A Little Bit Richer

Iona Bain: Hello, I'm Iona Bain, and welcome to A Little Bit Richer, brought to you by Legal and General. Now, author of Money on Your Mind: The Psychology Behind Your Financial Habits Vicky Reynal is here to explain the psychology of our spending. Vicky is a financial psychotherapist and runs her own clinic in London. She offers psychological support to people with money worries, such as overspending or debt, and combines this with guidance on making healthier money decisions. She also writes a weekly column for The Daily Mail, answering reader questions as their financial psychotherapist.

Welcome, Vicky.

Vicky Reynal: Thank you. Thank you for having me.

Iona Bain: Firstly, what is financial psychotherapy and how is it different from financial coaching?

Vicky Reynal: What I'm trying to help people do is unpick what feelings or emotions might be driving their money choices. People might come because they're overly generous and they don't know why that is, and they know it's against what's best in their financial interests but they can't stop themselves. What I often find is that there's feelings that are unconscious that are getting in the way. My job is to help them unpack that and understand it so that they can change the way they behave with money.

Iona Bain: I'm imagining that your upbringing is really important in shaping your relationship with money. I've heard that you form your attitude to money by the age of eight. I'm wondering, is there any truth in that?

Vicky Reynal: There is some truth. I wouldn't pinpoint it to a specific age because I think that a lot of experiences that we have in later years will shape our relationship with money in the long-term. Of course, the money lessons that our parents teach us growing up will have an impact on our relationship with money. If they tell us, " Don't be too greedy," or, " Money corrupts you," that will be in the back of your mind as you're trying to ask for a raise, for example.

But there's a lot of non- money related experiences when we're young that will shape what we do with money when we're old. Let's say you've been bullied a lot in school, or you felt different, you might find that, as an adult, you tend to overspend when you're out with friends. It's because you're trying to fit in.

Iona Bain: It's like you're trying to buy acceptance.

Vicky Reynal: Exactly. Which isn't about the money lessons learned, it's about something very different. Or you might see people who really struggle to spend money on themselves, so they become very frugal. That might come from a feeling that you're not really deserving of the good things that money can buy, that you feel guilty any time you spend anything on yourself. That might come from experiences growing up in which maybe your parents were not paying a lot of attention to you, or harsh teachers, or whatnot, that left you with a really small confidence in yourself.

Iona Bain: And low self-esteem.

Vicky Reynal: Exactly.

Iona Bain: Someone, I imagine, could be a big spender as an adult, but maybe their parents are quite frugal actually. Can you explain why there can be those kinds of differences?

Vicky Reynal: Our relationship with money has to do with so many different psychological factors, like our sense of deservedness, our personality, which is why you see in families with many children how siblings might end up having very different attitudes to money even though they have the same parents teaching the same lessons.

Because what drives our overspending, it could be coming from social pressures. Lifestyle inflation is very common. That term basically describes a phenomenon, when your income rises, your spending rises with it. Your costs go up and you end up in a worse financial situation on this higher salary than you before in the first place. Sometimes what's driving it is internal rather than external. If we don't feel lovable enough, we might go out there and spend on maybe beauty products or gadgets. It's that internal insecurity that might be manifesting through their spending.

Iona Bain: Well, speaking of social pressures, they influence our spending behaviours in so many ways. Can you give me a few examples?

Vicky Reynal: Yes. The fear of missing out is one that particularly young people often talk about. There's a lot of insecurity, sometimes of exclusion, sometimes it's about not being able to feel part of the conversation next time you're with them. And even fear of rejection or abandonment in some cases, so you'll do it literally at all costs.

You'll go to that wedding abroad that you know you can't afford. People can be so ashamed of admitting that they can't afford something. But actually, what they end up finding most of the times is that somebody else in that group is just relieved that they said something.

Iona Bain: Yeah.

Vicky Reynal: Maybe there is a cheaper restaurant we can go to. But we often feel ashamed and alone with our money worries, and that stops us from questioning these social pressures.

Iona Bain: And social media as well must be playing quite a big role. How are you seeing that reflected in the cases that you deal with?

Vicky Reynal: If we are curious about comparing upwards, well, the algorithms will pick that up and just feed us more of that content. Which creates an illusion, because what we see is people spending and we're assuming that they're in a better financial situation. What we're not seeing is all the debt that might be sitting behind some of the spending. We're left with a sense of shame that everybody else is doing better than us and we need to catch up, and not a lot of critical thinking goes into that.

Iona Bain: There's also this concept of retail therapy. When does that become problematic? Why do you think people turn to shopping so much as a way to self- soothe?

Vicky Reynal: Because it can be quite effective in the short term. When you find something that you like and you buy it, you get dopamine released in the brain, which means that you do get a real sensation of feeling better.

Iona Bain: You get a high.

Vicky Reynal: It also distracts you, let's face it. Then the effect fades away, and you're left sometimes with the guilt and regret. But also, the feelings you were trying to avoid are still there, be it the sadness, be it the loneliness, the stress, whatever it was. Isn't it better to just deal with the roots of the problem, rather than trying to fix it with a quick boost that then will leave you feeling worse?

Iona Bain: Does it take quite a long time for people to accept that they might have a problem with overspending?

Vicky Reynal: There is a lot of denial around it. We can justify it in our minds and think that it's normal. I would invite people to think about what's this about? Why did I have to go out there and spend? Really acknowledge the cost, which is not just financial. It's also all the anxiety it leaves people with.

Iona Bain: Absolutely. In your book, you make a distinction between overspending and financial self- sabotage, which is really interesting. Can you tell me a bit more about why there's a difference between the two?

Vicky Reynal: Overspending can have so many different sources. One of the reasons why we might be doing it is because we're unconsciously trying to get into financial trouble. I've seen people, for example, who were so scared of moving out of their parents’ house, of becoming financially dependent, they kept spending all their money, running out, so that they would have an excuse to stay home.

Another example that I've seen was one young man who kept running out of money in the first two weeks of the month. We were trying to spot patterns. The question that unlocked the case, so to speak, was when I asked, " Well, what do you do when you run out of money?" He said, " I call my dad." I said, " Okay, how's that relationship?" " Well, I never speak to him anymore now that my parents’ divorce."

Iona Bain: Right.

Vicky Reynal: You realize, well, that was his motive. This overspending was all about ruining the financial situation so that he could still have a relationship with his dad that he didn't know how to have otherwise.

Iona Bain: But once you'd unpacked that, it must have absolutely blown his mind to realize that that's why he was doing what he was doing.

Vicky Reynal: It opened up a difficult question, which is how can I have a relationship with my dad outside of this? We needed to think about ways to build that relationship.

Iona Bain: Really, it was more about finding better coping strategies for that relationship that would then have a positive knock- on effect for how he was managing his money.

Vicky Reynal: Exactly. Overspending is one way to do it, but a lot of people sabotage their finances by not attending to them, not talking about money. Suddenly, they're in this big mess because they weren't opening the bills.

Iona Bain: Yeah.

Vicky Reynal: Begin to unpack, " What am I gaining from this situation? Why am I doing this?" It could be because, at some level, you feel you deserve punishment and that's a very painful thing to uncover. Certain people might go through life with the sense that they don't deserve anything good. It could be because you desire rescue and that makes you feel looked after by other people.

Iona Bain: Do you think sometimes people also fear failing as well? That might explain why sometimes people don't want to tackle their finances, because that way, they can't fail at it.

Vicky Reynal: That's where sometimes the a- ha moment happens, when they see that actually, the very thing I was terrified of is happening through inaction. Is there a way for you to get more hold of your sense of agency and say, " Fine. I might not do it perfectly, but doing something is better than doing nothing." People carry a lot of shame when it comes to money, and a lot of fear as well.

A lot of times, what helps with that financial anxiety is knowledge. It's beginning to identify what is the fear about? A lot of that could be about not understanding the terminology, or not knowing what the options are.

Iona Bain: And because it can also feel quite overwhelming. But I guess, you got to start somewhere. Once you actually start looking into these things, they're probably not as scary as you think.

Vicky Reynal: That's right. In fact, when you look at research, more than 50% of the population suffers from financial anxiety. The one thing that really decreases the level of anxiety is financial literacy. The more we know, the less anxious we feel about it.

Iona Bain: Hear, hear. Knowledge is power. With that in mind, let's get to know another concept, the scarcity mindset. How does that lead to unhealthy financial behaviours?

Vicky Reynal: Scarcity mindset is the financial equivalent of seeing the glass half empty.

Iona Bain: Right.

Vicky Reynal: You're focusing on what you don't have, rather than appreciating what you have and looking at the potential. A scarcity mindset can be quite unhelpful because it leaves people feeling very afraid and insecure financially. Some people, when they feel that way, they might feel paralyzed, rather than starting with small steps that can help them feel more financial resilience. For example, putting away, even if it's five pounds a week, can start building a safety net that's there for emergencies. Isn't that better than not doing anything?

I've also seen people becoming very frugal or overworking, accumulating, hoarding money, unable to enjoy it. Unable to ever feel like they can stop and take a break, and say no to a project. It's just that anxiety that it generates when you feel like there just isn't enough, and you're constantly battling with the worries about the future.

Iona Bain: I'm wondering if Ebeneezer Scrooge had the scarcity mindset. If he was a real person, he would do.

Vicky Reynal: Absolutely. What you want is the opposite, the abundance mindset. Which is one in which you can feel satisfied as much as one can when it comes to money, but at least you can appreciate that you have enough to be doing certain things.

Part of the definition of financial wellbeing is about feeling happy and in control of your financial choices.

There's things that you can do to improve your situation. But we can also get creative and think, " Well, maybe there is a little side gig I can start." I don't know, " I can sell a few things on Vinted or eBay." Or maybe I can start tutoring to get some extra cash. When we become paralyzed by fear, it stops any creative thinking and that's what we need to get hold of. What can I do?

Iona Bain: Can people start to want more money because they feel that what they have is never enough? Is that also an example of a scarcity mindset?

Vicky Reynal: Well, yes. It's a result of it. The problem is that the goalpost keeps moving. If you don't get to a place in which you can appreciate what you have and work with those fears, reality check them. Am I catastrophizing when I feel I don't have enough? Then you won't be able to move past that, and there isn't enough money in the world that will help you feel safe enough if that sense of unsafety is coming from somewhere else that isn't just financial.

Iona Bain: Yes, because we do hear about incredibly wealthy people seemingly never satisfied with how much money they have. But is there some truth in the idea that, once you get to that point, you're no longer satisfied with what you've got? You're just thinking about what you can get next.

Vicky Reynal: I think it comes down to what is wealth for you, can you define that? Sometimes we get stuck thinking that things will make us happy. But actually, when you sit and think about the things that you value, it might be time with family and friends.

Iona Bain: Yeah.

Vicky Reynal: Sometimes when you are stuck in this greedy pursuit of wealth, it really begs the question, well, have you attached more to money than it can actually deliver to you? Is it that you're imagining it will make you more lovable, it will attract more friends?

There's all these symbolic meanings that we give to money, and then some people have the fortune or misfortune of finding out when they have enough wealth that actually money didn't deliver on its promise.

Iona Bain: Yeah, you never want to get to that point where you work so hard, and then you realize actually, it wasn't the money that I needed after all, it was something else. Yeah.

For those listening who think that they might have a scarcity mindset, what would you recommend for them, in terms of turning that around and creating more of an abundance mindset?

Vicky Reynal: One thing is to catch yourself thinking about what you don't have and try to very actively just shift what you're focusing on to what you have. You might write a gratitude journal about all the things that the money that you have spent so far has helped you enjoy, be it holidays or education. Some people find journaling really helpful and it can be jotting the patterns. Or even, just brainstorming with open questions. When I think about money, I feel X. Or even going back to the first money memories, that can be quite insightful. If all you remember was parents taking a deep sigh at the till, then you might begin to understand why you avoid the topic of money. Or if you watched them argue about it a lot when you were little, then you might be avoiding the topic in your relationship.

But there's a lot of other things that can keep fuelling this scarcity mindset, like too much social media exposure. Are you always looking at what other people have and comparing yourself unfairly to that? Well, maybe try to do less of that.

Sometimes it's also about watching out what we read, because there's a lot of news that maybe end up making you feel more anxious. Choose reading that is more nurturing, in which you're actually learning how you can improve your situation, rather than dwelling into how much worse things could get. Paying attention to all these things can really shift your perspective onto what is within your control, what you can do differently.

Iona Bain: Absolutely. One of my mottos is focus on what's doable. We can't achieve a perfect scenario with our finances, but there are things that we can do. It's about getting on with those things.

Vicky Reynal: Yeah.

Iona Bain: Can you suggest three simple money habits that will make us feel more secure and satisfied when it comes to money?

Vicky Reynal: Well, money is still a big taboo. I would say the first one is talk about it with people you trust. If you're worried about money, why not open up to somebody? You might find that they either have the same worries, or might have some information that is useful. Talking about it can help you make sense of things.

My second tip would be create a dedicated time in which you attend to finances. That's helpful for people on all ends of the spectrum. Find a time, maybe in the week or in the month, in which you will review your finances, maybe set some goals or look at your accounts, whatever it is, and don't miss it. If you're a couple, maybe it can be a money date in which you jointly do that and talk about your finances.

Finally, I would say be curious about why you do what you do with money. Pick up on the patterns. " Oh, I always overspend when I'm out with friends." Or, " It's always on a Sunday when I'm feeling lonely." I think start by asking yourself why more often. That would be my third tip.

Iona Bain: Vicky, this has been a fascinating conversation.

Vicky Reynal: Oh, thank you very much.

Iona Bain: Thank you so much, Vicky. Lots of a- ha moments there, for sure. Next time on the show, I'll be joined by Helen Tupper from Amazing If to talk about why our career paths need to be less linear and more squiggly. I'd love it if you could follow the podcast, leave us a review, and help others get a little bit richer, too. You can keep up with the show on YouTube, TikTok, and Instagram @ legalandgeneral. Thanks for listening. Until next time, see you soon.