Brad Klontz is an expert in financial psychology, financial planning and applied behavioural finance. He’s also the author of “Money Mammoth- harness The Power of Financial Psychology to Evolve Your Money Mindset, Avoid Extinction, and Crush Your Financial Goals”
In this episode of the Salesman Podcast, Brad explains why we all have weird beliefs around money, why this holds us back, and how to break through and improve our relationship with money.
Featured on this episode:
Resources:
- Book: Money Mammoth by Dr. Brad Klontz
- Dr. Klontz on LinkedIn
- Discover your Money Scripts here
Transcript
Will Barron:
Hi, my name is Will. And welcome to the Salesman Podcast. On today’s episode, we are getting into improving our relationship with money, and how that’s going to help you in sales and hopefully in your personal life as well. Today’s guest is Dr. Brad Klontz.
Will Barron:
Brad is an expert in financial psychology, financial product, applied behavioural finance and more. He’s also the author of Money Mammoth, Harness The Power Of Financial Psychology To Evolve Your Money Mindset, Avoid Extinction and Crush Your Financial Goals. Brad, welcome to the show.
Brad Klontz:
Will, thanks so much for having me.
Here’s Why You Should Be Teaching Your Kids About Money From the Word Go · [00:47]
Will Barron:
I’m glad to have you on, mate. The audience will know this. We just had a false start recording the episode. We’ll try and keep it as real as we possibly can. So I’m going to ask you the same question that I asked you three seconds ago, Brad. And we’ll go for it, but it seems like our relationships with our financials, our relationships with money, this should be something that we teach kids.
Will Barron:
This is something that almost every society on earth has to deal with as teenagers, as adults as going into retirement age. Am I off the track here or should all people have learned at least from what we’re going to talk about today at a young age, and we seemingly don’t?
Brad Klontz:
Obviously, I think you’re right. Money in the United States is the biggest source of stress in the lives of Americans. The American Psychological Association does a survey on this every single year. And it’s upwards around 70, 80% of Americans say it’s the biggest source of stress in their lives, but it’s not something we talk about it. So in schools here, we don’t even teach kids the basics of personal finance, let alone the psychology underneath it.
Brad Klontz:
And in the studies we’ve done, it’s the psychology that matters. Like the biggest problems we have are people aren’t saving enough for the future, they’re spending more than they make. I’ve yet to find somebody who doesn’t know better, who doesn’t know that they shouldn’t do those things. And so for me, why aren’t we doing it? It’s all about our psychology around money.
Defining Financial Psychology and Behavioural Finance · [01:58]
Will Barron:
So is there a definition of financial psychology or applied behavioural finance? Is there a way to define that before we dive into it and dive into the common sense of this? And then maybe there’s some elements of this that aren’t common sense that we should be implementing as well?
Brad Klontz:
Yeah. I should come up with a really good definition. You’re putting me on the spot here. I’ve based my entire life around this field, but I’ve never really come up with a good definition. It’s basically the intersection of the science of psychology and what we know about human thoughts, behaviours, motivations, emotions, what we know about that and how it relates to our financial life. And more importantly for me, is our financial outcomes. So what are we getting in our financial lives? And if we’re not getting what we want, that’s where a deep dive into our psychology around money can be extremely helpful.
Will Barron:
That makes total sense. Okay, then. So I feel like you’ve probably been asked this question a million times. So I don’t want to dwell on it. And I want to get practical of how we can use or we can improve our psychology of finance and money in the rest of the show.
Who’s to Blame For Our Lack of Financial Understanding? · [03:05]
Will Barron:
But whose fault is our lack of understanding in some of this? Is it our parents having a certain psychology or belief system or way of talking about money that indoctrinates children? Is it schooling that goes one way or another and university? Is it society? Where do our current beliefs and the psychology of money that we have currently, where does all this come from?
Brad Klontz:
Well, Will, I’m a psychologist. And so of course, it’s your mother’s fault. So that’s who we like to do in psychology is blame your mother. But I think it’s a combination of those factors. And all those things matter. All those things matter. But what matters most to you as an individual is probably your upbringing. The home you grew up in, the messages you received from your parents or whoever your caregivers were.
Brad Klontz:
And not only that, but your family history that sometimes goes back for generations around some of these beliefs around money and outcomes. And that’s what’s been really fascinating in our research is a lot of these beliefs are unconscious. We’re not even aware of them.
Brad Klontz:
For most of us, we just have this set of beliefs around money that’s clanking around in our subconscious, that’s leading to all these results in our lives, but we’re not even aware of where those beliefs came from. And sometimes we’re talking great, great, great grandparents set us up on this course in our relationship with money.
Practical Steps Towards a Better Relationship with Money · [04:31]
Will Barron:
From your perspective here as an expert in this space, do we need to go down some weird Freudian path of reliving our childhood memories of where … My dad used to always say, he still says it now, “Money doesn’t grow on trees.” Money’s literally made of paper. Money literally grows on trees, up until recently in the UK, now it’s all gone plastic.
Will Barron:
But all these weird things, do we need to go down this pathway of laying back on a sofa and having [inaudible 00:04:58] yourself, Brad, or a psychiatrist drill into us and understand all these issues? Or is there a better framework or mechanism to perhaps bring to light things that are holding those back and then resolve some of these issues and put perhaps better beliefs in their place?
“If you’re getting what you want out of life financially, you don’t need to do anything. Just keep doing what you’re doing.” – Brad Klontz · [05:20]
Brad Klontz:
Yeah. So that’s a tough question. And the bottom line is this, if you’re getting what you want out of life financially, you don’t need to do anything. Just keep doing what you’re doing. And then the other answer is depending on the level of how you’re feeling stuck, how you’re feeling like you’re hitting some sort of invisible glass ceiling around how much money you’re making, how you feel about your outcomes in life, your income, your net worth, how you handle credit.
Brad Klontz:
If you’re struggling with that, that’s where the deeper dive can become extremely beneficial. And I don’t think you need to necessarily talk to a psychologist around it unless you got some trauma around money, which is not that uncommon.
Brad Klontz:
Sometimes we have to unwind some really intense emotions because those emotions will lock a certain belief pattern in your brain, and that belief pattern is what’s getting you the results you’re getting. So it really comes down to how much you want to transform your relationship with money.
Will Barron:
Okay. Then from that perspective, and I’m trying to add layers to this here and add context for the audience. If a salesperson, and I find this common with our students in our training programme over at salesman.org [inaudible 00:06:20] academy. A lot of people commit into the training being uncomfortable talking about money, when the whole job presides around the idea of, “We are going to give you this value. We’re going to solve this problem in exchange for this cash.” Because we have to exchange something here, and cash is obviously a universal way to exchange value.
Will Barron:
For a salesperson to have success talking about large sizes of money that in their personal life they might be uncomfortable with in the business world, do they need to solve their own financial demons or is it possible just to work on the outward perception of this, of being comfortable talking about money in the corporate environment?
Limiting Money Beliefs That Might be Holding You Back · [07:04]
Will Barron:
I’ve not phrased that question very well, Brad, but our own personal demons about money, our own thoughts and beliefs about money, whether negative or positive, are they likely to hold us back when we’re talking about money in the corporate environment, when it’s not ours and it’s not the person we’re selling to, but we’re represented in an organisation as we go into these deals?
Brad Klontz:
In my experience in trying to intervene with people or help people in my various capacities and with the people I train and coach and everything, absolutely yes. If you’re tripped up around some sort of issue, how can you not leak that into your conversations with people? Or for example, let’s say that you have a real negative association with money, like in your family, in my research, we call it money avoidance.
Brad Klontz:
So you were taught rich people are greedy, money corrupts, there’s virtue in living with less money. You shouldn’t talk about money. If this was sort of ingrained in your brain, of course, you’re going to have trouble doing this. You might even feel bad when you start making money. And so this can really trip you up. So depends on those messages you were getting and how intense they were, that really tells us where we need to go from there.
Will Barron:
As you say that, my mom passed away five years ago now. But when I was a kid, maybe I was a young teenager, 13, 14, 15, I remember really vividly, the house my dad still lives in now, we were driving back and there was a fella in a nice suit and a nice fast BMW. And my mom drove past him.
Will Barron:
And I can’t remember if he did something or tried to change lanes or something like that. And she went, “That dude’s an asshole.” I remember sitting there going, “You’ve never met that fella.” I was like, “Why is that?” And she goes, “Well, look at the car he is driving.”
The Subconscious Moments From Our Upbringing That Shape Our Perceptions Around Money · [09:02]
Will Barron:
And so there was obviously some kind of issue with my mom there, then she was trying to inadvertently pass on to me. But that stuck as a moment in my mind of, “That’s not true. That guy is financially successful. That doesn’t automatically make them an asshole.” So are these the kind of moments that we’re looking for that could shape our thoughts and views on money? Or is that anecdote just totally way off there?
Brad Klontz:
No. So we call those financial flashpoint type experiences in our lives. And it’s a perfect example. Now, what’s fascinating, Will, is that you had, I don’t know if it was your age, I’m not sure if it was your wisdom, but there was part of you that said, “I’m not sure that’s the full story, mom. I’m not sure that’s the full story.” Now, that’s what most of us don’t do as kids.
Brad Klontz:
And it depends on how these messages come at us, and the message that like, if you had an unconscious sort of negative association of people who drive luxury sports cars, it would make sense to me. What’s amazing though, is many people aren’t even aware of those early experiences. All they know is they have this negative association with it, where they look down on people or they project attitudes towards them. And it can really trip us up because to your point, you don’t know anything about that person.
Brad Klontz:
And it might be okay to drive a car like that. It just might. You have to be able to entertain that possibility. But many of us in childhood, we get these money scripts, which is what we call them in our studies, these beliefs around money.
Brad Klontz:
And for many of us, it’s subconscious. We’re not aware of it because it’s conversation like that with your mother but it’s happened 1,000 times in your childhood. And all you know is that you associate certain things with money. You don’t even think about where it comes from.
“Our studies have shown that beliefs around money that are subconscious and come from our childhood experiences end up predicting things like our income, our net worth, and a whole host of financial behaviours.” – Brad Klontz · [10:22]
Brad Klontz:
And what our studies have shown is those beliefs around money that are subconscious for many of us, that come from those experiences, end up predicting things like our income, our net worth, and a whole host of financial behaviours. So they’re incredibly powerful.
Here’s How to Know if You’ve Got Money Issues That Might Be Holding You Back · [10:56]
Will Barron:
Is there a way to, because some of this is almost paradoxical because in your subconscious, you don’t realise that you’ve got these issues until perhaps you reach some kind of glass ceiling and then maybe you just doubt in your own skill as opposed to these avoidance of feeling stuck. I think the two words that you used there, Brad. How do we know if we’ve got an issue that’s holding us back before we reach the point where it becomes obvious? And at that point, we’ve wasted 10 years of our career just holding ourselves back for no good reason.
Brad Klontz:
Yeah. So I think on a preventative nature, it’s a good idea to know yourself. We can think of the metaphor of relationships. It’s probably a good idea to know yourself and know how your attitudes about a relationship, your attitudes about marriage or not getting married. All this stuff it’s really helpful to know who you are as a person. Like some of that self-awareness. I think the self-awareness around money is also very beneficial. It can keep you from getting into trouble.
Brad Klontz:
I’m a fan of self-awareness in general. Obviously in sales, it really helps to know yourself. And so I think it’d be incredibly beneficial before you get in trouble around it. And the weird thing about money is we don’t really talk about it. So in the example of relationships, when you’re in school, you’re dating. You’re talking to your friends about this date, that date, what you’re looking for in a wife or a husband or a partner.
Brad Klontz:
These conversations happen all the time. You get to see this modelling out with your own parents, with your friends’ parents. None of this happens with money. People don’t talk about it. We have a lot of shame around money. There’s a lot of shame. When you talked about Freud, Freud identified that. You said that there’s a tonne of shame around money. We feel ashamed that we don’t have enough. We feel ashamed that we have too much.
Brad Klontz:
We feel ashamed that people are going to judge us. And so all that shame leads to silence. And when there’s that silence, there’s not the opportunity for us to sit back and sort of shuffle through beliefs and decide, “Well, I don’t want that one. And how does your dad look at money? Oh, I like that. I’ll pick that one.” We don’t have the same opportunity to challenge, be aware of those beliefs and change the ones that aren’t working for us.
A Practical Action Plan to Help You Understand Your Own Negative Perception About Money · [12:40]
Will Barron:
So by the book and work with you, Brad, is half the answer to this question, of course. I’ll plug on your behalf. But what does this look like practically? Is this, for a fellow like me going down the pub with a bunch of my mates, who maybe I want to bring in an older fellow who earns way more than me, and maybe I want to bring in someone else who’s less focused on money and has a different type of career or they’re semi-retired or something like that.
Will Barron:
How do I go about practically without, as I say that I’m visualising sitting around the campfire and singing kumbaya and kind of getting a bit hippy with some of this, how do I go about understanding my own obsessed negative thought patterns? Is it just a case of getting around people who have different perspectives and just openly talking about it? Is this a super simple answer to a long and convoluted question?
“Your financial outcomes in life are based a lot on your beliefs around money, how you were brought up and what socioeconomic status you were born into.” – Brad Klontz · [13:34]
Brad Klontz:
Well, I love the idea, Will, of picking the brains of somebody who is further along than you are. So the bottom line, you have to understand this, your financial outcomes in life are based a lot on your beliefs around money and how you were trained and what you were brought up and what socioeconomic status you were born into and what they taught you about money, what they taught you about strategies.
Brad Klontz:
And so it can be really helpful to kind of do like a little deep self analysis dive, where you ask yourself questions like, okay, so what are my memories around money? How did I feel about the socioeconomic class I grew up in? What did my mom teach me? What did my dad teach me? It can be really helpful to reflect on that. What are some of those early experiences I had around money? All that is really, really useful.
Brad Klontz:
But in terms of adopting new beliefs that will help you further your career, make more money, grow your net worth, that’s where I think you really does help to get in front of somebody who’s at a step or two ahead of you, or they’re doing what you want to do, they’re making what you want to make.
Brad Klontz:
And you sit down with a student with an open notebook and you’re like, “Tell me how I should start thinking about money.” And you pay very close attention to what they say because you want to adopt that mindset if you want to get those results.
Why Most People Never Attain Financial Success · [14:39]
Will Barron:
How much of this? And you’re a scientist. You may not be familiar, but regular audience know this. I’ve got a background in chemistry. I’m a published scientist. How much of this is very literally, if you’re around the right people and you’ve got the right strategies for long enough, you’re going to become financially successful? How much of this is luck? And how much of this is just people getting in their own way? People have talent and there’s opportunities in front of them, but they are subconsciously choosing not to take them?
Brad Klontz:
I think a lot of it comes down to, and in Money Mammoth, as you mentioned, one of the metaphors we use is the concept of a tribe. So you have a socioeconomic tribe. This is the way that humans have evolved for our entire time on earth. Except for recently, the last few hundred year, we’re in tribes. We have a tribe, a hunter-gatherer tribe, 100, 150 people. This is how we’ve developed our entire psychology as a species.
Brad Klontz:
And so if you’re in a tribe and it’s socioeconomic tribe but people who don’t have money, they have certain attitudes about people who do have money. They have certain habits, they have certain beliefs. They’re going to teach you how to survive. They’re going to teach you how to thrive within that context, but they can teach you nothing about how to live and thrive and survive in a middle class context for an upper income class. They can teach you nothing about it.
Brad Klontz:
And as a matter of fact, they’re going to teach you probably bad things about it because they don’t like that other tribe. This is built into our psychology too. We want to kill those people. We want to take their stuff. And so really ultimately, if you want to climb the socioeconomic ladder, there’s a bunch of psychological difficulties in doing that. Number one, you’re going to have to abandon the tribe that you’re from.
Brad Klontz:
And if you know people, if you’ve experienced it yourself, who’ve climbed the socioeconomic ladder, a lot of times, there’s a bunch of hands trying to pull them down. And emotionally, they feel like they’re abandoning the people who they love the most. It’s one of the reasons why we see people who come in the large sums of money blow it. Lottery winners lose all their money. People inherit money and lose it all.
Brad Klontz:
And one of the reasons we do that is because it pulls us further, further away from that tribe, which makes us feel incredibly anxious, because historically, if you were abandoned from your tribe, or if you moved away from your tribe, you died. So it’s an existential panic that happens for us.
Brad Klontz:
And so it’s really tough. I think psychologically is the hardest part. In terms of bettering your financial life, and in order to do it and do it well, you really have to study this new tribe and this new culture and learn how they think and how they navigate the world.
Will Barron:
For sure. Now, I want to come back to … And this is slightly off topic, maybe, happiness and stuff at the moment, and where this ends. Do we have to constantly go through the tribes and end up sat on $100 million yachts next to Jeff Bezos to kind of satisfy our needs here. We’ll come back to that in a second. But anecdotally, I’ve got a lot of pushback at the moment.
Will Barron:
And I’m sure the audience will do this when they start crushing in sales, they start making a bunch of money. I’m getting a reasonable amount of pushback at the moment from friends, a few members of family, because I’m looking at buying an expensive car. I’m looking at buying this expensive [crosstalk 00:17:46].
Brad Klontz:
Will, you’re such an asshole. No, I’m just kidding.
Will Barron:
Well, it’s almost like a passive aggressive kind of all, maybe that money could be better spent elsewhere. But I’m not really, even after the car, I want to be in this specific … I’m not talked about this too much on the podcast yet. I want it to be a big reveal if and when it happens.
Will Barron:
But I’m just as interested in being part of this car, their owner club, and they’ve got a really good network of events and there’s loads of small business owners. And I know spending X amount of dollars, pounds on this car will probably come back in deals and contracts and sales training, because I’m working with a bunch of people who are also in this kind of owner’s network. And I feel slightly uncomfortable about it, all of these.
Will Barron:
And I understand to a super base level, some of what’s going on here of different people’s thoughts and beliefs. And I can see it becomes obvious in them as I kind of talk about this car and the networking and the events that they have and all kind of stuff. And I can see it in a few of my friends, and again, a few members of family that they are almost projecting how uncomfortable they are with their financial status onto me.
What to Do When Friends and Family Project Their Money Issues Onto Your Financial Decisions · [19:05]
Will Barron:
And not proactively trying to pull me back from this, because they want the best for me. I’m sure they do if you ask them honestly, and you explain the situation, but I can feel that a little bit of tension. What do we do, Brad, when other people, the audience who are listening to this feel that as well, maybe they’ve just had a absolutely killer year.
Will Barron:
They’ve made a crap, some money in commissions and they’re looking at a new house, new car, whatever it is that’s pushing their own boundaries. How do we deal with people when they’re not being, they’re on our side, they want us to win. But again, maybe they’re projecting some of their issues onto us.
Brad Klontz:
It’s a real challenge. And because to your point, these people love you. They care about you. It’s not like they’re interested in your demise. They’re unconscious around what they’re doing to you. They just know that you’re leaving the comfort zone, and this feels uncomfortable.
Brad Klontz:
And sometimes they’ll even say, “Well, people are going to look at you at this way or that way.” And you’re like, “I don’t care about people. I care about you. I care about my tribe and I’m getting this from you.” And it’s something we accidentally subconsciously do to each other, but really it does come down to that socioeconomics comfort group that we’re in. And it’s challenging.
Brad Klontz:
First of all, it’s easier when it’s subtle and slow. So when your income grows gradually over time, you learn to adjust to this situation. You learn that you frankly, some of your friends leave you. Some of your family can be upset at you. But when you get a lot of money really fast, that’s when it’s extremely challenging.
“I say this for dramatic effect, but when you grow your financial capacity, you’re either going to have to get rid of your money or get rid of your friends. And if you don’t do one of those two things, it’s going to be uncomfortable. And it’s going to take some time for you to adjust to this.” – Brad Klontz · [20:32]
Brad Klontz:
And I will tell people, I say this for dramatic effect, but you’re either going to have to get rid of your money or get rid of your friends. And if you don’t do one of those two things, it’s going to be uncomfortable. And it’s going to take some time for you to adjust to this.
Why It Might Be a Healthy Move to Drop Some of Your Friends Once You Improve Your Financial Capacity · [20:44]
Will Barron:
And from a psychological perspective, this is me saying this, is it fair to say that that might be healthy for you? It might be healthy for you to grow and leave a few people behind?
Brad Klontz:
Healthy, not healthy, for me, it’s like, well, what do you want? And I feel like you have a right to better your life if you want to, financially, and try to talk about it with the people love most, and just understand that some of you, if they have that like money avoidance pattern, where they have this deeply held belief that money is bad and there’s virtue in having less money, and the only way to get rich is through corrupt means.
“People have this belief pattern that rich people are greedy or bad. Now, ironically, in our studies, the people who really strongly believe that rich people are bad are also the ones who most desperately want to be rich themselves, which is really sort of a fascinating conundrum psychologically.” – Brad Klontz · [21:20]
Brad Klontz:
People have this belief pattern, rich people are greedy, bad. If you really strongly believe that, now, ironically, in our studies, the people who really strongly believe that are also the ones who most desperately want to be rich themselves, which is really sort of a fascinating conundrum psychologically.
Brad Klontz:
But just understand this, they are going to give you a lot of negative energy towards this because that’s how they look at money. It’s not personal to you. They love you. They want to be close to you, but it’s going to be intense. It’s going to be psychologically really intense and emotionally difficult for you.
Will the Chase for More and More Money Ever Come to a Stop? · [22:00]
Will Barron:
Sure. Well, I’ll go on the record. It’s fine to leave people behind. I’ve left friends behind. They are doing just fine. I’m doing just fine. And this leads me on to my next question, which is, where does all of this end? Because it seems like, so I’m from a lower middle class background. My dad was a middle management and then runs his own small business. And mom always worked in hospital pharmacies.
Will Barron:
It is kind of like this weird golden lock zone of no flores, but also no kind of like issues with food and housing, anything like that. I’ve surpassed respectfully what my parents have ever earned, way beyond that. And I feel like I’m getting close now with some business stuff that we’re doing to breaking beyond where I’ve been for the past two or three years to the next level.
Will Barron:
And that to me, and probably told the audience is exciting. The number is that we’re earning the revenue, what we’re taking home, is almost like a game that I like to play and I like to see increase. Now, I don’t think I’d be sad if the business just collapsed. I think I’d just have to find something else to do. I’d have to go back to a sales job.
Will Barron:
I don’t take it personally. So taking that out of the equation. When does this end? Or does it not end? Do I end up an 80-year old fellow chasing rather than a couple of million revenue a year, 100 million revenue, and this just continues onwards? Or is there a set point where people tend to go, “Okay, well, I’m now earning three times more than what my parents did. This is kind of a natural level where people start to slow down and become comfortable.”
Brad Klontz:
Yeah. For me, it’s just a matter of preference. I don’t like the pathological part of always wanting more. It can be very pathological. There are examples of people who do do terrible things and sacrifice their family and their health for more and more and more. And sometimes they’re trying to fill an emotional hole.
Brad Klontz:
Sometimes they grew up in poverty and they have this belief there’ll never be enough money, and they’re really anxious about it and they’re scared. And so they run through life very anxious and scared. And that’s no way to go through life either. So it depends on the route to the pursuit. But I feel like having goals is fun. You mentioned, Will, that it feels like a game to you. Play the game, have fun. I don’t think there’s anything wrong with it.
Brad Klontz:
But understanding that ultimately, there’s no amount of money that is going to answer the big questions in life for you, which is around connection, around passion, around purpose. And money can help with that. But money doesn’t magically solve all of humanities existential problems. Now certainly, if you’re lower income, which is how I grew up, if you’re poor, not having money will make you depressed and miserable and cause all sorts of problems in your life.
Brad Klontz:
So there is that sort of middle class, getting up there, making sure that you have a roof over your head, that you can provide for your children, that you’re not going to bed hungry. Now obviously, hitting that point I think is really important. I hope everyone gets there. But really when you get into those upper echelons of upper middle class higher, a bunch of money’s not going to magically solve all your problems.
The Correlation Between Happiness and More Money For People in the US · [25:05]
Will Barron:
I’m remembering this. I think this is somewhat cliche and I don’t know if this is totally out of date, but I remember reading in whatever book it was, that around $80,000 in the U.S was a point where every dollar added didn’t increase dramatically the amount of happiness that people had.
Will Barron:
Is there any data behind that number? And is there a more accurate? What I’m trying to get at is, is there a benchmark where the science tells us that people at this benchmark, money is a nice-to-have as opposed to something that is going to dramatically decrease the levels of happiness?
Brad Klontz:
So we can talk about it after the podcast and put on our nerd hats on the science on it. But basically, there’s been a lot of research that has shown that the median income level, household income, which is around that 70, 80,000 mark here in the U.S, that there’s no statistically significant correlation between more money and happiness. There’s been some dispute around that. But I think in general, it makes a lot of sense because if you feel like you’re part of the tribe.
“In psychology, we call it relative deprivation. So this is a fascinating concept that says how you rate yourself financially in terms of how you’re doing is not based on an objective number. It’s subjective and it’s based on the people you’re around. That’s how you decide whether you feel rich or you feel poor. If you’re in a village and you have three goats and everyone else has one goat, even though you might not have running water, you will have the subjective experience of feeling wealthy and feeling like your things are going well. And otherwise, if you have a $2 million mansion but everyone else has a $10 million mansion, you’re going to feel relatively deprived and poor.” – Brad Klontz · [26:16]
Brad Klontz:
So in the broader United States, if you’re making around the median income, you don’t feel like you’re deprived. You don’t feel like you’re suffering. And what we know in psychology, we call it relative deprivation. So this is a fascinating concept where how you rate yourself financially in terms of how you’re doing, is not based on an objective number. It’s subjective and it’s based on the people you’re around. That’s how you decide whether you feel rich or you feel poor.
Brad Klontz:
If you’re in a village and you have three goats and everyone else has one goat, even though you might not have running water, you will have the subjective experience of feeling wealthy and feeling like your things are going well. And otherwise, if you have a $2 million mansion but everyone else has a $10 million mansion, you’re going to feel relatively deprived and poor. And so it’s really in relation to our comparison group. That’s how we decide whether we have enough money to feel like we made it or not.
Will Barron:
I love this. This makes total sense. I started off in St. Helen working town. And my first sales job, I felt like I was absolutely crushing gay. Then moved to the south of the UK, just outside Cambridge. And I was like, I have skin compared to all of these suckers down here. And now back up in north leads in the north UK, for people who’re listening from Europe and the UK, who are familiar with this, that is a somewhat affluent place.
Will Barron:
And again, I’m kind of at the, not the bottom of the tone pole, but in kind of the middle to bottom of, where we live, there is so just insane houses that is even a stretch for me to visualise the fact that I’ve got the possibility of living in one of those someday. Now, they’re just people. A lot of them are self-made entrepreneurs, small business owners, as opposed to clearly, it’s unlikely that it’s going to turn out that I’m the prince of some foreign, tiny country, and I’m going to get given 100 million on the back of not doing any work.
Will Barron:
So it is achievable for me to get into those, but I still feel like we are looking at those houses, and the there’s one particular house around the corner as a Rolls Royce sat outside. And I’m like, “God, that’s a stretch for me to imagine myself there.” So, Brad, we’ve covered why people feel these ways back and forth about money.
Will Barron:
We’ve covered that there are some psychological or subconscious issues that can hold people back. What do we do if we want to proactively push into this? What if I, from a place of sort of, “Other people have got mega houses where I live and Rolls Royces, why can’t I have it?” From a healthy place as opposed to a narcissistic place of, “I’ll take their shit from them.”
in psychology, we call it relative deprivation. So this is a fascinating concept where how you rate yourself financially in terms of how you’re doing, is not based on an objective number. It’s subjective and it’s based on the people you’re around. That’s how you decide whether you feel rich or you feel poor.
Money Scripts: Understanding Your Relationship With Money · [28:45]
Will Barron:
How do we position ourselves, and how do we change our psychology around money and finance to enable us to push towards this? Do we have to just fake it till we make it? Do I need to go to a Rolls Royce dealership, sit in the car and tell myself, “This is just a car. I could have this one day.” How do we go about making those big leaps forward possible psychologically so that we can put the hustle in and make it happen as well?
Brad Klontz:
Yeah. So understanding your money scripts, understanding your family history, understand if you do a real conscientious dive into your financial mistakes and really take credit for them [inaudible 00:29:23] All the studies we’ve done on ultra wealthy individuals, they have more of an internal locus control. They blame themselves for their problems. They are sort of the instrument of change and blame in their own lives.
Brad Klontz:
That can be a really, really helpful mindset. It actually separates middle class and lower income people from people who make it up into the upper echelons of wealth is this earnest desire to look at, “It’s not that I had a bad customer, it’s like, what could I have done differently in that sales process?” That’s where the goal is. That’s number one. Number two, understand your money scripts.
Brad Klontz:
So I have a website, moneysscripts.com. You can take the test that I’m talking about that we’ve used in many of our studies. It’ll put you in a category. You can read about the research on those categories. Understanding your psychology can really help. And then you mentioned it too, Will. I almost feel like it is a game for you. And you keep moving to neighbourhoods that push you.
“When you’re around a bunch of people who are having entrepreneurial success, you’re way more likely to have entrepreneurial success. This is just how human beings work. By the way, this works either way. Like all of a sudden if you lose all your money, if you want to learn how to survive, hang around people who have lower income. Many of them are very happy and they spend their lives doing incredible joyous things.” – Brad Klontz · [30:15]
Brad Klontz:
Like when you’re around a bunch of people who are having entrepreneurial success, you’re way more likely to have entrepreneurial success. This is just how human beings work. So if you could put yourself in front of people who are having the experience you want to have. By the way, this works on either way. Like all of a sudden you lose all your money, if you want to learn how to survive, hang around people who have lower income. Many of them are very happy and they spend their lives doing incredible joyous things. And you need to learn how to do that.
Brad Klontz:
So get yourself in front of people and around people who are having the experience you want to have, and study them as if you are a psychologist yourself. You’re an anthropologist. You’re trying to figure out, okay, how do they think about things? How do they handle money? How do they approach business? Become extremely curious. And that’s how we learn. And that’s how we grow.
Logic Versus Emotion When Tackling Your Money Beliefs · [31:03]
Will Barron:
Final question, Brad, before we wrap up and you tell us more about the book, where we find it, more about you as well. But how much of this is logical in that, say I end up buying this luxury car, buying into this brand and this lifestyle that is definitely not going to follow because it’s just going to be sat in a garage and probably use it once a week, once a month. It’s just going to drop in value over time.
Will Barron:
But say like I buy into this idea, and I start going to these car meets up. I start engaging with these much more wealthy individuals than what I am but I perhaps aspire to be. How much of this is logic of, I need to speak to these individuals and say, “Oh, well, this person is running this type of business. They’re doing this. Or this salesperson is working this way or that way.” How much of it versus logic is then emotion of allowing yourself to get wrapped up into that?
Will Barron:
And allowing, I don’t know if this is like a shortcut to your subconscious of allowing events or places or conversations to happen that inspire you and that side of the fence. How much of this is logical, we can be proactive about it, versus emotional, we need to be in situations where maybe some of it happens to us?
Brad Klontz:
Yeah. I feel like the logical aspects are the easier part, to be honest. I feel like it’s pretty simple. It’s pretty simple. If you want to have a certain outcome, you find out how people get that outcome. Read some autobiographies and then just go ahead and do what they did. That’s kind of how, I don’t want to say it’s easy, but it’s simple in that way. It’s like, just do this set of instructions and then you can get where you’re getting.
Brad Klontz:
Now obviously, we got to take the random billionaires out who struck it rich in one generation. There is no playbook for that. There’s elements of luck associated with that. But in terms of bettering your life, there’s a playbook. Find the playbook, read it, and then do what they did. Now, a lot of times you might not want to do what they did. It might have taken more than you want to to give in to do that, but find the playbook could do. I think the emotions are much more difficult.
Brad Klontz:
When you said you’re going to buy a sports car, I said, “Oh, there you are being an asshole, Will.” Your mom mentioning that to you. It’s incredible that you have that conscious awareness, but if you had a negative association with it, I almost guarantee people who’ve had an experience like that, they’re just not aware of it. Or they’ve heard their family talk about people who drive those kind of cars. It’s that unconscious sort of association that really can trip us up.
Brad Klontz:
And so I think it’s really to your benefit to look at your psychology around that and ask yourself, why wouldn’t it be okay for you to do that? What sort of associations do you have on that other tribe? Are they accurate? Is this just a way to look at them so you can feel better about yourself?
Brad Klontz:
I think approaching it with a lot of curiosity, can be extremely beneficial, because what happens is we have these automatic thoughts and beliefs about those people. Poor people are got poor because they did this. Rich people are like that. And a lot of it is based on partial truths and misinformation.
Will Barron:
Yeah. That makes total sense. I do a daily journal and I catch myself, this story anecdote with my mom. I knew it at the time. I remember of thinking it at the time, but it came up in a journal. I knew I was prepping for the show, Brad. So I was like, that might be a good anecdote to bring up on the show.
Will Barron:
But then as we talk about it, it seems even more ridiculous now. And I should just completely forget about it. And I think I forgot it, but I think I didn’t hold onto it as, I didn’t agree with my mom at the time. And I’m pretty sure I don’t agree with it now. But then even just getting out there, talking about it on this show, writing about it in my journal, when it came up the other week, I feel like that is almost therapeutic in its own way.
A Practical Approach to Improving Your Money Beliefs, Getting Richer and Improving Your Relationship with Money · [34:31]
Will Barron:
Am I over complicating all this? Or do we just need to be practical? Hang out with rich people if we want to get richer and just do what they do? Have I just spent half an hour going way too deep and we could have wrapped up the show and had a nice succinct episode within five minutes?
Brad Klontz:
Yeah. The problem is that you won’t go hang around those disgusting people unless you look at the beliefs around those people first. That’s part of it. But to your point too, I think whichever way you can get there, the fastest is the best. I will say this too, one of the problems is that, and you run into this all the time with sales people too, is they get too big for their riches.
Brad Klontz:
They try to project themselves as having more than they actually do, thinking that this is what wealthy people do. And all the studies on wealthy people actually show that they do the opposite. So the ones who are most likely to flash wealth are the ones who actually have less of it, which is really fascinating because everyone starts thinking, “Oh no, I know this ultra rich person who does it.” That is not the majority.
Brad Klontz:
And here in the U.S, the majority of millionaires are self-made. It’s upwards of 80%. And when we do studies on those individuals, I’m talking people 11 million in net worth. They are vigilant around money. They’re savers. If you ask them how much money they made, they would tell you they make less than they do.
“The only way to become wealthy is to hold onto net worth to save it. And if you’re spending it on depreciating assets like cars, it needs to be money that is throw-away money for you because buying cars is not an investment. That’s money that’s going to go down in value.” – Brad Klontz · [35:59]
Brad Klontz:
And so it’s a fascinating thing because many of us try to emulate this stereotype we have of rich people, and actually that’s not how people become rich. They become rich by, it’s net worth. And the only way to become wealthy is to hold onto net worth to save it.
Brad Klontz:
And if you’re spending it on depreciating assets like cars, it needs to be money that is throw away money for you because that’s not an investment. That’s money that’s going to go down in value. And so looking at it as a luxury, people don’t do that unless they can actually afford it, or they’re not in the ranks of the wealthy for very long.
Will Barron:
The people I know that have the type of cars that I’m talking, and I’ll tell you off air in a second about it, Brad, they drive like a crappy, old banger as their main car, then have a prestigious sports car or even super cars from this brand locked up in a nice pristine garage.
Will Barron:
And they like to polish it and look at it and drink up a coffee sat in the seat every morning. But they’re all wearing crappy polo shirts and ripped up jeans and crappy trainers. And they’re all typically salespeople who had success five to 10 years ago, who invested appropriately and are now killing it on the back of that. A lot of them got into property and things like that. Obviously they’re small business owners who have just like hustled and grinded their way to where they are right now.
Will Barron:
So yeah, I think you’re right. This seems to be people who are doing less well [inaudible 00:37:09] who don’t have the cash to just flash and show off. Then there’s a weird gap in the middle, where my partners, my message is a doctor. So I see a lot of [inaudible 00:37:18] it’s by flashy cars when I know exactly how much they earn, and I earn way more than what they earn.
Will Barron:
And I’m not driving around in a flashy car day to day as my main vehicle. And wearing Gucci t-shirts and all this crap and nonsense trying to play this bling game. And then you see the actual wealthy people on the other side are all dressed like scruffs, haven’t had hair cut in three months, but actually have the wealth to back it up. So I think there’s an interesting dynamic there. Right?
Brad Klontz:
Very much so. Good observation. And social media, it’s a toxic place that just lies to you about how wealthy people go through life.
Social Media and How It Has Changed Our Perception of Wealth and Money · [37:28]
Will Barron:
Yeah. I will go on record. There’s very, very few rich 23-year old driving Lamborghinis in real life who have actual wealth. There’s probably a handful in the west world who have made it themselves, but there’s a lot of people on Instagram, young fellas, young girls.
Will Barron:
I’m 35. I’m saying younger than me who are driving these ridiculous cars, living this lifestyle, whereas it’s just a facade. It’s not real. They don’t have the wealth to buy a 400 grand car. They’re hiring it. They’re borrowing them. They’re taking pictures next to one part in the street. And it’s just not real.
Will Barron:
Social media, it’s another conversation for another time, Brad, I think. I don’t know if you’ve got research data on this, but with it being a relatively new phenomenon, that must have changed people’s perceptions of wealth together.
Brad Klontz:
Yeah, it does. And back to that, relative deprivation psychology. Before, it would just be, we would be exposed to people in our neighbourhood. And somebody had a nicer bike that was shiny and we’d feel a sense of deprivation like, “I want that bike.” Now a bunch of it’s false too.
Brad Klontz:
But you see on Instagram every day, all these people who seem to have a happier relationship than you, driving a nicer car in front of a mansion. You have no idea if any of that stuff is theirs. But what it does is it triggers a sense of deprivation inside of you. And if you notice and you click on those profiles, they’re all selling something. They’re all selling you a course on how to become wealthy. And they know that they trigger your sense of deprivation that it’ll help them sell their get-rich-quick course.
Will Barron:
Yeah. And look, to be blunt, the audience will know this. Well, that’s why I’m not talking about this car. I’m not naming brands. I’m not doing anything on that front because I’m not sure how to approach this with our audience, because our whole brand, Brad, is based on the back that I’m just this knuckle dragging salesperson like the audience. I’m still doing sales calls every day.
Will Barron:
The business do great, revenue wise, but I’m not taking anything out of the business. The business is growing and I’m still skinned every month by the time all the expenses are paid, because I want to do it along with the audience.
Parting Thoughts · [39:50]
Will Barron:
So with that, mate, and just for anyone who’s new to the show, hopefully that gives a bit of context as to why I’m not showing off this car that we may or may not be buying in the next few weeks. But Brad, tell us about the book, Money Mammoth and where we can find out more about you. And you mentioned the website earlier on as well. Tell us about that link as well.
Brad Klontz:
Yeah. So Money Mammoth is my sixth book. Wow. I can’t believe it’s been 6:30, but had my latest research on there. For example, one study, we got people to save 73% more after just spending an hour of have them visualising their goals and doing weird sort of vision board stuff, but 73% increase in savings.
Brad Klontz:
So I’ve got the science and techniques in there in Money Mammoth. I’m @Dr. Brad Klontz on social media. And if you want to learn more about your money scripts, I put it online, moneyscripts.com. That’s the test we’ve used with, I’m going to say almost 100,000 people now and done studies on.
Will Barron:
Amazing stuff. Well, to all that and the shown it to this episode over at salesman.org. With that, Brad, I want to thank you for your time. The fact that you’re doing actual research on this and not just pulling ideas and thoughts out of thinner is really important to our community and your community as well. So I appreciate that. I’ll just plug you on that point specifically. Oh, thank you for your time and your expertise and for joining us on the Salesman Podcast.
Brad Klontz:
Thanks, Will, it was a lot of fun.
