Yahoo Finance Ramit Sethi: Are ‘Invisible Scripts’ Limiting Your Financial Freedom?
We like to think of ourselves as individuals with beliefs and habits that are entirely our own. But that’s not always true. The people around us and our society deeply influence who we are and what we think.
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There’s wisdom in that culture, but it can also be limiting. Famed financial expert Ramit Sethi highlights how this concept impacts our financial wellness through an idea called invisible scripts.
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What Are Invisible Scripts?
Sethi says invisible scripts are messages that we absorb about money from society and our parents. These messages direct our financial actions, often without our conscious consent.
This creates a problem. When you’re making financial decisions based on inherited wisdom, you don’t always make the best decision for you or your family in the present moment.
Some invisible scripts are damaging, but others are beneficial. For example, if you had frugal parents, they might have cautioned you against going into debt. Thus, it’s important to be able to differentiate between invisible scripts that help and hurt you.
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7 Invisible Scripts You May Be Following
Every person has their own invisible scripts because no two childhoods are exactly the same. But some are more common and potentially more damaging than others. Here are seven examples of invisible scripts that could be dictating your financial habits.
“You’re throwing your money away on rent.”
Many people believe that renting an apartment is like throwing away money. The idea is that when you own a house, your mortgage payment goes toward paying off an asset you’ll own. Rent payments don’t offer anything in return, except a place to live.
But it can be smarter to rent in some situations. For example, renting lets you allocate funds you would have had to use for a down payment to other investment opportunities. These can grow faster than the value of your home. Renters also enjoy greater housing flexibility, which is beneficial if you aren’t ready to settle in an area long term.
“We don’t talk about money in this house.”
Some families refuse to talk openly about money. While this isn’t inherently positive or negative, it may not be the right approach for your household.
Talking about money gives you the benefit of hearing diverse perspectives, which may help you make more informed decisions while building wealth.
“Credit cards are a scam.”
Some financial experts say credit cards are a scam you should avoid entirely. However, using one can sometimes be beneficial. For example, paying off a credit card bill consistently can improve your credit score, making it easier to qualify for major purchases in the future, such as your first home.
You’ll have to decide for yourself whether credit cards are right for your financial plan. Just don’t let an invisible script keep you from using them as a tool if the situation is right.
“Stop spending money on lattes.”
There’s nothing wrong with trying to save money by limiting non-essential purchases. However, it’s a mistake to assume that life’s small pleasures should be avoided until you reach prosperity.
Lattes can fit into your budget just like concert tickets and travel. The key is to make these types of purchases as part of a broader financial plan.
As long as you’re contributing to your future by saving, it’s OK to enjoy life by purchasing things like lattes. Just make sure you do it responsibly.
“Money changes people.”
The idea that money changes people is common and not always wrong. But plenty of people become millionaires without changing a thing about themselves. For example, Warren Buffet still eats the same breakfast from McDonald’s that he did when first starting out.
The point is that you can become wealthy without losing yourself in the process. Don’t let this invisible script block you from that.
“You don’t get that level of wealth without making a few shady deals here and there.”
Researchers say growing income inequality is driving public mistrust of wealthy individuals. This invisible script could be a key reason why.
Although some wealthy people earn their money by stepping over others, many don’t. Simply contributing to a retirement account for 30 to 40 years can turn you into a millionaire. There’s nothing shady about that.
“The stock market is gambling.”
Investing in the stock market consistently is one of the most straightforward paths to prosperity. But people in some households grew up hearing that the stock market is the same as gambling.
The data shows that isn’t true. Over the past 30 years, the S&P 500 index has grown by an average of 10.22% annually — a long track record of success.
You can lose money in the market over any given period, but the general trend is up. That means putting some money in the market can help you grow your wealth faster.
Just make sure to invest in index funds. Trying to pick individual stocks can become more like gambling.
“Student loans are a scam.”
College costs more today than it ever has, but that doesn’t mean going is a poor idea — even if you need student loans to do it.
These loans can help you earn a degree that increases your earning potential for the rest of your career. They can be a smart financial decision because of that.
However, some student loans may not be worth taking out. For example, borrowing money to get a degree that won’t qualify you for a higher-paying job than what you have now can be bad for your financial future.
The Takeaway
Everyone has their own invisible scripts, which play a role in dictating their financial habits. Awareness is the key to overcoming these. You should think about the financial attitudes you grew up around and how those could be impacting you today.
Are your invisible scripts helping you? Or are they limiting you from reaching your full financial potential? Questioning your long-held assumptions could be exactly what you need to create the wealth that you’ve been working toward.
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This article originally appeared on GOBankingRates.com: Ramit Sethi: Are ‘Invisible Scripts’ Limiting Your Financial Freedom?
