people work their way out of poverty isnít just about
money. It requires addressing the beliefs and culture
around money that may be keeping people stuck
financially and emotionally.
many of my financial planning colleagues, I have an
interest in finding effective ways to help middle- and
low-income people increase their financial health. One
method Iíve used from time to time is teaching
offered classes on basic financial skills like managing
money or the fundamentals of investing. Iíve also
tried offering classes focused on money scripts ó
peopleís basic, and sometimes fallacious, beliefs on
the subject ó or other aspects of money psychology.
Guess which classes fill and which ones donít?
matter what their income level, 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 Iíve seen time and
time again over the years that this simply is not true.
low-income people increase their financial literacy is a
start, but it isnít enough. This was confirmed for me
recently, at the annual Financial Therapy Association
meeting, when I heard a talk that Louis Barajas gave. A
noted author and expert on giving financial advice to
lower-income people, he said, "All the financial
literacy in the world is not going to help the
into a poor family in East Los Angeles, Louis managed to
become the first Hispanic certified financial planner in
the U.S. and pull himself out of poverty. After a
successful career, he returned to his childhood
community to live his passion of helping his community
transcend poverty. It turned out to be far more
challenging than he ever dreamed.
Louis said in his talk, he discovered that, "Most
people in poverty are unaware that their cultural
beliefs hold them back." He described some of those
beliefs, which I call money scripts. A few of them are:
sense of fatalism, that "this is just how things
assumption that working for someone else is the only
group dynamic where anyone who reaches for too much
success is pulled back down into the communityís
financial comfort zone.
victim mentality of blaming and feeling powerless to
for financial advice on the wealthiest or most
successful person in the neighborhood, without the
knowledge to evaluate the validity of that advice.
has found that telling someone about a better way doesnít
work. He had to find how to expose them to it. As he
said, "If you donít see a brighter future, you
wonít plan." But even before that, people need
help to take care of their urgent needs first before
they can even consider that a future exists.
Barajasís talk only confirmed for me how important it
is to consider peopleís beliefs and emotions about
money. This is essential knowledge for financial
advisors, debt counselors, social workers, volunteers
and anyone working to help people get out of poverty.
More money or more knowledge about money is simply not
enough to help people who seem stuck in poverty or in a
repeated pattern of financial missteps.
easiest way to advise people who are struggling
financially is to focus on the mechanics of managing
money. Yet anyone who really wants to help people make
lasting changes in their money behavior needs to find
ways to help them look deeper. Ironically, the need to
look beyond the money to build financial health is one
important thing the poor and the wealthy have in common.
Kahler is president of Kahler Financial Group in Rapid
City, S.D. He writes for AdviceIQ, which delivers
quality personal finance articles by both financial
advisors and AdviceIQ editors.