64. Brad Klontz Pulls Money Out of the Stone Age
This week I have the pleasure of speaking to one of the leading experts in financial psychology, Dr Brad Klontz.
I uncover answers to questions that even Brad himself has never discussed before: what was his understanding of ‘wealth’ in childhood? How did this evolve and change in adolescence?
We also discuss the role of money scripts (a concept first coined by Brad himself), the role of mindset in helping or hindering your path to financial success and avoiding money conflicts in relationships.
Few know more about the psychology of money than Dr Klontz, so listen, learn and enjoy.
You can check out more about Brad here: https://www.bradklontz.com/
Also, do check out his upcoming book, Money Mammoth, available to pre-order here (I’ve ordered mine!): https://www.amazon.co.uk/Money-Mammoth-Unlocking-psychology-extinction/dp/1119636043
Episode Transcript
Jason Butler 0:05
Hello, and welcome to the Real Money Stories podcast. I'm Jason Butler. And I invite you to join me as I have intimate money conversations with people from all walks of life. Whether you're just starting out on your money journey, or well down the track, there's bound to be something you can learn from these stories about taking more control of your money, so you worry less, and enjoy life more. Real Money Stories is sponsored by Vanguard, bringing value to 30 million investors worldwide. Visit vanguardinvestor.co.uk for more details. And remember, the value of investments can go down, as well as up and you may get back less than you invest in.
Hello there. Happy New Year, Jason here. And thanks for joining me on another edition of the real money stories podcast. Before we get into this week's interview, which is an absolute cracker, I know you're gonna love it, I just thought I'd share a couple of thoughts with you and ideas to help you win with money in 2021. Now, I've recorded a video on my YouTube channel, and also written a blog called 21 ways to win with money in 2021. So check those out. If you want just some tips and ideas and insights that might help you make more progress with your money. And if you've got them all covered, and you feel like you don't need any help, then just share them with friends, relatives or colleagues, because I'm sure there's plenty of people out there who can benefit from it. So that's all about winning with money. Now, I was featured in the FTS year end, a New Year's money resolutions article by Claire Barrett. And I was one of about 14 or 15 contributors. And they asked us all what our new year's resolution was in relation to our finances, I'm not really a big New Year's Eve, sort of New Year's resolution sort of person, because I believe it's all about habits, routines and behaviors, right. So it's focusing on inputs, not outputs. But nevertheless, for 2021, I have got a resolution or rather a priority that I want to give more to charity. And once I say give more, I mean, give more money. Because I'm in the fortunate position, as you as you will know, from if you've listened to my stuff and read my stuff before that, you know, when you winning with money, and you don't have debts, and you don't have rent, and you've you know you're building, you've got a good cushion behind you, you can actually give much more generously than if you're up against it. And you're really struggling to make ends meet, and living paycheck to paycheck. So I've, luckily I'm in that situation I've always given to charity events, it's my darkest financial days. So there's no excuse there. I mean, I still think it's important. If it's 3040 pound a month, whatever you can afford, give something because there's always someone who's got it worse than you. But as I've improved my financial position over the years, I've continued to increase how much I give in charitable contributions, charitable gifts. And I do this by the charity, charities aid foundation account. And this is an account rather than sort of giving to lots of different charities and trying to keep track of it all. And all the drama that goes with that. The charities aid foundation account is a single account that has charitable status, they charge a tiny, tiny fee for running it. And you put your contributions into that whether they're regular monthly amounts, one off amounts, and I do both regular and monthly. And the money sits in there, like a like a normal bank account doesn't earn any interest. And then you can distribute and make gifts to charities from that account. And I find it's really good because it means it divorces the decision to gift money to charity to charity, from the actual giving of it to the charity. So there's no excuse I can, I can separate those two decisions out. And it means that I'm very intentional. And it's key part of my day to day, month to month and year to year financial planning. But I'm always putting money into my charities aid foundation account. And then periodically, whether it's a disaster appeal, or it's a plan thing at the end of the year, or Children in Need appeal, whatever it is, or even a friend who's you know, fundraising, I can then make a contribution from the account. So I'm really getting serious about my charitable donations.
And in fact, I'm looking to try and really gift most of what I earn moving forward to my charitable account, because I really want to get serious about giving and the benefits there is that when you are making charitable donations, you are showing gratitude and you're expressing empathy and care for other people. And the funny thing is abundance comes to people who who display those characteristics. And so it means that whenever I do work and people are paying me to do speeches, talks, webinars, articles, you know, create content, whatever it is the vast majority of that money, I don't pay any income tax on it. Because or if I do pay income tax on it. I'm getting it back from the government because when you make charity All gifts, as long as you pay income tax the government as 25% to your gift, so if you put 1000 pounds into charitable donation, that becomes 1250 pounds. So it's pretty good. And if you're a higher rate taxpayer, or you pay higher capital gains tax, you may also benefit from higher rate, tax relief difference between higher rate or the additional rate, and basically rate, so that's for people in the UK. So that's between 20 25% or in the case of capital gains another 10% saving because it changes your tax bandings. So that's what I'm doing in the New Year charitable donations, check out their charity aid Foundation website, they've got information on there, there are other providers, but really strongly recommend in these difficult times, there's always someone worse than you. Why don't you think about making more, more significant or even starting making charitable donations if you're not already doing it, and perhaps try and look at putting it into a charities account first, so that you can actually separate the making the donation with the actual giving it to the charity. So check that out. So let's get on to this week's interview, which I know you're going to love with Dr. Brad clontz. Right, well, I've got a real treat for you this week. There are a handful of people in financial psychology, money, psychology, money behavior, that people who speak and write about money, like me go to their the people that we read that we follow their research, and we got a lot of time for and one of those people is with me tod ay. Dr. Brad Klontz. Hi, Brad.
Brad Klontz 6:41
Hey, thank you so much for having me.
Jason Butler 6:42
Yes. All right. Did I say your surname correctly?
Brad Klontz 6:46
Ker-lance.
Jason Butler 6:46
Ker-lance?
Brad Klontz 6:47
Close enough.
Jason Butler 6:48
Good. All right. I just want to defend you. Right. I know you're a busy guy. And obviously, as far as research goes, when it comes to understanding the why behind our buyer and all about money, you know, a lot. But you've got a new book coming out, haven't you? I know you've written lots of stuff and done lots research. So before we get into the whole, you know, the backstory and your particular interest in money behavior, can you just tell everyone about the the new the new book?
Brad Klontz 7:16
Sure. It's called money mammoth. And it's it's harnessing the power of financial psychology to evolve your money mindset, avoid extinction and crush your financial goals. And it's really wrapped around the metaphor of how we're all running around with a cave person brain, and related to money related to our environment. And the miracle that I think that occurs is that any of us are good at money to begin with. I mean, that's sort of the thing that's weird and strange, because we're just wired to do everything wrong when it comes to money. And that's essentially what the book covers.
Jason Butler 7:46
Yeah. And I know that your father is also sort of been involved in financial psychology even before you so you've really kept this in the family for a long time. And I know there's a lot a rich depth of understanding that you've been collaborating with lots of people over the years. So I'm really looking for I'm hoping my copy. Turns out, we're recording this just before Christmas 2020. I said to my wife, I don't really want anything in the world. But I do want Brad's latest book. So there we go, I'm looking forward to that reading over the summer, over the Christmas holiday. And now, obviously, I've read a lot of your stuff. And you do sometimes touch on your personal experiences and your own personal experiences and money. And that's really what this show is about. It's just trying to get people to weave their own experiences of money. So we all kind of break the taboo of it, and then realize that, you know, we're all human, and none of us are perfect. So take us back then. I mean, your sort of early money memories, what what were they like, especially with a father like yours, who was a psychologist as well?
Brad Klontz 8:43
Yeah. So what's interesting about my story is that Believe it or not, I got my doctorate before my father got his, which is an interesting thing. When I, when I was growing up, my dad was a school teacher. And so was my mother. And they got divorced when I was two. And, you know, if you ever want to just cut your net worth and destroy your financial life, a divorce is a really handy way to do that. And so I grew up in a situation where we didn't have much money. And I was just reminded of this the other day, I just made a tic Tock video on this. But I took my seven year old skiing, and last weekend, and I, this memory came to me. So I was seven years old. My father took me to the ski mountain when I was seven years old. But it wasn't to ski. It was to watch people ski. And so he thought this would be a great way to sort of expose me to other things in the world. And this was one of his mindsets he took me to, he would take me to very sort of diverse cultures and areas because he wanted to expose me to things that he wasn't exposed to growing up. And I think in his mind, this was looking at this is this cool thing? And, and I and I remember saying, Hey, Dad, can I ski and he and he's like, Oh, I think in that moment, he was he saw his mistake. And he's like, no, sorry, son, we really can't afford it. And so I grew up with that mindset, like, gosh, I don't want to be in that situation. I can't give that experience to myself and to my own children. And so I was really struck by the experience last weekend of taking my son skiing, and it brought tears to my eyes. It's like here, I am benefiting from all the hard work of these previous generations. So I'm in a position where I can financially take my child skiing. And it was just an incredible emotional experience. But it really did bring back those early memories for me, to your point around not having enough money.
Jason Butler 10:25
Yeah, scarcity, because that's a big problem. I mean, I had a similar situation, I grew up with scarcity. There was never any money paycheck to paycheck, and many people do but but other people go with abundance around them. And then that can also have a negative effect. But But equally, you know, early childhood things can have positive effects. So so your dad clearly was trying to do what he could to broaden your horizons. But inadvertently, there was that scarcity around money. So how did your attitude to money in your relationship with it evolve as you became a sort of teenager and young person young adult?
Brad Klontz 10:55
Yeah, so that's a great question. By the way, Jason, no one has ever asked me these questions before. So this is actually really fun for me. I remember as a child, when I started to go and hang out with my friends and their parents. So once I started actually hanging out at other people's houses, I had one friend, and I'll never forget it, whose I would say, upper middle class. And I was really fascinated. So first of all, walking into the house, I'm like, wow, what this is a much bigger, nicer house. And in a nicer area. This is interesting. And I remember, as a adolescent, I don't know, 12, or 13, essentially interviewing his father at the dinner table, I wanted to find out what he did for a living and how he made money. And I realized that I had this sort of scientist mindset at that age. I'm like, Look, my family's just as hard working just as smart. Like I didn't have any low self esteem around their efforts and their ability to think I was just like, they're obviously doing something very differently. They either had a different upbringing, a different mindset. And if they chose a different career path, I became utterly fascinated and passionate about figuring out what is that mindset that allows one family to save sort of stay stuck in generational, you know, poverty, or not having much money versus another family that seems to have everything else similar except that mindset, and then their outcomes.
Jason Butler 12:12
So this was as a teenager, you were intellectually curious and interviewing your friend's dad about kind of what was the secret sauce?
Brad Klontz 12:20
Absolutely. And what's funny is I never thought about it until we're talking but that's exactly what I did. And it now I'm getting some insight to as we're talking of that's been my one of my primary lines of research academically, is studying the mindsets and habits of ultra wealthy individuals.
Jason Butler 12:37
And can I just ask, if it's not too, prying to ask, what did he say to you? Or did he can you remember what he said? What was the secret sauce? Yeah, so
Brad Klontz 12:45
the what I understood at that time was, oh, he's into sales. That's essentially it. He's, he's, he's working for a company that is very much focused on growing and increasing income, and increasing their customer base. He wasn't a teacher working for the local school district. That was that was the mind that was the one of the things that really popped for me.
Jason Butler 13:07
So I'm just trying to think, What impact did that have on you as you became a young man then? So that was the intellectual curiosity. You're You're, you're interested about the secret sauce, but What impact did that have on you? Because obviously, where we go with academics or trade, or whether we continue studying, or whether we're going to be an entrepreneur, all these things are kind of, they're all in a melting pot. How did that influence you? And where did you go?
Brad Klontz 13:31
I think that once I saw that, you know, it's not. Once I saw that the game wasn't fixed, let me put it that way. The sense of helplessness just melted away. And then it became an empowering search for what's the strategy? Because a lot of times when you grew up poor, or lower income, you have this learned helplessness, it's like this sense that no matter what we do, we can never climb the ladder. The game is fixed, you know, people like us. We don't go to schools like that. We don't live in houses like that. There's this this tribal sort of understanding that we're stuck here. And there's nothing we can do about it. So victim mentality.
Yeah. Essentially, yes. Which, which we can buy, honestly, right? Like in this thing we can get, we can get inherit this from our grandparents, it gets passed down. And I think it just really popped the lid off that and it's like, well, actually, no, you can actually do that. You just have to find the right people who can mentor you and show you how to do it.
Jason Butler 14:27
So the impact on you. Let's just just just spend a little bit a moment just going back over there again. So the impact for you is you realize the game wasn't rigged, it was possible to break free as it were. And we'll put aside the definition of wealth and riches and what the role of money but you thought, hang on, it's not limited. So that's possible. I've just got to find out. You know how I'm going to do it. And you said that's liberating and empowering. So anyone who's out there who's had difficult times it's been a tough year for many people or they've had some trauma or they've had a divorce or anything that's a curveball that hit their life. There's no limit to where You want to go, you can have abundance in your life, you just got to figure out the route to it. If you just believe it, right, that's what you're saying.
Brad Klontz 15:06
It's true. And I will, I will just correct myself a little bit. It might actually be rigged. So I just want to sort of like acknowledge the fact that there are systemic barriers. And like, for example, growing up or like, you're not going to as well as school, you don't have the same sort of connections. I mean, that can feel really rigged now. However, you can hack it, and you can find a way to to beat beat it and make your way through the system despite the obstacles.
Jason Butler 15:32
Yeah, so so in unfairness and inequality, and lack of equality of opportunity, that that's always been there. And that's been since the beginning of time, it may be more or less now. And it may seem whatever. But I think what you're saying is there is a route through for those who who want to find it. Yeah. So that's interesting. So what did you do? Did you go to college? Or did you go straight into the workplace? And if so, you know, what route did you take?
Brad Klontz 15:57
Yeah, I was kind of on the fence about going to college. I came from a working class area. And it's like, I don't want to be a teacher. So why do I want to go to college, but but my mom went to college, and as well as my father, and they were pushing really hard. And they, I ended up getting a couple sports scholarships. So I went to college to play sports is why when, and I was like, fine, I'll do that. I love playing sports. And so that's why I went and I wasn't a very good student. And then I, I remember, I got a 2.6, my first semester, and my girlfriend at the time, got a 4.0. And I felt like such a loser, that I that I had her Teach me her study technique. And then I got a 4.0 the rest of my time in school. And so I got sort of credit her with that. And that sort of shift for me. And then I started to research, okay, I wanted to become a mental health provider, I wanted to help people. And so I remember very literally, okay, which mental health providers get paid the most money. And so that's why I decided to become a clinical psychologist. And so that's what I did. So I ended up getting a Masters getting a doctorate. And when I got out of school, though, I owed $100,000, in student loan debt, and counting dollars 100 100,000. Yeah, which isn't uncommon here in the US at all. As a matter of fact, that's on the lower end right now of what people are coming out with. And I was raised, though, to be frugal, like, we didn't have much money and debt was just a nightmare. You weren't supposed to have any debt. But I saw that as the only way I could get there. And so I owed $100,000. And it was terrifying. For me, I saw a friend of mine, in one year, make $100,000 trading stocks. And so Jason, I thought, but this is how I'm going to get out of debt. So I sold everything, I had a value, which which I literally did. And I put it all in the stock market, I was renting a house, I had no furniture, I had lawn chairs for furniture I had one for I mean, it was it was crazy. Put it on the stock market. And I had an incredible run of about three months, and then the tech bubble burst. And I was sitting there going, Oh my gosh, how could a reasonably money just melt away? I knew nothing about investing. But neither did my friend. And I just saw him make $100,000. But same finish.
Jason Butler 18:06
He was speculating right at the time. Now looking back that was
Brad Klontz 18:10
trading as a trader yet speculating.
Jason Butler 18:11
So speculating is just hoping you're gonna make a killing and hope that you don't get killed? Yeah. So but so what happened to the gains all evaporated away? And you ended up with with not a lot? or?
Brad Klontz 18:21
Yeah, no, I'd say I'd lost about 75 or 80% of the money I put in there. And at this point, this this is kind of what led to my interest in financial psychology because I'm like, why would somebody do something so stupid? I'm a reasonably intelligent person, why would I do this? And I started to do some lit searches in in psychology and money, and I couldn't find anything. And so I sort of joke that within a matter of a couple of weeks, I became the world's leading expert, because essentially, psychologists had ignored money entirely. And if you know, and I know you know, this, but a lot of behavioral finance stuff. Well, most of it came from economists, not psychologists. Um, so it's been something that's been avoided. And so I immediately was like, Okay, I got to figure out why I did this. So I, I went home, and I put a tape recorder in front of my mother, and she'd gone through this before. It along my path to being a psychologist, and I started asking her stories. What was it like for you growing up around money, Mom, how did you feel about it? I know you guys didn't have much money. How did you feel about that? What was it like for grandma and grandpa, and I and all these stories starting to emerge? that just blew my mind. So for example, my grandfather lost all his money in the Great Depression, which I had no idea happens. So he's a young man. He goes to the bank all the money's gone. And it's like, that's a traumatic experience. I had no idea that happened. What I also didn't know Is he never put $1 in the bank the rest of his life. So it didn't, yeah, scarred, traumatized. The rest of his life. So now all of a sudden, I'm one now all of a sudden, this family not having money, you know, being poor, it all starts to make sense. Like, he has this belief. You can't trust banks with your money. That was an experience. So all of a sudden my mom's anxiety around money made sense. And then me trying to like, do the total opposite crazy swing in the other direction. it all made sense understanding my family. story.
Jason Butler 20:01
It's fascinating you say that about you interviewed your mom. And it's very competitive, very self aware for you to do that, because I help about three or four families a year through my business generation next, where what I do is I help them prepare their heirs to receive their inheritance. So it's not estate planning or financial planning, it's just part of my job is I do the I do interviews with the matriarch or patriarch, or Gen one or whatever. And I hear these stories going back one or two generations, even before them about these things that no one knew these scars, these things that had a big difference to them. And you're absolutely right. The experiences you have as a young adult, or even as a child influence for the rest of your life, your your money, reactions, your money decisions, it sounds to me, like, and I'm interested if you if you were to tap back into the script concept, because you you, you pioneered the idea of money scripts, and perhaps you might want to just explain to people a little bit more about money scripts, and perhaps touch on your own experience of that. Because that concept of we have these scripts that then influences if we can understand them, we can hopefully be more aware and a bit more cognizant of those shortcomings.
Brad Klontz 21:04
Absolutely. So a perfect example of a money script is my grandfather's. You can't trust banks with your money. Yeah. And so many scripts are these typically subconscious beliefs like, like, I had no idea that belief pattern was in my family. But once I learned it, I'm like, Well, of course, this explains just about everything. Yeah. And so we all have these beliefs around money, they usually they're inherited, or they come from direct experiences as a child, very often, they're only partially true. Like, for example, you can't trust banks with the money well, 100% true in the Great Depression, not true now, like there's actually laws in place so that you will trust banks. And so they're all partially true, they're culturally bound. And what's so fascinating is, and we've done studies now with 1000s of people on these, your money, scripts, your beliefs around money, predict your income, your net worth, your approach to using debt, and a whole host of financial behaviors. So they're incredibly powerful.
Jason Butler 21:54
Um, so as you you, you became a sort of self taught, non economist behavioral expert on money, you know, from the psychology side of things, because there's been a melding together in recent years of the economy, and the psycho psychology side of things, the economists and psychologists are nothing more friendly now and sort of accepting of each other. But I'm just wondering how you then developed your, your personal relationship with money as you become a young man in your 20s? And sort of going down this route? You got your masters, were you? Were you a natural saver, a natural spender, or somewhere in between? Or did you have highs and lows? Or was it just a very steady line as you became more self aware?
Brad Klontz 22:31
I think that I had some blips in highs and lows. So for example, when I got out of grad school, I owed $100,000, in student loan debt, but I thought I needed to buy a luxury watch. You know, course,
of course, right? And so yeah, of course I did. Because here, I just served this, I did this thing. And I, you know, when I first got out of college, to even for grad school, I bought a brand new car. And again, I felt like I realized, in retrospect, it was like, I wanted to show people where I came from that I had made it. Like I wanted to show a look at arrived. Exactly. And so I'm now in retrospect, of course, that's, that's, that's actually not how most self made millionaires spend their money. We've done some studies on that. But it's that sense of like, you know, I want to show people that I'm worthy. And so I realized that I have that inside of me, like, when you grow up lower income are studies have shown that you're much more likely to look at money as a status thing. Compared to people who are ultra wealthy, you don't look at it that way, isn't?
Jason Butler 23:28
There isn't there, there's this aspect of the need for extrinsic motivation and vote if you're not secure in yourself. And this is not a judgment about you or anyone. But if you're not 100%, secure in yourself. And that's that basic need for security and feeding, you know, you're good enough that you are looking for validation from others for consumption, too.
Brad Klontz 23:47
So we all don't feel really bad about ourselves, I guess. I mean, there's studies that have been shown to that men are more attractive to women when they have outward displays of wealth. So this isn't something that, you know, we're all just, you know, tripping ourselves up, because we don't know any better. It's like, it goes back to what I talked about earlier. It's like you have to overcome this natural tendency, like, so we're all we're all like, tribal, social animals. But we have these impulses says, Yeah, exactly. Yeah, there's a reason that peacock, you know, spreads the feathers, it works. And so you have to sort of overcome that. And the people who who do that are studies show tend up not to have much money, because they're spending that money to try to show the world that I'm okay. And ironically, the people who are millionaires that we've studied there, they actually are more likely to downplay how much money they have. And it really makes sense, because the only way to become wealthy is to actually hold on to it. And not spend it.
Jason Butler 24:39
Yeah. Um, so Brad, I'm interested in you said you had some detours and as you went through as a young man, you sort of had a few you know, the watch and stuff. How did you how did you turn the dial on that? And what was there a pivotal moment or was there an epiphany was there never again, was there a big sort of a low that was so bad that you thought no, or was it just a gradual realization? This is not the way forward.
Brad Klontz 25:01
So I would, I would describe those two things as the blips on my screen because I'm actually wired to be an extreme saver. And to have that sort of scarcity mindset, like, there's not enough money, there's not enough money, and also a drive to like, I'm going to become wealthy. This is something I want. So those were actually the driving forces in my life. So the big irony is that, with those two blips, most of what I was doing was radical savings, to the point of possible dysfunction. Like when I met my wife, I had a $500, I was making a six figure income, I drove a $500 car actually had two of them. And I would fix the one that broke and drive the other one. I had a ping pong table in my living room, I had no furniture, I had a mattress on the floor that was used. I didn't have a television. I mean, that was that was how my wife met me. And why because I paid off my loans in three years. And I was saving 40% of my income with the whole entire goal that I'm going to become wealthy. And so I would say that was a bit of an extreme reaction.
Jason Butler 26:01
If conspicuous consumption, if I can use that term is what evolutionary psychology tells us that tracks females to males. Why was it? What was it that your wife found great about you in this frugal, you say radical? What did you say radical savings mentality? She must have thought you were a genius and figured it all out? No idea.
Brad Klontz 26:21
I think it was my ping pong skills.
Jason Butler 26:23
Oh, I see. Was that what you were gonna call a ping pong?
Brad Klontz 26:27
Yeah. And she was she was studying to be a psychologist. I think it was we really connected around the psychology
Jason Butler 26:32
side of things. Yeah, good stuff. All right. Well, that's really good fun. And thank you for that. So if you think about now, this is an interesting one. I get lots of questions from my readers and followers about this particular subject. And I'm doing a live on Instagram on this shortly. But this issue of managing money and managing money, not just conflicts, but differences of opinions and alignment of goals between partners, that's called partners married, whatever relationship situation you're in, it's it is it can be difficult, everyone's different, everyone comes a bit different. And if you've got two very different types of people with different money scripts, or different views about money, or they come from different income families, I'm just interested to know, one is is how you and your wife kind of navigated that particular blip of coming together with your finances. And secondly, just some takeaways that people who may be suffering some slight misalignments, or frustrations, in their own relationships when it comes to money, and their significant other.
Brad Klontz 27:28
Sure, so I would say, first of all, if you're totally in line with your partner around all issues related to money, you're very rare doc. Yeah, that is, that doesn't usually happen. And so conflicts around money or, you know, are ubiquitous, it's the number one reason for divorce the first years of marriage. So just sort of starting at the base that, you know, I'm just going to guess that you have some conflicts with your partner around money, like this is a very normal thing. Now, what happens is, we have a tendency to sort of get polarized. So for example, I told you my background, my wife came from an upper middle class background. And so it was probably, you know, subconsciously, one of the reasons I was attracted to her, as I mentioned, I'm attracted to that to being upper middle class. And so that we've had conflict, and we still do. And what's so interesting is, it's really easy to get polarized. So as I, as I, I'll take a more extreme saving position, because I see she wants to buy a couch. Now the interesting thing, Jason is, I think it's okay to buy a couch like I didn't have one when I met her, so I can recognize that at the ping pong table. Yeah, exactly. I can recognize I'm open minded in the sense that I understand that I have an unbalanced relationship with money based on where I came from. Yeah. But what's interesting is, if you're not careful in the discussion, all of a sudden, I could be putting her mentally into this, like outrageous Fender category, which, by the way, she doesn't belong to at all. But compared to me, and so and the same thing. So that's what you have to watch out for is getting more and more polarized, because essentially, what we try to do is we try to convince each other that our money scripts are right, and the other one's wrong.
Jason Butler 28:52
Yes, yes. And that's part of protecting your ego write it down without realizing it. And so it's interesting because my wife is an introvert, and I'm an extrovert. She has no interest in spreadsheets and stuff. But one of the ways that we've, so what we've done is not trying to focus on our weaknesses, we focus on our strengths. So my wife will manage with a certain amount of money, she knows that's what it is, she will manage it very well. And I don't need to micromanager if she she doesn't want to know about all the intricacies bits and bobs, but she wants to know the macro. So what we've done over the years, we've been married 26 years in January, like you we we have we've agreed kind of what were our strengths and weaknesses are with this. And I've got her line of reporting. So she has access to the bank account. Obviously, she has a lot of reporting to the overall wealth and all the bits and bobs. She knows the support team to call if if something really serious happened. And but we've also got the kind of her lane she likes to stay in her lane and I've got my lane, and then the key decisions we make together but the micro bits whether it's her area or Maya, we leave that to each other and we just check in. So I think I think what you're saying is you before you were saying you have to be aware of differences and not only A accentuating differences but be aware of them. Have there been any other strategies you've used in your relationship to ensure that you avoid landmines and sort of blocks or misunderstandings? Yeah, so
Brad Klontz 30:13
one of the things we have in our relationship is we have a spending limit, at which point we agree to consult with each other. And I think this adds makes us both feel good about it, like, you feel like you have a handle on what's happening with your partner with yourself. And for us, it's like $100. And that's just like, if it's a purchase over $100, we're gonna just consult about it. And and it's a stopgap to, because I'll find myself saying, I don't really want it that bad. And she doesn't say no, I mean, we don't set it up where we're being paternalistic in any way. But it's sort of checking in. And that's really, really helped. The other thing we do is, you know, and this is something to be avoided, I think, where sometimes one partner will just take the whole ship, take the whole financial ship, and that comes with a bunch of negative consequences, quite honestly,
Jason Butler 30:54
particularly someone gets a will does.
Brad Klontz 30:56
Yeah, absolutely. And so for example, like right now, she is managing the expenditures in the non business side, and I'm focusing on the business books. And so we were constantly talking about and communicating. But But she, we both have a handle on it.
Jason Butler 31:13
So that idea of feeling empowered, having agency as we call it, and feeling a degree of control that makes you feel secure, also helps the relationship stay fresh and solid, and it stops any kind of difficulties. I want to just touch to touch on you in your professional work. I do a little bit of pro bono work, not much because of the time commitment. But there was one particular chap A few years ago, and I could not understand how a high income guy like him, didn't have more savings. And when I sort of gently dug into it, not doing therapy, but just trying to be friendly with him. It was clear to me he had some form of addiction that was causing him to spend money now not quite know what the addiction wasn't still to this day. I'm just wondering addictions, wherever they're spending, addictions, drugs, gambling, or whatever it is anything that decimates finances is, is if the partner then finds out that's almost worse than adultery, because it's that lack that's destroying of trust. But also, it's the wasting of the family money, I'm just interested to know is to what extent when does someone need to bring in an addiction expert or, or a behavioral psychologist to help them with that area, versus a money coach who can help them with their financial blockages is where's that thin dividing line? When does it become an addiction? which needs especially addiction help? And when is it a problem with spending money on things that don't matter? Where you perhaps a money coach could help you?
Brad Klontz 32:38
Yeah, that's a great question. And it really comes down to whether it's a disorder. And so we have to define disorder. So I put those into the category of money disorders, whether it's compulsive buying disorder, which is probably what your client had, or gambling disorder, or a hoarding disorder, the disorder is, is a behavioral pattern. And it does have that addictive element. But essentially, it's causing significant negative consequences in your life. It's not just like, a little bit of stress around money, or we've let this credit card go up a little bit more. But it's like this is a behavior you've tried to stop, you know, you need to stop, you know, it's a problem. And whatever you do, you just can't make it stop. And so that's sort of the indicator, it's interfering with either your work or your sleep, or your mental health or your relationship, it's causing damage in your life. And that's, that's when you need to look for an expert. And of course, one of the symptoms that goes along with it is financial infidelity, where you're lying to your spouse around it. And this is part of the part of the like, I want to stop. And so I perhaps been caught or I made a promise to my partner that I'll stop. And then I slipped back into it, I relapse into the behavior. And it's actually pretty common, like, for example, compulsive buying disorder. There is many people in the United States who have a major depressive disorder right now, as have a compulsive buying disorder, it's around 6% of the population. And that's a full on addiction. It's not just a shopaholic to feel better, it's people who really, really struggled to stop it.
Jason Butler 33:58
Right? So if you have someone in your life, you think whether it's a friend, your partner, relative, whatever, what are the ways that you can potentially help that person? You know, I, my thoughts would always be to share a story about yourself, like say all in others, if you think something is happening in someone's life, that is financially that there's something they're doing that's harming themselves financially, whether it's buying, obsess, you see lots of parcels turning up, you know, they haven't got the money, what's a, what's a good way of trying to raise the issue with someone that they might have a problem without making them feel defensive? or stupid or silly?
Brad Klontz 34:33
You know it, I think it's really interesting. You're asking me that question, because your podcast isn't a great example of exactly how I think you could intervene with somebody. And what you're doing here is we're talking about our own personal stories, and it's a lot easier to hear it, it actually reduces shame, like, which is a really, really big issue. And so that's one of the reasons that I'm super happy to talk about how I screwed up around. Because look, hey, again, we're wired to do it wrong. So it really reduces that shame. So I think that's a it's a great way to start.
Jason Butler 35:01
Yeah. Yeah. And as I say, I think what I've did with one person who I knew I thought was doing some things I just said, Oh, you know what? You don't see me a normal self. Is there anything you want to share with me? Is there anything you want to get off your chest, you know, you just don't seem your normal, happy, go lucky self. And then if they feel like they really, the dam is going to burst, and I want to tell you, they will, or I will share a story about something I did wrong, that made me feel bad. And just sort of get that off my chest. So they feel they're not silly. So there's different ones. Yeah,
Brad Klontz 35:28
personally, and I'll throw in there too. Like if somebody gives you the gift of actually sharing what's going on with him internally, resist the urge to give advice. And instead just listen and just sort of repeat back what they're saying. It's it's like, the most powerful relational technique that that's that exists, is reflective listening, where you're just saying, Wow, so that's really stressful. Wow. And so as they're talking, you're just sort of mirroring it back to them? Yeah. It's incredibly powerful.
Jason Butler 35:52
Yeah. And active listening is very, very, a lot harder for most people. Because they're normally listening to speak. I understand that. And and you just say, you don't have to fix someone, you just have to let them because most of us got the answer within us. You just have to let them let first of all the pressure out of the pressure cooker, slowly, and and then eventually, they'll they'll come out and got their oxygen mask on, then they can start thinking okay, well, is there anyone you know, or you can start suggesting a book or tour or podcast? Yeah. Right. I'm conscious of the time. I know, you're a busy guy. So before we let you go, I'm just trying to think you've been around. I mean, you're a very young looking guy, but you're, you know, you've got a lot of experience in this sector. And you've got a lot of experience of life. What do you what sort of pearls of wisdom about the whole relationship with money that we have? Would you want to share with people as to kind of like your top two or three tips, and specifically in relation to any ideas and concepts that will be in your new book that that people might then want to dig in deeper and find out more about?
Brad Klontz 36:55
I would say that to start with the the D shaming process like so if you're struggling with money, just understand it's not because you're crazy, lazy or stupid. There's a very logical reason why you've done the things you've done around money. And I can almost guarantee you that if I, I took a baby, and I put them into your life, and and they had your parents and they grew up where you grew up, and they had the same experience, they'd probably be doing the same thing you're doing right now. Yeah. And so it's very, very predictable. And I think, wow, that's what a relief it is to know that. So yes, we've made mistakes. And if you can understand your history, so understand, what were the early experiences you had around money, your parents, your grandparents, if you can really understand that history, all of a sudden, your beliefs will make sense. And then if you can really look at those beliefs, and like, for example, let's say you have the belief that money corrupts, or rich people are greedy, there's a chance that someone's experienced that directly. And and if you can look at that belief, and try to make it more accurate, because of course, it's true in some circumstances, but it's not. It's not and so that you want to really look at that belief and expand it. So that it is it's more accurate in more situations. And that's when you can start Transforming Your Life. You absolutely
Jason Butler 38:02
get the book the money mammoth is that is that correct? Money? mammoth.
Brad Klontz 38:07
That's right.
Jason Butler 38:07
That's how, definitely get a copy of it. I always have, you know, as I say, always have the greats and anything like your previous books. I know. It's gonna be great fun. But Bradley, lovely to talk to you. Thank you very much for the time, we'll make sure there's links to your websites and you're on Instagram, you're on tik tok, you're on Twitter, you're on all those things, LinkedIn everywhere. And you got what make sure your websites on there, but keep up the good work. Thank you for spending time with us today. And good luck.
Brad Klontz 38:34
Thank you, Jason. It was a real honor speaking with you.
Jason Butler 38:41
What a great interview, I really enjoyed speaking to Brad there on that one. He gave some really great insights, didn't he? Also, the fact that no one had actually ever asked him those questions before. So I was quite pleased about that, for someone of his stature. But he's talked about quite a few things there, didn't he? He discussed the idea that although many people do have disadvantages and things might seem like they're stacked against them, once you realize that you can win with money, and you can win and get ahead, then that's the first step, isn't it, not thinking you're a victim and hiding behind the sort of social barriers that might be there in your circumstances. I mean, he himself came from a low income family, didn't he? And he had that scarcity mindset, thinking that, you know, he would never have enough. But wasn't it amazing that he interviewed his friend's dad when he was about 13 or 14 and sort of trying to find out why he had more money than his own family? And what was different about him? So that was that intellectual curiosity. success leaves clues, doesn't it? Then it was interesting, wasn't it? He he became a day trader in the late 90s, to try and clear his student finance that he'd accumulated and lost about 80% of the money when the.com boom all crashed. And then he talked about interviewing his mom didn't he and sort of finding out more about the family history and that he's great. indebted lost most of his wealth in the Great Depression in the 30s. And that really had a big scar on his granddad and the family and that sort of that really underpinned a lot of family beliefs about scarcity. And you can't trust the banks and sort of the whole money beliefs that they had. It was interesting to know that he, he shared that idea that when he was a young man, he, when he graduated, he went out and bought himself a really expensive watch, and, and that swanky car to sort of think that by showing he was consuming, and he bought some nice things that he was somehow winning with money. But he makes the point that it's an evolutionary thing, isn't it that that men are more attractive to women, if they have outward displays of consumption and wealth, and that's, that's evolutionary, that's programmed into us. But as we know, looks can be deceiving a bit like the peacock. And then he talked about becoming a radical saver didn't even when his wife met him, all he had was a ping pong table, and not much else was saving 40% of his income. And in fact, he paid off his student debts within three years. So that was interesting. And he talked about the fact that very few people when they come together in a, in a relationship forever 100% aligned with money. And in order to avoid conflicts and problems there, that really what you need to do is have some set of rules that you can all work to and have common values and align those. And he mentioned that I did in the of the spending limit, in his case, $100, when, you know, if it's more than $100, him and his wife have to consult each other just to sort of be a check and balance. And quite often he, he sort of says to himself, well, I can't really be bothered, I don't really need that thing, or want that thing as much. And we we touched on the idea of money disorders differently. And this issue of when do addictions become a problem? And when do you need to seek help? And he just said, Look, whenever a disorder is causing really serious detriment, that's when you've got to get help. But he talked about the importance of listening to someone who might be wanting to be sharing their problems or concerns with you, not trying to fix them, and perhaps just speak back what they've told you. So that we de shame that whole issue. And that at the end of the day, the most interesting insight I got from the whole interview is this thing that if someone had had your upbringing, with your circumstances and experience, they probably be like you are with money, good, bad or indifferent. And that's really liberating, because it means that actually, you know, you can change things. You're not really responsible for your upbringing, but you are responsible for how you take your life forward and the money decisions you make and the relationship that you develop with money. So really great interview, really recommend you get a copy of Brad's book, the money mammoth, really, really interesting, new piece of work from him lots of insights there to help you really win with money. So great interview, hope you enjoyed it. And I'll, I'll see you next week. Thanks for listening to real money stories with me, Jason Butler. If you like what you hear, please do tell your friends. And more importantly, please rate us on your preferred podcast app, because it really does help us get the message out there. So until next time, good luck with your money journey. Real Money stories is sponsored by Vanguard bringing value to 30 million investors worldwide. Visit vanguardinvestor.co.uk for more details. The value of investments can go down as well as up and you may get back less than you invested.
Transcribed by https://otter.ai