Think of a neighborhood made up of houses that are similar in size and value, where many of the residents are in similar life stages and have similar incomes and lifestyles. It’s a comfort zone where people generally know what to expect and what behavior is expected of them.
In the same way, we tend to inhabit financial comfort zones made up of those who mirror our financial circumstances, often having similar spending and saving habits and similar beliefs about money. Often, the boundaries of our particular financial comfort zones are formed by the income levels, lifestyles, and money behaviors we grew up with. As adults, our financial comfort zones may continue to impose artificial restrictions that are not necessarily defined by what we can or cannot afford or what we really want.
Suppose someone grows up in a low-income family and neighborhood where it’s normal to just get by from month to month, shop at thrift stores, do without even small luxuries, and have little expectation of going to college. If that person goes on to get an education and becomes financially successful, they no longer need to hold to those very frugal habits. The financial comfort zone that defined their childhood no longer fits. Yet they and those around them may become uncomfortable if they break the barriers and move out of that zone. People may even be ostracized for “forgetting where they came from.”
At the opposite extreme, for those growing up in wealthy families, the financial comfort zone may include private schools, international travel, live-in household staff, and expectations about Ivy League educations and lucrative careers. If someone moves out of that comfort zone to choose a public university or become an artist or a teacher or join the military, that can be very uncomfortable for their family and their peers. They will typically get a lot of pressure to conform to the expectations and boundaries of the financial comfort zone.
What happens when a financial comfort zone is shifted because of outside circumstances? Say someone was raised in an affluent financial comfort zone and went on to a career that allowed them to continue that lifestyle. Then a huge financial setback, such as a business failure, eliminated their major source of income. Trying to stay in their financial comfort zone might mean borrowing heavily and piling up credit card debt. For a time, they can continue life as usual and hang onto what is familiar, until they can no longer afford to borrow and eventually the wheels come off the financial bus.
The opposite is also true. Someone may live a life of excess frugality, needlessly denying themselves luxuries or even basic comforts, because frugality defines the financial comfort zone that they grew up with. Even though their income and net worth would allow a much broader financial comfort zone, they still limit themselves to the narrow one they are used to.
Similarly, people who come into unexpected wealth often may subconsciously feel a need to get rid of it so they can stay in their comfort zone. I remember working with a couple at a moderate income level who inherited several million dollars. They had no idea the property owned by the wife’s parents was worth that much. And their reaction was depression. We spent some time exploring their money beliefs and discovered a major money script that “Money we didn’t earn isn’t worth having.” Moving slowly into a higher financial comfort zone by their own efforts would have been fine, but being shoved out of it so suddenly by an unearned inheritance provided a huge challenge.
We did a lot of work together to help them modify those money scripts, and eventually they became comfortable with the inheritance and went on to use it well for both their own wellbeing and giving to others.
One of the goals of modifying our money scripts is to expand the boundaries of our financial comfort zones. Ideally this expansion extends both the upper and lower limits, supporting people in becoming more at home with themselves and others regardless of their financial status.
Check out The Financial Therapy Podcast by Rick Kahler concerning this topic.