Many years ago, I sat in a training taught by the late, great Stephen R. Covey. He spoke about the importance of listening as a leadership tool. In a section of his training about the importance of understanding and compassion for others,  he said something that I’ll never forget:

“No one can act honestly outside of their own perceptions.”

Acting Honestly

This simple sentence hit me like a ton of bricks. No one, not me and not you, is capable of action outside of what we “know” to be true, no matter how wrong we may actually be.

Because in our minds there exist embedded beliefs about how the world works.

These beliefs we’ve acquired through experience: whether by our successes or failures, through joy or tragedy. They betray our naiveté or our pessimism. These perceptions about the world are the background of our thoughts and the unspoken assumptions in our decision making.

And usually, we don’t even realize they exist.

The accuracy of these perceptions will determine much about our path in life. If something does not lie within our perceptions, it is impossible to us. We cannot “act honestly” about something we don’t understand.

And, this is true in relationships, work, food, exercise, technology, and even money.

The Personal Finance Echo Chamber & Perceptions

Covey’s statement gives us a clue about why the Personal Finance Echo Chamber doesn’t help most people. Most personal finance advice is geared toward budgeting, reducing costs and saving; it’s geared toward getting people to think about their money as an accountant thinks about the company balance sheet.

But, the accountant view of personal finance is a galaxy away from the average person’s experience with money. For most people, their perception of money is all about emotion.

This isn’t necessarily a bad thing. It’s a crucial part of being a human being.

Q: What house should I buy?

A: The one that FEELS like home.

Q: Which gift should I get for my spouse?

A: One that shows how much I LOVE him or her.

Q: Where do you want to go out to eat Friday?

A: It depends on what MOOD I am in.

The accountant view of personal finance is not on most people’s perceptual radar and so it is not very convincing. The PF community says “budget” and outsiders perceive “too difficult, not worth it”. The PF community says “everyone needs an emergency fund” and outsiders perceive “I’ll never be able to save that much”. The PF community says “FIRE” and outsiders perceive “what a bunch of privileged snobs.”

It doesn’t really matter who is right.

What matters is the PF community, if it wants to speak to the broadest possible audience, has to work around the very real perceptions that keep people from making better financial choices.

Picking Up Financial Cues

The root of these perceptions is that most people don’t learn about money like they learn about math or science.

It’s possible to go from daycare to PhD and never learn anything about personal finance. There is no standardized testing on money. No objective standard for sound financial decision-making.

There are many reasons for this, but I think an overlooked one is that our culture isn’t comfortable talking about money.

It’s a taboo subject.

Think about how many people’s finances you really know about. It’s likely only a small portion of the people you know well.

Money joins politics and religion as the 3rd part of the holy trinity of topics you do not discuss in polite conversation.

Not having enough money can be seen as a personal failing. Being bad with money can be an embarrassment in some circles or a strange badge of honor in others. Bragging about money and having too much money relative to your peers can be perceived just as bad.

Could you imagine the parental interventions that would occur if money were taught more regularly in schools? Money is a personal topic.

So each generation is taught money in a personal way. In fact, the closest analogy I can think of is how we are “taught” our native language: almost by accident, through observation and mimicry from parents, friends, peers and our culture.

My daughter is 5 years old. She uses the word “like” as a filler.

“How many kids were at the park?”

Like… there were 5 of us.

I’m sorry, it’s an awful habit. I didn’t teach her this on purpose. Neither did her mother.  But we say “like” in that manner sometimes. Perhaps more importantly, her friends do too. So why wouldn’t she mimic it?

Money is the same way.

Each one of us picks up financial cues whether our parents intended to communicate them or not. Our financial beliefs, assumptions, and perceptions are a reflection of theirs.

We are either mimicking their behavior and perceptions or we have had to consciously choose and struggle to overcome those perceptions. Often we have to do both.

You Are What You Did Yesterday

Let me give you two brief examples. One from my own life and one from one of my best friend’s life.

I grew up in a stable, middle-class household.

My friend grew up in an unstable, lower-class household, always moving between various family members and friends.

I was told to save from a young age. And I did, rarely spending money on anything through my college years.

My friend was never “told” anything about money. No one he knew could afford to hold onto it for long enough to talk about it.

When we each began to support ourselves financially, we ran into trouble because of what we had learned about money.

I felt like I was in a world of financial hurt, because in my head money was for saving and not for spending. It didn’t matter if I was still saving 25% of my income, this false idea about money made me think I was doing something wrong.

And I struggled with feelings of guilt and inadequacy for several years.

My friend similarly struggled. But even when he had more than enough money to support his needs, he couldn’t hold onto it. Nothing in his life had ever prepared him to value money as a long-term tool.

We are today what we did yesterday. So if we want to be something different tomorrow, we have to do something different today.

Leaving Your Past Behind

You likely have something similar from your past that is holding back your financial future.

Or, maybe it is not so dramatic.

Maybe it has more to do with your fear of financial failure. Maybe you were taught money is how you get love or friendship; power or popularity.

Maybe you’ve unintentionally learned that being bad with money is just your lot in life.

Maybe spending money on stuff gives you a sense of control.

Maybe you’re really concerned about keeping up with the Joneses.

It could be just about anything.

Math teachers are yet to find a number high enough to count all the possible false beliefs about money floating around out there.

Regardless, your previous experiences with money could be limit your perceptions, and thereby limiting your financial future. Changing our deeply-held assumptions is uncomfortable and often painful. It’s easier to stay in the rut than to climb out.

But it isn’t impossible. The first step is figuring out what they are. Here are some ways to get out of the mental rut of our past assumptions:

1. Examine your financial transcript. Since your personal finance education was mostly accidental, it’s a good idea to look back on what you learned and when:

  • What were your parent’s financial habits? Did they explicitly teach you about money?
  • What did you learn from money in a classroom setting?
  • What is your earliest experience with money?
  • When and how did you become financially independent from your parents?
  • What is your greatest financial success or worst financial failure?

2. Examine your past goals. Nothing tells us more plainly where our financial perceptions are askew than seeing which goals we fail at year after year. “The definition of insanity is doing the same thing over and over again and expecting different results.” -Albert Einstein.

We could also say “the definition of insanity is doing the same thing every January and expecting a different February.

If you struggle to make progress on long-held goals,  then the culprit is likely to be between your two ears.

3. Examine your regrets. Which financial choices do you immediately regret? It’s not a purely financial one, but I nearly always regret dessert. Then why do I buy dessert you might ask? Because I’ve trained my brain to crave it of course!  Likewise, about $183 billion is spent every year on advertising which is meant to train your brain to think about brands and products in a favorable way. They “hack” our thinking so we impulse buy.

4. Talk Openly About Money. It’s been suggested that one of the best ways to overcome bias and bigotry is to get to know people from other groups, different from your own. I believe the same is true for financial biases and blind spots.

Like I said before, most of us aren’t comfortable talking about money openly. But this cultural habit only allows our assumptions to fester and our past to have an outsized impact on our future.

Be financially vulnerable with others. Talk about “your numbers” and talk about your fears and your dreams. But most importantly, listen to what others have to say about their own financial situation.

Your issues may be very similar and who knows, maybe you’ll hear or even make a life-changing suggestion or two.

5. Talk to People Outside the PF Bubble. The PF community is full of people who all see money in the same way. I’ll be the last person to say the PF community way is wrong, but surely we can learn things from those people who see and think about money differently.

One quick glance at my brother’s finances is all you’d need to know that he struggles with planning for his financial future. And yet, he is one of the most generous people I know. If I was down to my last $100, I wouldn’t give anyone else a penny. But it’s not a hypothetical for him: he’s generous even when he has less than $100 to his name.

You should find people who have done what you have struggled to accomplish. If you want to be an entrepreneur or self-employed, you may need to retire many of your preconceived notions about money. If you want to raise a large family on a budget, find parents who are doing this.

Making Changes That Last

These limiting beliefs are a part of us, but they are not us.

In many cases, simply learning what our financial blind spots are is empowering enough to allow us to move on from them. In the book “Your Brain At Work”, the author David Rock talks about the importance of labeling and then re-framing when it comes to managing our perceptions and other mental threats.

When we experience a negative internal reaction to something money related we should label it. Give it a name that reminds you of what it does to your finances. Once named, we can re-frame that perception as something your brain did, and not you.

For example, I labeled my tendency to not want to spend money on anything ever as “scrooge”. But “scrooge” is something I trained my brain to do. Which means I can train it to do something else.

In this mental state, a whole new perceptual field may be open to you. You can then make changes that last because you can act honestly within those perceptions.

About the author: Michael is a former Organizational Behavior Consultant turned Financial Coach at The Change Brothers. He left the corporate life behind because he’s passionate about helping people achieve REAL CHANGE in their finances so they can live their dreams. If you’re ready to change your relationship with money, read his free book, take his online course or work with him 1:1.