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Money means different things to different people. Their attitude often reflects their risk tolerance. As their advisor, you need to determine if aligning with their perception is the right way to go, or if you need to change their point of view.

Growing money takes time. People can recover from financial setbacks, if they have enough time. But once time is gone, it’s gone forever.

18 Different Perceptions of Money

  1. Raw material. This is a perception you can encourage. Money is something that, when properly deployed, can make you more money. Venture capitalists and angel investors come to mind. Money means growth potential.
  2. Independence. It aligns with retirement savings. How much do you need to accumulate to serve as a base to produce an acceptable income? Once you no longer need to earn a living, you fit into the “independently wealthy” category.
  3. A safety net. It’s the emergency fund you tell clients they must have — six months worth of living expenses, put aside where it’s not subject to stock market volatility. It gives them peace of mind.
  4. Easy come, easy go. There are people whose money seems to pass through their hands. It doesn’t stay long. They might gamble. They live extravagant lives. They rationalize that if they lose it, they can always make it back. Eventually the clock runs out.
  5. Monopoly money. Some people are so rich, when they want something, the cost is incidental. Your client has a desired retirement lifestyle. They need a certain asset level to fund their lifestyle. They have multiples of that number. I heard stories when the children of the very wealthy would go out clubbing, a member of staff would hand them an envelope of cash to spend that night. It’s difficult to teach them its value.
  6. Candy. Money is something to be enjoyed. When they have it, they spend it. They are impulsive shoppers. If they run out, they continue shopping on credit. They need to learn how to set their sights higher and practice deferred gratification.
  7. A means to fill in a space. They have lots of bills. Some are a little overdue. Others are a lot overdue. When they get money, they pay a bill or two. It’s like a dam with many holes. Eventually the dam comes crashing down.
  8. Buys respect. This can be viewed two ways. The Broadway Musical “Fiddler on the Roof” included the line about people asking for advice: “When you’re rich they think you really know.” People respect great wealth. The second view is “the trappings of wealth.” Some people will go into debt to buy a large house and a fancy car to create the perception of wealth.
  9. A blessing. Some feel wealth is a gift from God. Money has been entrusted to them to help others who are less fortunate. In the 1800s and 1900s, many wealthy Americans like Andrew Carnegie and Henry Ford wanted to use their great wealth to better the lives of others. It’s the rationale behind donations to museums and hospitals. Related: 4 Strategies for Effective End-of-Year Philanthropy
  10. Something to give away. You’ve seen the parents who constantly hand money to their children. They want them to have a good life. They want to keep them happy. Their kids don’t have an immediate need, but they are showered with cash anyway. The parents have little or no savings.
  11. Something to be loaned. It’s similar to the “raw material” example. It’s different because the raw material might be lost if the investment fails. These folks prefer to lend the money, with the expectation it will be returned. They might lend without interest to a family member or engage in a business where they provide financing secured by assets.
  12. Something to earn interest. A better expression might be to get a return. This person might buy CDs or bonds. They might invest in rental property because the income generated is similar to interest.
  13. Something to be saved. In parts of Asia, there is no safety net for citizens like we have in the U.S. It’s common practice to use a portion of your earnings for food and shelter, saving the rest. If disaster strikes, you are self-sufficient. You are in a position to lend to family members.
  14. To be hoarded. Scrooge in Charles Dickens’ “A Christmas Carol” comes to mind. You can never have enough. You always need more. You collect your debts. You amass, but don’t spend on yourself.
  15. Something that’s taxed. They remember the expression, “It’s not what you earn, it’s what you keep.” They see the government as an adversary, trying to find ways to separate them from their money. They need a good accountant.
  16. The root of all evil. Let’s remember, the passage actually reads “The love of money is the root of all evil.” Some people just remember those last four words. They equate money with evil, therefore people who have more than they do are undeserving. Someone must even the score. They need help in making some money of their own.
  17. Something to hide. Some wealthy people go to great lengths not to appear wealthy. It’s the opposite of “Money buys respect.” They wish to be anonymous. They live modestly, dress modestly and drive ordinary cars. They don’t want to draw attention. That’s fine. You can work with that mindset.
  18. Insurance. Money, or the expectation of money, is protection. If something happens to them, their survivors will have adequate resources. They won’t be in a bad spot or dependent on others. Life insurance provides this kind of protection.

Money itself should be respected. It’s not meant to be squandered. Part of your role as an advisor is getting clients to think along these lines.

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Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book, “Captivating the Wealthy Investor,” can be found on Amazon.