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Know Yourself, Know Your Money

Discover WHY you handle money the way you do, and WHAT to do about it!

By Rachel Cruze
  • Read in 16 minutes
  • Audio & text available
  • Contains 10 key ideas
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Know Yourself, Know Your Money by Rachel Cruze

Know Yourself, Know Your Money (2021) tackles personal finance from a novel perspective. Rather than simply showing you how to create a budget or telling you to save more each month, it unpacks the psychology behind decision-making. If you want to improve your financial health, you have to understand why you make the mistakes you do. Get a handle on that and you can start changing your money mindset and build a better future.

Key idea 1 of 10

Your view of money is shaped by what you learn about it as a child.

Rachel Cruze’s friend, Amanda, has always loved to shop. For her, shopping isn’t just about finding great deals – it’s a sport.

It gradually became more than that, though. Despite having a well-paying job, she regularly spent more than she was earning. By the time she was in her late thirties, her partner was growing increasingly frustrated with her financial behavior and her marriage was in trouble. Something had to give.

After seeing a counselor, Amanda realized that her behavior was a reaction to growing up with extremely frugal parents – the kind of folks who save the bags from cereal boxes “just in case.”

It turned out that overspending was Amanda’s way of rebelling against excessive thriftiness. This isn’t a unique experience – in fact, just about everyone’s relationship with money is shaped by their childhood.

The key message in this blink is: Your view of money is shaped by what you learn about it as a child.

Financial decisions aren’t made in a vacuum. Some factors, like how much you earn, are obvious. Other factors operate in the background, but they’re no less influential.

As the psychologist and bestselling author Henry Cloud puts it, “How you’re glued together has everything to do with how you spend your money.” If you want to make better choices and improve your personal finances, you have to first understand why you handle money the way you do.

That’s where the concept of the money classroom comes in. This is where you first became aware of the adult world of personal finance.

All children learn about money in two different ways. The first is what their parents communicate verbally. The second is what their parents communicate emotionally.

Different households create different kinds of classrooms. Some parents never discuss money with their children; some don’t talk about money at all. This creates a verbally closed classroom. Others are open – parents bring up issues like bills or investments at the dinner table.

Emotional communication meanwhile can be positive or negative. In some households, children feel a sense of calm when financial topics come up. In others, money is associated with stress and anxiety.

These variables interact to create distinctive classrooms, but thinking about your childhood experiences in this way can help you explore your relationship with money in the present. How? Well, let’s take a closer look at three common types of classrooms and the challenges that come from growing up in them.

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