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The Psychology of Money

by Sheldon Litt, Ph.D.(more info)

listed in psychology, originally published in issue 26 - March 1998

We're all very interested in money, but not many of us understand it. There are several new books on the market now trying to explain this complicated and highly emotional subject, but unfortunately they only lead to more confusion.

As an old wizened psychologist whispered to me many years ago (he must have been in his 90s): "Money is the most sensitive nerve in the body."

Many social scientists, economists, writers, psychologists and screwballs have tried to expound on this popular topic, but few have succeeded in their attempts at clarity. Ezra Pound tackled it clumsily, though in poetic form. Karl Marx gave it a try, but this great ideologue of money never earned enough to support his family. It is reported that his mother once told him – stop writing about Capital and go and earn some for a change. For most of his life, the theoretician of the grand communist economic scheme lived in poverty with his wife and children, supported by his comrade Engels.

Certainly professional economists don't shed much light on the realities of dollars and pounds. Besides being highly unreadable, they are for the most part incomprehensible. About the only thing the economists have in common when they discuss money is their disagreement. Often I have seen the Nobel Prize winners in Economics, here in Stockholm. (Though it's not really a Nobel, since the founder of the awards, Alfred Nobel, never stipulated an award for these characters in his famous will a hundred years ago.) In fact, just this year the Swedes have held discussions about eliminating this controversial award altogether. It is common knowledge that the economic laureates seem to know as little about this vital topic as the rest of us. Proof of this is that one of the recent winners, I note, was foolish enough to promise his ex-wife in his divorce settlement the money he was hoping to win for the Nobel Prize. Now what better example can there be of a scholar who doesn't understand the value of money.

No, these academics dwell in the ivory tower. The rest of us have to deal with money in the harsh world of reality. One thing I can tell you about money is that if you are faced with an emergency and have an urgent need of cash, it becomes incredibly difficult to locate.

Whereas, on the other hand, should you, more fortunately, have large sums at your disposal, you may discover to your amazement that there may really be nothing in particular that you need just at the time. (Nothing that money can buy, in any event.)

So we see that money is one of those relatively goodies, perhaps related to Einstein's relativity theory, in that our perspective on it is changing all the time.

My favourite philosopher of money, the American author Henry Miller says that there are two kinds of money – hard money and soft money. Now, hard money is when you are doing your daily shopping for food at the local market and pressing every penny. Soft money, that's when you're out on the town one evening with your girlfriend (or boyfriend) celebrating a birthday – then spending is easy and money is soft.

There's another interesting dimension of money pointed out by Miller, one which is largely overlooked today. That is the feel of the stuff, the material in one's pockets. The happy jangling of coins, the contented playing with wads of bills. Packing it into a bunch and running it through your hands. Or piling it up somewhere so you can better play with it. For most of us in this hightech world of symbolic currency, money is more frequently seen as figures in black and white on a print-out from a bank or financial institution; so much in, so much out. There's no tactile sensation at all in these abstract transactions; how impoverished we have become compared to the worker with his fat and happy bulging Friday pay envelope. He can feel the money. The documents we receive in the mail concerning our financial liquidity don't give the same expansive joy as feeling the dirty lucre in our little fingers. The sensual aspect of it, the touch, playing around with it before you throw it away or spend it wisely, or save it.

This emotional aspect of money was, of course, emphasised by Sigmund Freud and his followers. For the psychoanalysts, a person's attitude toward money is written in his childhood. Volumes of books have been written on the relationship between money and faeces.

We produce and play with the stuff as adults in the same fashion as small children produce excrement. Freud's famous essay "Character and Anal Eroticism" set the stage for many imitators of the Master of Vienna when it comes to discussing emotional ties to money.

Whatever one may think of the applicability of psychoanalytic theory to the study of economics, one cannot deny the interesting case studies and phenomenological descriptions collected, documented and duly classified by the Freudians.

For example, some of the various types of patients described by Freudians are worthy of study, in terms of their attitudes to money: 1) the compulsive non-spender, who lives beneath his income. Perhaps due to emotional insecurity, he will refuse to part with a cent; 2) the compulsive spender, who can spend everything he earns, and more so. Then there are the many subtypes, for instance pretended wealth and its opposite, pretended poverty.

The compulsive nonspender is often seen by Freudians as relating to constipation. But interestingly enough, they are often especially vulnerable, say the doctors, to confidence men and tricksters who promise them the only kind of love they are able to understand - a sudden and large increase in monetary reserve. Thus, they can easily fall prey to wild schemes and scams. Think of a case of constipation that switches over to extreme diarrhoea. Naturally, the emotionally healthy person steers a monetary course in between these two extremes.

The second case, the compulsive spender is often out on a quest of using money to buy love. In Freudian terms, he is buying the love he didn't receive in childhood. Some spend money on themselves compulsively when depressed, e.g., women who buy lots of expensive dresses or shoes, even though they already have closets full. Gamblers and stock speculators may be compulsive spenders who get excited at the prospect of losing; then they are able to punish themselves. Then there are the manic spenders who seem to enjoy just throwing money away.

The strange relation of man to money is a complicated and difficult one. Thinking about this topic always reminds me of a wealthy patient who consulted me many years ago. Despite the fact that he had over 20 million pounds, he was desperately depressed about money since he had recently suffered a loss of 2 million in stocks. In reality, there is no difference between what one can do with 20 million or 22 million, but for him it had become nearly an issue of life and death.


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About Sheldon Litt, Ph.D.

Dr Sheldon Litt is an American psychologist who trains professionals in modern methods of psychotherapy. He has taught at many universities in northern Europe. He was trained by Fritz Perls at the New York Institute for Gestalt Therapy.S. Litt, Inedalsgatan 25, S-11233 Stockholm, Sweden. Tel: +468 651 2489 Email:

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