This guest blog was written by Chris Budd who wrote the original Financial Wellbeing Book, and also the Four Cornerstones of Financial Wellbeing. He founded the Institute for Financial Wellbeing and has written more than 100 episodes of the Financial Wellbeing Podcast.

Each of us has a set of beliefs, borne out of our experiences. Are these beliefs right? Are they helping us make great financial decisions?

Right and wrong

I recently saw a book review posted on X (formerly Twitter). The person reported they found the book to be inspirational and that it provided credible insight into the topic.

Scrolling down my feed, I came across another review, coincidentally for the same book. This reviewer thought the book was complete nonsense and they were annoyed that they had wasted their time reading it.

Who was right?

And what might this tell us about our own beliefs around money?

Right or wrong

The point that struck me about these two reviews is that the book had not changed. It was the same words, the same ideas, the same conclusions.

The difference between the two reviews was the belief system that each reviewer had brought to reading the book. Their view of the world through which they processed what they had read.

Does this mean they were both right? Or that they were both wrong?

Both of the reviewers of that book used the ideas within it to further entrench themselves and confirm their existing ideas.

We do this all the time. A Conservative voter will tend to read the Daily Mail or the Telegraph, and a Labour voter the Mirror or the Observer. These papers propagate a certain viewpoint, one that readers want to hear as it confirms their beliefs to be correct. This is a process called “confirmation bias”.

Self-limiting beliefs

Asking which of these reviews about the book was right is not a very helpful question. Ideas don’t have to be right or wrong. They can exist to engage us, entertain us, and provoke thoughts. Hearing about a belief that we disagree with doesn’t make that belief wrong.

As a student, I once sat in a pub watching two friends argue about music. One argued Pink Floyd was the better band, and the other insisted it was Go West. It was a pointless argument because it was about opinions.

The only time that beliefs can be seen as being wrong is when they lead to bad outcomes. Some of our beliefs will lead to good outcomes (“good” in this case being defined by outcomes which align with personal values). Sometimes, however, our beliefs can lead to poor outcomes.

We call these “self-limiting beliefs”.

Money self-limiting beliefs

This can be seen very clearly when it comes to our relationship with money.

We see many of these self-limiting beliefs in the study of financial wellbeing (which is a broad topic including anything relating to the relationship between money and happiness).

For example, there is a general belief in our society that more money will make you more happy. This is most certainly true – give a homeless person enough money for shelter and food, and their wellbeing will almost certainly increase.

However, the impact of incremental increases in wellbeing are reduced significantly as we get wealthier, and the wellbeing that could be obtained from other sources becomes much greater. Understanding where you lie on this axis is a key part of a financial plan.

Challenging self-limiting beliefs

There are many types of self-limiting beliefs around money. For example, “I’m not very good with money” or “Investing in the stock market isn’t for me”.

Once we realise that we all have these money beliefs, there is a key conclusion to be reached.

Beliefs are not truths.

Just because someone believes that Go West are superior to Pink Floyd doesn’t necessarily make it true.

What are your beliefs about money? Are they helping you, or are they leading to poor outcomes?

Try this exercise. Write down sayings that you use about money over some time.

If you tell your children that money doesn’t grow on trees, make a note. If you find yourself having an opinion, make a note of it. Perhaps you see someone drive past with a personalised number plate on an expensive car – Are you envious? Do you sneer? Do you barely notice?

These notes will enable you to build up a picture about your money beliefs, and allow you to ask yourself this crucial question: are my money beliefs helping me make good financial decisions?

Remember, these beliefs are not right or wrong, and they are not truths. But they are you.

Bring these realisations to your next meeting with your financial planner. There’s a good chance they will have seen these before and can help you to understand how you might improve your beliefs, and thereby make better financial decisions.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.