Human's Relationship with Money | Basics
What factors decide my relationship with money?
Hello, 👋
We are all unique in terms of how we see and deal with money. I was always curious why we can’t have one true perspective for money and why there is a discussion always going on in family and friend groups around how someone should deal with money. My curiosity forced me to deep-dive into the human relationship with money and what factors define that relationship.
Here, I tried to categories and list different factors which affect this relationship. Enjoy!
Garvit Sahdev enjoys understanding ideas that shape our world. The Thoughtful Tangle is an initiative to share this journey and experience with his friends who love to do the same. He selects one idea and dives deep into it to understand its basics, relevance, impact and opportunities around it. The thoughtful tangle is special because 👇
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We are doing a series on ‘money’ as it is truly an idea which shaped the evolution of humanity and is still shaping it in many ways. Check out this series at
» The Money Series | The Thoughtful Tangle
Money Mindset
Emotional Aspects of Money
Money isn’t just numbers—it’s tied to our emotions and can trigger feelings of fear, desire, shame, or relief. These emotions often shape our financial decisions.
Fear and Security
Financial Safety Net: People often save money or invest in insurance to create a buffer for uncertain times. Having a financial cushion provides peace of mind, reducing fear of emergencies or job loss.
Risk Aversion: Some people avoid risky investments or business opportunities due to a fear of losing money. They may prioritize stability over potential high returns, often sticking to safer, predictable options.
Desire and Aspiration
Material Goals: Many are motivated by the desire to own things like a house, car, or gadgets. These goals often drive people to work harder, save more, or sometimes take on loans to achieve them.
Life Experiences: Beyond material wealth, people often aspire to spend time on experiences like travel, education, or personal development. The pursuit of these experiences can shape budgeting and spending habits, with some prioritizing adventures over possessions.
Shame and Pride
Financial Success: Achieving financial success can boost self-esteem and social standing. People might take pride in owning assets, having a high-paying job, or being able to provide for their family, and this motivates them to continue striving for financial growth.
Financial Struggles: On the flip side, struggling with money can lead to feelings of shame, especially if societal expectations or personal standards aren’t met. This can cause stress and sometimes lead to unhealthy financial decisions, like overspending to “keep up appearances.”
Stress and Relief
Debt and Bills: Managing debts and recurring bills can be a significant source of stress for people. Constantly worrying about payments can cause anxiety, and may lead to poor financial decisions, like accumulating more debt or ignoring payments.
Financial Freedom: The ability to live without financial constraints—where all bills are paid, and debts are cleared—brings immense relief. Financial freedom allows people to pursue passions, relax, or take risks without the weight of financial stress.
Psychological Factors in Money Management
These psychological factors deeply influence how people perceive, manage, and make decisions about money throughout their lives.
Early Experiences
Childhood Financial Situations: A person’s early exposure to money—whether growing up in a wealthy or struggling household—often shapes their financial habits and beliefs. For instance, someone who experienced financial hardship as a child might be more inclined to save aggressively or avoid debt.
Parental Money Attitudes: The way parents handle money, such as whether they were frugal or spent freely, sets a foundational example for how their children view and manage their own finances. These attitudes can be passed down, affecting how one feels about spending, saving, or taking financial risks.
Self-Worth and Identity
Money as Self-Validation: Some people equate their financial success with their sense of self-worth. Having wealth or a high income might make them feel valuable and successful, pushing them to constantly strive for more as a way of validating themselves.
Financial Independence: Others may see money as a way to achieve freedom and independence. Financial independence allows them to feel secure in their identity, making decisions without relying on others or external support.
Scarcity vs. Abundance Mentality
Limited Resources Mindset: People with a scarcity mindset often believe that money is limited and hard to come by. This can lead them to hoard resources, avoid risks, or fear running out of money, resulting in conservative financial choices.
Unlimited Opportunities Mindset: In contrast, those with an abundance mindset see the world as full of opportunities. They believe that wealth can always be created or expanded, which encourages them to take risks, invest in new ventures, or pursue bold financial goals.
Risk Tolerance
Conservative Investments: People with a low tolerance for risk often prefer safer, more conservative investments, like bonds or savings accounts, where the chance of losing money is minimal. This cautious approach is driven by a desire to protect what they already have.
Entrepreneurial Ventures: Those with a high-risk tolerance may be more willing to start businesses or invest in high-risk ventures. They’re more comfortable with uncertainty, believing the potential rewards outweigh the risks.
Social Dimensions of Money
Social dimensions influence how individuals relate to money, shaping their financial choices through societal expectations, cultural norms, family obligations, and a desire to create a positive impact.
Status and Comparison
Conspicuous Consumption: People often spend money on luxury goods or experiences to display their wealth and social status. This behavior, called conspicuous consumption, is driven by the desire to be seen as successful or to "keep up" with others, leading to spending on items that project wealth and status.
Social Media Influence: Social media amplifies the pressure to maintain an image of success. Constant exposure to others' lifestyles can influence people to spend more, often beyond their means, to match or surpass what they see online, even if it doesn't align with their financial reality.
Cultural Attitudes
Money Taboos: In many cultures, discussing money openly—whether it's about earnings, debt, or financial struggles—is considered taboo. This silence can prevent people from seeking financial advice, discussing important financial decisions with others, or addressing issues like debt until it becomes overwhelming.
Cultural Financial Practices: Different cultures have unique financial practices, such as saving traditions, investment strategies, or how money is shared within families or communities. These cultural norms can influence how people prioritize spending, saving, and investing, often aligning their behaviors with those practices.
Family Dynamics
Inheritance: The way wealth is passed down within families plays a significant role in shaping financial behaviors. People who expect to receive an inheritance might feel less pressure to save, while those without this expectation may work harder to create their own financial security.
Financial Responsibilities: In many families, individuals are expected to contribute to household expenses or support extended family members. These obligations can influence a person's financial choices, sometimes delaying personal goals like saving for a home or investing in education to meet family needs.
Philanthropy
Charitable Giving: Many people feel a sense of social responsibility and are motivated to give money to charities or causes they care about. This desire to contribute can shape financial decisions, encouraging them to allocate part of their income toward helping others or creating a positive impact.
Social Impact Investing: Some people choose to invest their money in companies or projects that aim to solve social or environmental issues. Instead of purely seeking profit, they look for investments that align with their values, balancing financial returns with a positive societal impact.
Economic Understanding
Financial Literacy
Budgeting Skills: People with strong budgeting skills can effectively manage their income and expenses, ensuring that they live within their means. This involves tracking spending, setting financial goals, and allocating money wisely to avoid overspending or running into debt.
Economic Principles: A solid understanding of economic principles, like supply and demand or inflation, helps people make informed decisions about their money. This knowledge allows them to better predict market trends, understand how the economy affects their financial health, and make smarter investment or spending choices.
Income and Wealth Creation
Active Income: Active income refers to the money earned through work, such as a salary or wages. People focus on increasing their active income by seeking higher-paying jobs, promotions, or additional employment opportunities, which helps them build financial security.
Passive Income: Passive income comes from sources that don’t require ongoing work, like investments, rental properties, or royalties. Building passive income streams allows people to earn money with minimal effort over time, contributing to long-term wealth creation.
Debt Management
Good Debt vs. Bad Debt: Understanding the difference between good debt (like student loans or a mortgage, which can build future value) and bad debt (like credit card debt, which often has high interest and doesn’t create value) helps people make smarter borrowing decisions. Managing good debt responsibly can improve financial outcomes.
Debt Repayment Strategies: Effective debt repayment strategies, such as the snowball or avalanche method, enable people to systematically pay off their debts. By prioritizing high-interest debts or focusing on paying down small balances first, individuals can regain control of their finances and work toward becoming debt-free.
Behavioral Patterns with Money
Spending Habits
Needs vs. Wants: Understanding the difference between needs (essential expenses like food, housing, and utilities) and wants (non-essential items like entertainment or luxury goods) helps people prioritize their spending. Focusing on needs first can prevent overspending and ensure financial stability.
Emotional Spending: Many people spend money to cope with emotions like stress, sadness, or even boredom. Emotional spending can lead to unnecessary purchases and strain finances if not kept in check, as people may buy things they don’t need or can’t afford just to feel better temporarily.
Goal-Setting and Planning
Financial Goals: Setting clear financial goals, like saving for retirement, buying a house, or paying off debt, gives people direction and purpose in managing their money. These goals help them focus their efforts and make better long-term financial decisions.
Action Plans: Once goals are set, people need actionable plans to achieve them. Creating step-by-step plans, like saving a certain amount each month or cutting back on specific expenses, turns financial goals into reality, providing a roadmap for success.
Impulse Control
Budgeting: Sticking to a budget is one way to exercise impulse control, ensuring that people only spend what they can afford. A well-structured budget helps prevent unplanned purchases and keeps financial priorities in focus, helping people stay on track toward their goals.
Mindful Purchasing: Mindful purchasing involves taking a step back before making a purchase to consider whether it aligns with one’s financial goals and needs. By controlling impulses, people make more thoughtful, intentional purchases, avoiding regrets and financial strain.
Delayed Gratification
Long-term Investments: People who practice delayed gratification often invest in long-term financial assets like stocks, retirement funds, or real estate. This behavior shows a willingness to wait for future rewards rather than seeking immediate gains, leading to greater wealth accumulation over time.
Saving for Major Purchases: Delayed gratification also helps people save for large purchases, such as a car or a home, instead of relying on credit or loans. By saving over time, they avoid debt and can make these purchases without financial stress, reinforcing disciplined money habits.
Ethical Considerations in Finance
Values Alignment
Personal Values: People’s personal values, such as honesty, fairness, or environmental concern, often shape their financial choices. For example, someone who values fairness might avoid supporting companies that exploit workers or engage in unethical practices, guiding where they spend or invest their money.
Financial Decisions: Aligning financial decisions with values means choosing investments, spending habits, and earning opportunities that reflect what’s important to the individual. This can involve avoiding certain industries or supporting businesses that align with one's ethical principles.
Ethical Earning
Ethical Career Choices: Many people seek careers or jobs that align with their ethical beliefs. This could mean working for companies that promote sustainability, social justice, or fair labor practices, or avoiding roles in industries they find morally questionable.
Fair Business Practices: For entrepreneurs or business leaders, ethical earning involves running a business that treats employees fairly, respects human rights, and operates with integrity. It may also mean ensuring that the company’s profits are generated in a way that doesn’t harm people or the environment.
Ethical Spending
Conscious Consumerism: Ethical spending involves being mindful of where one’s money goes. This includes supporting companies that align with personal values, such as those promoting sustainability, fair trade, or cruelty-free products. Conscious consumers often avoid wasteful or unethical spending.
Boycotts: When individuals learn about unethical practices in certain companies or industries, they may choose to boycott those businesses as a form of protest. This decision not to support certain brands or products reflects their commitment to ethical spending.
Sustainability
Sustainable Investments: Some people choose to invest in companies and projects that prioritize environmental sustainability, such as renewable energy or eco-friendly technologies. These investments reflect a commitment to aligning financial growth with the protection of the planet.
Eco-friendly Purchases: Ethical consumers may prioritize buying products that are made with sustainable materials, have a smaller carbon footprint, or come from companies that focus on environmental responsibility. This approach ensures that their purchasing decisions minimize harm to the environment.
Power Dynamics in Finance
Financial Independence
Freedom from Debt: Achieving financial independence often means being free from debt, which provides the ability to make choices without financial constraints. Without debt, individuals can more easily pursue opportunities, invest, or retire without the burden of owing money to others.
Passive Income Streams: Building passive income streams, such as from investments, rental properties, or royalties, helps individuals gain financial independence. These income sources provide financial stability and freedom, allowing people to make decisions based on preference rather than necessity.
Influence and Control
Corporate Influence: Large corporations or business leaders often have significant influence over markets and economies. This power can shape financial opportunities, investment choices, and even policies that affect individuals' financial environments.
Political Donations: Individuals or organizations may use political donations to influence policymakers and advocate for legislation or policies that benefit their financial interests. This power dynamic affects how economic regulations and opportunities are shaped.
Transactions
Consumer Power: As consumers, individuals have the power to influence market trends through their purchasing decisions. By choosing to buy or boycott products, people can drive demand for certain goods and services and impact corporate practices.
Market Influence: Individuals and businesses with significant financial resources can shape market trends and economic conditions. Large investors or influential business leaders can affect stock prices, market demand, and overall economic stability through their financial actions and decisions.
Time Perspective in Financial Planning
Short-term Thinking
Immediate Gratification: Short-term thinking often leads to seeking immediate gratification, where people prioritize current desires over future needs. This can result in impulsive spending or short-lived enjoyment rather than saving for future goals or investments.
Cash Flow Management: Effective cash flow management involves balancing current income with expenses. Short-term thinkers may focus on managing daily or monthly finances to avoid immediate financial problems but might neglect long-term financial planning.
Long-term Planning
Investment Strategies: Long-term planning typically involves developing investment strategies to grow wealth over time. This includes diversifying investments and choosing assets that appreciate in value, ensuring financial growth and stability for the future.
Career Development: Planning for career development involves setting long-term professional goals and acquiring skills that will enhance future earning potential. Investing in education, training, and networking can lead to significant career advancement and increased financial opportunities.
Money and Well-being
Financial Stress
Physical Health Issues: Financial stress can lead to physical health problems, such as headaches, high blood pressure, or sleep issues. The strain of managing financial concerns can negatively impact overall health, prompting people to seek solutions to alleviate stress.
Stress Management: Managing financial stress involves developing strategies to cope with anxiety related to money. This might include budgeting, seeking financial advice, or finding ways to reduce debt, all of which can improve mental and physical well-being.
Money and Mental Health
Anxiety and Depression: Financial problems can contribute to mental health issues like anxiety and depression. The constant worry about money can affect emotional stability, leading to increased feelings of distress and potentially worsening mental health conditions.
Therapy and Support: Seeking therapy or support for financial-related anxiety helps address the mental health impacts of money concerns. Professional support can provide strategies for managing financial stress and improving overall mental well-being.
Work-Life Balance
Time vs. Money Tradeoffs: Balancing work and personal life often involve making tradeoffs between time and money. For example, working longer hours may increase income but reduce time spent with family or on personal activities. Finding a balance is crucial for maintaining overall well-being.
Lifestyle Choices: Decisions about work and lifestyle impact financial stability and personal satisfaction. Choosing a job that offers flexibility or aligns with personal values can enhance work-life balance, contributing to better financial and emotional health.
Financial Wellness
Financial Education: Gaining financial education helps individuals make informed decisions about managing money, investing, and planning for the future. Better financial knowledge can reduce stress and improve confidence in handling financial matters.
Holistic Wealth: Holistic wealth encompasses not only financial stability but also emotional, social, and physical well-being. Achieving financial wellness involves integrating financial health with overall life satisfaction, ensuring that all aspects of well-being are addressed.
Find Your Relationship
Try to answer the following questions to explore your relationship.
When I stopped here, my mind was already wondering about mutually exclusive money personalities. We will be dealing with that in the next post.
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ABOUT THE AUTHOR
Hey everyone, I'm Garvit Sahdev 😎. I'm on a mission to gain a deeper understanding of the world, and to develop solutions that can trigger significant global change.
My curiosities span various domains including food, business theories, material science, market size calculations, economics, politics, and sports, etc. 🧐
Professionally, I have a diverse background spanning startups, consulting, policy development, market research, system building, ISO, colour physics, nanomaterial synthesis, textile chemistry, etc. 🐘
Note: Generative AI has been used for writing this piece under the supervision of the author.
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