In my years of studying financial psychology, I have worked with many people. From farmers and small-business owners to students, parents, teachers and financial advisors. If my experiences have taught me anything it is this: when it comes to money, we all have issues. But we all can get better. 

Rich, poor, experienced or green, we can all learn to have a better relationship with our money. No matter where you are starting from, learning these rules, and developing the habit of coming back to them when you get off track, will help you get to a stronger place financially. As advisors, you can help your clients develop stronger financial thinking by learning these three rules, and helping clients to incorporate them over time. 

Rule 1. Listen for the Story

Every financial decision starts with a story. A person’s relationship with money is almost never about the numbers. It is about the stories we tell ourselves because of those numbers. This is why one client can feel satisfied with a middle-class lifestyle while others feel constrained on several million dollars a year. 

Each of us has come to believe certain stories based on our upbringing and our experiences with money: stories about who we are and who we are not, stories about what we can and cannot do in the world. This is where our relationship with money is rooted, and this is where sound money management begins.

It starts with a story.

Some people, having watched their parents lose sleep during the housing crisis, will shrug off any suggestion of real estate in their own portfolios. Others believe deeply that life is too short to worry about tomorrow, and are painfully underprepared for retirement. All of us have felt the pull of marketing campaigns that tap into our personal hopes and goals. We buy clothes, cars and homes that reflect the way we want to feel about ourselves. Taken together, these day-to-day financial choices add up to a lifetime of financial health, or instability. 

As advisors, recognizing that every financial decision is based on a story can help you to tap into your client’s underlying financial narrative. For tips and tools on how to help clients to change the stories that may be working against them, there are some wonderful resources in Mind Over Money (Klontz & Klontz, 2009), Strangers in Paradise (Grubman, 2013), and of course my own new book, LOADED (Newcomb, 2016).

Rule 2. Help Them Choose Healthy Strategies

The stories we believe lead us to choose certain strategies for meeting our needs. A person who believes that ‘good’ parents pay for their kids’ college tuition in full may sabotage their own financial security in order to nurture their children. This strategy may meet some basic needs (caring, nurturing, knowing they matter, etc.) but it threatens others (security and basic survival in retirement).

The goal of a sustainable financial plan is that it will meet today’s needs without sabotaging the needs of our future self. In order to do this, you can help clients to recognize the difference between a need and a strategy.

Needs are constant, but strategies are flexible. Even the frivolous items we buy on impulse are attempts to serve a fundamental need such as fun, comfort, ease or relaxation. Simply cutting back on expenses without addressing the underlying needs that those expenses are meeting is a recipe for unhappiness. This is why so many people set out to make financial change only to find themselves ‘cheating’ on their plan.

A sustainable and satisfying financial plan is far more like a map than a diet. It’s a plan for meeting all of your needs with your limited resources.

Advisors can help clients choose healthier strategies by asking questions that help identify the underlying need. “What are you afraid will happen if Jr. has to work part time or take our some loans to get through school?”  Once you hear the need you can help them to devise a strategy that will meet the need without sabotaging their future.

Remember, there’s a story underneath the strategy. For example, if the ‘good parent’ story is leading clients into financial insecurity, it might help to point out that ‘good parents’ model good personal financial decisions, and student loans are often a great motivator for hard work. The goal is to find a new strategy that will still meet the underlying need. When you can help them do this, following their plan will feel deeply satisfying.

Rule 3. Connect Assets to Income

Every stream of income can be traced back to an asset that is valuable to others. While we don’t all start out with assets, we all have resources (time, energy, and intelligence at the very minimum). Learning how to combine one’s unique resources into valuable assets that can increase your income streams is the heart, the very soul, of making money.

When clients learn to think of their money in terms of assets and resources rather than simply in terms of income, they will naturally become more attuned to protecting and growing their assets.

Most of us don’t learn early on how to calculate the amount of income that a lump sum will generate. The result is that we can feel much wealthier than we actually are. Recent research tested the effects of presenting retirement savings to one group of individuals as a lump sum ($100,000) and to others as an income stream ($500 per month for life). They found that people who were presented the lump sum felt more adequately prepared for retirement than those who saw the income stream (Goldstein, Hershfield and Bernartzi, in Press).

Again, it goes back to a story: “$100,000 is a lot of money,” is one story, while “$500 per month isn’t enough,” is another.  The same financial asset leads to two different stories depending on how it is presented.

By helping your clients to make the connection between the income they enjoy and the assets required to produce that income, you can help motivate greater saving and the cultivation of all potential sources of value. Many people have untapped resources (summer homes that could be rented out, unused valuables that clutter their lives, etc.).

Once people begin to see that they have value beyond their salary, and learn how much income to expect from a lump-sum asset, they may naturally be motivated to look for ways of earning extra income in order to boost their retirement savings.

These three rules can help you as an advisor to bring your conversations with clients to a new level. By helping them to recognize and challenge the stories that influence their strategies for creating and consuming their stores of value, you can lead them into healthier and more stable financial lives.