Episode: 309 - Medical Debt & Credit Scores: Understanding Your Money Habits
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Have you ever wondered why you handle money the way you do? Perhaps you splurge on certain things or find budgeting tedious and unpleasant. The reality is that our money behaviors are often learned, much like old family recipes. These "money scripts," which consist of beliefs and habits surrounding money formed during our childhood, can sometimes hold us back from reaching our financial goals. The good news? You can rewrite your financial story.
The Influence of Money Scripts
Everyone has a unique relationship with money, shaped by a combination of experiences, values, and learned behaviors. Many of these behaviors originate from what are known as money scripts—unconscious beliefs about money that emerge throughout your life. These scripts, often absorbed from family, environment, and even the financial industry itself, can significantly impact your financial decisions.
Consider your own experiences. Did your parents constantly worry about money? Were you taught that money is scarce or that discussing finances is taboo? These early experiences can forge deep-seated beliefs that drive your financial habits today. Perhaps you associate spending with happiness, a belief that might lead to impulsive purchases, as it once did for me. Or maybe you were taught that maintaining a good credit score is fundamentally important.
The Reality of Credit and Debt
A recent example that illustrates the effects of these money scripts is a rule finalized by the Consumer Financial Protection Bureau in the United States. This rule removes medical debt from consumer credit reports. While the debt itself isn't erased, its impact on credit reports is. This, in turn, could increase credit scores by an average of 20 points, allowing individuals to qualify for more debt on car loans and mortgages.
However, if you're already struggling financially with medical debt, borrowing more money could put you further into debt—not the ideal scenario. This reflects the deeply ingrained beliefs that have been fed to us, reinforcing a reliance on debt.
Steps to Change Your Money Mindset
Rewiring your financial mindset begins with identifying your money scripts—a key step toward achieving financial freedom. Here are actionable steps you can take today:
Reflect on Past Experiences:
Consider your past experiences and family dynamics around money. What messages did you receive about spending and saving? Once you identify these beliefs, challenge them and ask yourself: Are these beliefs truly serving me? Are they even accurate? Upon reflection, I discovered that many things I'd learned about money weren't true, but they shaped me into the spender I became.
Set Achievable Financial Goals:
Start with small, achievable financial goals. Creating a budget might seem daunting, but it's a foundational step toward aligning finances with your values and priorities. At Debt Free Dad, we call the first attempt your "first crappy budget" because perfection isn't the goal—progress is.
Surround Yourself with Positive Influences:
Surround yourself with positive financial influences, whether through books, podcasts, or communities. If most people around you are living paycheck to paycheck, finding a support system is crucial for changing your financial narrative. Surrounding yourself with individuals who are succeeding financially can transform your perspective.
Ryan's own brother, the owner of Debt Free Dad, once said he would eliminate his debt. At the time, Ryan thought he was crazy. His determination to succeed financially has since inspired thousands, including Ryan.
Taking Control of Your Financial Future
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Thank you for reading, and here’s to a renewed financial mindset!
Resources Mentioned
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Transcript:
Ryan:
Do you ever wonder why you handle money the way you do, why you splurge on certain things or avoid budgeting like the plague? The truth is, our money behaviors are often learned, passed down like old family recipes. These money scripts, which are beliefs and habits around money formed in childhood, can hold us back from reaching our financial goals. But the good news is, you can rewrite your financial story. My name is Ryan Nelson, and my wife and I paid off about $160,000 in debt over eight years while we were raising three kids. So we all have a different relationship with money. That relationship is shaped by a mix of experiences, values and learned behaviors. Many of these behaviors stem from something called money scripts. Money scripts are unconscious beliefs about money that are formed throughout your life, and these scripts, often absorbed from our families, from our environments and, yes, the financial industry themselves, can significantly impact our financial decisions. Think about this for a second. Did your parents constantly worry about money? Were you taught that money is scarce or that talking about finances is taboo? These early experiences can create deep-seated beliefs that drive your financial habits today. Maybe you learned that you associate spending with happiness. This was a big thing for me. I associated spending with happiness for years and it led to a ton of impulsive purchasing. Or maybe you were taught that having a good credit score is super important. That's all that's talked about. So I you were taught that having a good credit score is super important. That's all that's talked about. So I want to dive into just a quick real-world example that's just happened recently. The Consumer Financial Protection Bureau here in the United States on Tuesday finalized a rule to remove medical debt from consumer credit reports. Now it's important to understand this isn't removing the debt from what you owe. Basically, what it's doing is it's just the ability for it to appear on your credit report. So one of the benefits that's being talked about the most by doing this is that it's going to raise people's credit scores by an average of 20 points, which will allow them to qualify and I mean, if you want to guess what it is, you may be guessing that you're going to qualify for more debt for car loans, for mortgages. That 20 point increase is going to allow people to borrow more money, which, if you think about, if you're in medical debt and you're already struggling financially, raising your credit score to give the ability to borrow even more money and sink deeper into debt is not great, and these sorts of things happen all the time.
Ryan:
Our beliefs about money have been fed to us from the time we were born and they continue to be fed to us and they reinforce the dependence on debt, and I think this story is a good example. I'm sure there's good behind it, but the biggest benefit that's being talked about the most is everyone's ability to borrow more money, and you've got to stop having this mindset of borrowing money all the time, because that is basically being fed to you. For me, that's why I thought the way I thought is that that is why I spent so much. That's just the, that's just the society in the United States is spend, spend, spend. So what can you do to rewire your brain around money? Identifying your money scripts is the first step towards, you know, achieving financial freedom, and here's some actionable goals that you can start taking today, that you can start taking today. So, number one one of the things you can start doing is just reflect on your experiences and your family dynamics around money.
Ryan:
What messages did you receive about money, about spending, saving? Once you start uncovering this, you can start to challenge them and start asking yourself questions Are these beliefs really serving you? Are they even true to some degree? I found that when I really started to dive into it and started educating myself, a lot of the things I learned about money were not true at all. They were just things that we were told were true in order to us become the good little spenders that we've become. And are these things holding you back from achieving your financial goals?
Ryan:
Number two is you can start by just setting some small, achievable financial goals. Maybe you want to create your first budget. We call it here at Debt Free Dad one of the things. When we have people create their first budget. We call it your first crappy budget, because it's not going to be perfect when you start, but you have to just start somewhere, and so maybe it's just creating a budget, and that budget that's something that aligns with your values and priorities. And then, number three, super important surrounding yourself with positive financial influences. Whether it's reading books, listening to podcasts like this one, most people are living paycheck to paycheck, so you need to be a bit intentional about who you surround yourself with if you want to change your money story, and I can't stress that enough.
Ryan:
My brother, who is the owner of Debt-Free Dad told me I don't know, it's been a long time 10, 12, 15 years ago that he was going to get out of debt, and I told him he was crazy. I told him he was just like. That's the dumbest thing I've ever heard. Who does that? Nobody does that. We all have debt, and sometimes someone has to go first to change your mindset. And he went first and he's helped thousands of people, including myself.
Ryan:
And I think when you get around other people who are winning with money, you're going to be amazed at how you think differently. Because if you're hanging around a bunch of people who say all you're going to have is debt, chances are all you're going to have is debt Chances are all you're going to have is debt. So hey, if you're looking to improve your finances in this next year, then I want to encourage you to check out our weekly newsletter, simplify my Money, where you'll get actionable tips, stories and helpful information to take control of your personal finances and start actually winning with your money. Thanks for joining us today and we will see you on an upcoming episode. Take care.
