status might still be affecting your finances. Locus of Control The sense of control that the APA study is referencing is often referred to as a locus of control.

[00:02:45] According to psychologists, individuals see the ability to control the events in their life as either being internal, meaning they have the control, or external, meaning control is out of their reach. For instance, an individual with an internal locus of control who flunked a test would think that he did not study hard enough, and would decide to do better in the future. If he aced a test, he would see that as evidence that he prepared well.

[00:03:14] Someone with an external locus of control, on the other hand, might think she got a poor grade because the test was too hard, or the teacher wrote bad questions. And if she did well on the test, she might attribute the A to luck, or the teacher being too easy on her. Your locus of control can strongly affect your financial life. For instance, psychologists have found that individuals with an external locus of control are more likely to carry debt.

[00:03:44] Experts theorize that this is because an external locus of control leads to a sense that nothing you do matters, since there's no beating banks or the man. With that attitude, there's no compelling reason to get out of debt. Individuals with an internal locus of control, on the other hand, recognize that all of their financial decisions are entirely within their control, which means they make proactive decisions about their money.

[00:04:13] Protective and reactive behavior patterns Generally, individuals who grow up poor are attempting to protect themselves when they develop an external locus of control. The APA study found that people who grew up without much money are more likely to take a small, immediate reward instead of a larger, later reward. In the context of a financially tumultuous childhood, this behavior pattern makes protective sense.

[00:04:42] When you don't trust that the outside world will treat you well or fairly, then you're likely to grab what you can when you can. Unfortunately, this kind of impulsivity is part of what leads to higher debt among those with an external locus of control, and it makes it very difficult to get ahead financially. Waiting patiently for a larger, later reward is what investing's all about after all.

[00:05:09] In addition, feeling as though you don't have control can also affect your determination. One part of the APA study asked participants to recall a moment of financial uncertainty before giving them an unsolvable puzzle. Those participants who had grown up poor gave up on the puzzle 25% sooner than those from wealthier backgrounds. This is a reactive behavior pattern. The world is too tough, and I just can't get ahead.

[00:05:39] This can hold you back. Just imagine how many people have given up on their dreams at the first setback because of such reactive behavior patterns. Changing your sense of control. The good news is that it is possible to move your locus of control. The authors of the APA study found that asking participants to recall situations when they felt in control helped to ameliorate their sense of loss of control.

[00:06:08] That's because having confidence in your abilities causes you to try more often, usually bringing more success and more confidence. If you tend to feel out of control when you're facing economic uncertainty, think of a time when you handled a problem in a way that you were proud of. The problem doesn't even need to be financial in nature. Any time you felt in control can be helpful. The next time you face economic uncertainty,

[00:06:37] focus on that memory of being in control before making any decisions. Recalling that sense of control can help you maintain it. Mind over matter. Successful people know that looking within is the only way to realize your dreams. But counting on yourself can be very difficult if your childhood taught you that you cannot control your circumstances. Unlearning that lesson and reversing detrimental behavior patterns is not easy,

[00:07:07] but it's possible to reprogram your sense of control and improve your finances. You just listened to the post titled How to Overcome Your Money Mindset Issues If You Grew Up Poor by Emily Guy Birkin with ptmoney.com And now a word from our sponsors at Betterment. When investing your money starts to feel like a second job, Betterment steps in with a little work-life balance.

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[00:09:32] Shopify.com slash OFD. Our history certainly affects the way we handle money and life in general because we all have deeply held subconscious beliefs that influence our behavior and the way we internalize things. I think the first step in overcoming programming that may be holding us back is to be aware of it. Growing in self-awareness can be a lifelong process,

[00:10:01] but it's certainly well worth the effort. It can provide some space between an external trigger and our knee-jerk reactions. And in that space, we can empower ourselves to tell a new, more helpful story and let our reactions flow from there. So for example, I, like many people, have abandonment issues that are rooted in my childhood. It has affected my relationships my whole life because I have an ingrained belief

[00:10:30] that people will always leave me. In the past, that has made me either very guarded or very clingy, especially in romantic relationships. But awareness of this tendency allows me to choose differently and tell myself a different story about it. When I looked at this from an external locus of control, I felt at the mercy of other people's whims. But from an internal locus of control, I can take the position

[00:11:00] that I will never leave me and that I can be my own best friend. That more empowering story allows me to enjoy the people around me without any clinging or guardedness. Because whether they stay or go doesn't affect my relationship with myself. Similarly with money, I had a deeply ingrained belief that a high income was a reflection of my worth as a person. In order to leave my high-income job,

[00:11:29] I needed to rewrite this story. I've come to realize that my self-worth need not be tied to a salary. It has more solid ground when I tie it to my integrity, how I treat myself and others, and my commitment to my own personal growth. Look, we all have issues. I'm no exception. But if we're ever going to get beyond them, we must first develop awareness of what our issues are

[00:11:57] and allow ourselves to question our most deeply held self-limiting beliefs. And that's a wrap for another Monday show. Have a great rest of your day and start to your week. And I'll be back tomorrow where your optimal life awaits.