Psychology of Financial Planning

Chapter 3Financial Flashpoints: Exploring a Client's Financial Background

Financial flashpoints are life events “associated with money that are so emotionally powerful, they leave an imprint that lasts into adulthood.”¹ Financial flashpoints can range from the mundane to the traumatic and are a key element in the development of our financial psychology (as illustrated in Figure 3.1).² In our attempt to make sense of our experiences, we develop money scripts^®, which drive our financial behaviors. Our financial behaviors and outcomes, in turn, give rise to new financial flashpoint experiences, which either further ingrain our money scripts or inspire us to adapt and change them. An exploration of an individual's financial flashpoints can provide important clues around how they have shaped their relationship with money. In fact, even some of the most befuddling financial behaviors can make perfect sense when a financial planner understands the circumstances that shaped the client's mindset around money. Connecting the dots between a client's financial past and their present can help them more consciously create the financial future they want and anticipate potential psychological roadblocks along the way. Financial flashpoints can have intense emotions around them, and in some cases, lasting change might require a referral to a therapist with experience in working with trauma.

Figure 3.1 Klontz‐Chaffin Model of Financial Psychology

The following exercises are designed to ...