Ep 565 - How to build a cash ladder & discovering your money script

The Money To The Masses Podcast

The episode explores the psychological relationship individuals have with money through the lens of 'money scripts' and provides a practical

Key takeaways

• Dr. Brad Klontz identified four money scripts: avoidance, worship, status, and vigilance.
• Money avoidance is linked to lower net worth because individuals may avoid looking at bank statements or asking for raises.

Main topics

• Financial Psychology
• Money Scripts

Notable quotes

The fix is not some great mindset transformation. It's just exposure.

Conclusion

Listeners gain both a psychological framework for self-reflection and

Transcript preview

Speaker 1 (0:00) Before we start, this episode is brought to you by Interactive Investor. Unlike platforms that take a bigger cut as your wealth grows, ii uses a simple flat monthly fee. So as your portfolio grows, your platform fees don't. Want to go global? Enjoy award-winning international trading and hold up to nine different currencies to keep exchange fees low. Plus, you pay zero fees on regular monthly investments. Join ii and discover how you can keep more of the money you make. capital at risk. Speaker 2 (0:29) Hello and welcome to episode 565 of the Money to the Masses podcast with your resident expert as always Damien Fay and me Andy Leakes. Damien welcome back how are Speaker 1 (0:37) you doing? I'm good thanks Andy and we were talking off air just now about Pokemon cards again funnily enough because I think the great and good in the Pokemon world must have heard us after last week's episode where we talked about trading cards and in particular Pokemon cards because the scalpers are angry, aren't they? Yeah, they're up in arms because Speaker 2 (1:00) they've just released a new set of Pokemon cards. You've probably heard about it in the news. People were queuing around the block. And one thing they were worried about, the retailers and also the Pokemon card producers, was scalpers. And yeah, scalpers are upset because it seems that... the rare cards are actually available in a lot of the packs. So they have effectively overproduced some of these rare cards, which for the scalpers is not a good thing because it means that it actually brings down the overall value of the cards that they're buying up in bulk in order to try and sell online at a profit. But I'd argue, Damon, it's a good thing because obviously you've got lots of new collectors coming into the game, lots of young collectors as well, and it means they are going to get a better chance of getting these rare cards and filling up their collections. Maybe this edition of the Pokemon cards aren't going to be as rare and Speaker 1 (1:47) as valuable, but I think it's a good thing for the game overall. Yeah, and I love the fact that scalpers are unhappy. See, look, I've even got the terminology down now after our education last week. Lots of people reached out about last week's episode. So I think us doing it on the podcast last week. It was really interesting for a lot of people. Now, what's on this week's show? We're going to do something different again this week. So we've got two pieces. The first piece, which is the different piece, is a bit of psychology. I'm going to be asking you questions. Andy knows nothing about this at the moment, but I'm going to be going through some questions. Think of it a bit like a personality test to do with money. So everyone listening. can play along and they can learn about themselves. And the second piece on the podcast is about cash ladders. So the world has changed. We've got to the stage now where interest rate expectations are such that when you lock your money away for longer... you are now getting rewarded for it in terms of savings accounts. In the past, that wasn't true, or the recent past, I should say, that hasn't been true because the interest rate expectations were that rates would go higher, but they would come down over the longer term. So it meant you got great easy access savings rates, but poor rates on things like five-year fixed rate bonds. That's now changed, and it means you can use this method to boost your average rate of interest on your savings. Speaker 2 (3:17) Okay, so let's get on with that first piece. It's going to be, like you say, a bit different. I don't know much about this. I'm ready for the questions. It's about money scripts, isn't it? And kind of like the personality test of money. Speaker 1 (3:27) Yeah, so I'm going to be doing something different. I'm going to ask you some questions. And as I have already said, if you are listening to the show, then play along as well, because you will learn a lot about yourself. And I'm going to ask you these questions, Andy. So you've got to answer honestly. Because at the end of it, I'm going to tell you what your answers say about how you handle money. So the idea behind this piece is that we all pick up money beliefs when we're young. So it's long before we understand money or know anything about pensions or interest rates. And it's because we hear our parents talking about money. I mean, they could just be arguing about things like bills, or it's just the way we observe how they interact with money situations. And so what happened? a financial psychologist called Dr. Brad Klontz gave these beliefs a name. He called them money scripts. And back in 2011, he published research that sorted them into four types. And then he followed that up with a study looking at how each type actually behaves with money. The findings are quite uncomfortable in places, I'll admit that. So what I'm going to do is take that research and... make a very simplified version of the questions that were asked in it just to give people a flavor and some insight potentially into how they deal with money what their money script is so how it's going to work is i'm going to read three statements for each of the four types and then you have to agree or disagree and if you agree you give yourself a point and if you disagree then you don't give yourself any point so at the end of each section you should be able to add up your points and it will come to a total and it will come to a maximum of three. And then just keep a note of those and we'll go through all four scripts. But along the way, I will be discussing each and giving some tips if it's a character trait that you have. So one caveat before we start is the research only covered 422 people and they were... of a particular type. It was a bit niche. It was mostly older people, well-educated people, and most of them were married. So it's not a perfect mirror of everybody that's necessarily listening to the show or the wider population, but it should be an interesting exercise nonetheless. So Andy, are you ready to start the quiz? Yeah, I'm ready to start the quiz. Speaker 2 (5:52) I was just wondering, Dave, before we start, is this a sort of quiz that I can potentially also... conduct on my wife and we can then compare our scores and see what kind of person, because you know, with a personality test, you can see what kind of a partner you are, whether you, we've done all those things before. And then you realize that you are the clash or you, or you, or you're very compatible. Am I basically going to do this with my wife and then realize that this is where we're going wrong. I Speaker 1 (6:16) think it's probably a fun exercise just to do anyway with anybody and see how everybody's different. Because as you say, you probably have different character traits and you'll also understand not only yourself, but perhaps a little bit better how your partner deals with money. So I think that can only be a good thing. So the first one we're going to do is money avoidance. So statement one, do you agree or disagree? People who are rich usually got there by treading on other people. God, that is tough because there are certainly a Speaker 2 (6:47) lot of people I know that have done that. I'm going to, do you know what? I don't want. hate in the comments but I'm going to say yes for the purpose of this because there are people I know that I've got there that are like that and that's that's why they're in the position there are I'm sure there's plenty that have done it through the right means but Speaker 1 (7:02) I'm going to say yes and this is just a bit of fun so it is there's no right or wrong answer so statement two is I feel a bit uncomfortable when I have more than the people around me do you agree or disagree yeah I can agree with that I can I can see myself in situations Speaker 2 (7:17) where Speaker 1 (7:17) that's happened I'm going to say agree So statement three is when money's tight, I'd rather not open my banking app. Do you agree or disagree? I disagree. Speaker 2 (7:27) Just if I'm going on me in the last few years, I will hit it head on. So I disagree. Speaker 1 (7:32) So we'll come back to the scores later on. But generally speaking, money avoidance is the belief that underneath it's money that is somehow. bad or dirty or that wanting it makes you a bad person so this is the character trait if you answered all of those questions probably agree there's going to be one of your strongest ones but we've got the other character traits to go through don't forget so you're going to pick the one which has the highest score now people with this particular script often feel that they don't really deserve money and so they push it away without even realizing it now here's what the research found that money avoidance was linked to lower income and lower net worth it was also linked to avoiding bank statements altogether which i think a