Can Money Buy Self Esteem? Lessons From Money Psychology

Money is important in the world we live in and while it is not everything, Zig Ziglar once said that it “ranks right up there with oxygen".

This week in our Money Psychology series, we are looking at the relationship between money, self-esteem and self-worth.

The term self-esteem is used in psychology to describe the overall subjective sense of personal worth or value in a person. Simply explained, it is how much you appreciate and like yourself no matter the circumstances you could be in.

Often, self-esteem is interchanged or confused with self-worth which is the feeling that one is good enough and worthy of belonging and love. The difference between self-worth and self-esteem is that self-esteem relies on external factors like successes while self-worth is the value someone places on themselves whatever the circumstances.

When it comes to money, does having more or less determine one’s self-esteem or self-worth?

Lora Park, an associate professor of psychology at the University at Buffalo and the lead author of It’s All About the Money (For Some): Consequences of Financially Contingent Self-Worth, notes that people are more vulnerable to negative psychological consequences when they tie their self-worth to the pursuit of financial success.

The study findings showed that when self-esteem is based on financial success, people were prone to make more financially based social comparisons with others leading to their feeling less in control over their finances which led to their experiencing more financial hassles, stress and anxiety.

Again, basing one’s self-worth on the money they have, could often be inconsistent leading to the person struggling to feel worthy.

Is there a relationship between being poor and suffering low self-esteem?

A 2015 study by the Oxford University and the Joseph Rowntree Foundation found that being poor could lead to a negative spiral of fear and self-loathing, as summarised here by Dawn Foster for The Guardian. 

The study report says when battling poverty, people often enter a ‘scarcity mindset’ - read more about scarcity mindset - which is characterised by a heightened focus on immediate goals for short-term survival. 

This is at the expense of long-term planning and peripheral tasks - which could lead to the perpetuation of the poverty cycle. 

By being unable to afford essentials like food and housing for instance can make people feel like they are failures. This may lead to internalising negative stereotypes like their being poor is because they are incompetent or deeply flawed.

The study indicates that significantly lower levels of confidence in one’s ability to succeed are associated with negative physiological and physical health consequences as well as reduced professional and educational attainment. 

A rather grim finding from the study was the effect this has on children raised in such an environment. 

“Children raised in environments of low socio-economic status show consistent reductions in cognitive performance across many areas, particularly language function and cognitive control (attention, planning, decision-making),” an excerpt from the study reads. 

Low self-esteem can lead many people to a lack of confidence and thereby create a sense of hopelessness.

Characteristics of self-esteem include:

• A feeling of security no matter the circumstances
• Being self-confident
• Having an identity regardless of situations
• A sense of belonging
• A feeling of being competent

Does having money give one high self-esteem?

Over the course of our Money Psychology series, we have seen that while we may generally think that we are largely rational when it comes to money, there is a huge degree of emotions that affect our relationship with money as we dissected in  10 Common Money Fears and How to Overcome Them.

It thus can be problematic to associate money with self esteem - in the sense that with money, then self esteem is automatically guaranteed, or even elevated. 

If you were to believe that making more money is the biggest ingredient in improving your esteem, consider the fact that the pursuit of money will sometimes, or even often, come into conflict with your values, passions and goals. 

And therein lies the problem. You may find yourself in an occupation that, yes does make you money, but is not necessarily making you happy - deep down you hate it. So if self-esteem is about a sense of belonging and security, then this money you are making is unlikely to significantly increase self-esteem. 

And as we have seen, low self-esteem is directly related to a scarcity mindset that significantly hurts your decision making and long term planning ability. 

Coming back to money emotions, the fear of losing all money one has, or a significant amount of it, is real for many people. So if you actually lose all your money, then you could lose all your confidence if you had tied your self-esteem to the money. While it is normal to worry about money and paying bills when you are hard on cash, a strong self-image is needed for you to recover and get back on your feet.

Also, if you let money dictate you self-worth, then you really will not value yourself very much since what you attached your value to is gone. We all have qualities that give us the sense of self-worth and confidence and these are independent of the size of our bank accounts.

Do you compare yourself to others financially?

If you do this, then it shows that your self-esteem is based on what others say or think about your financial status.

By financially comparing yourself with others, more often than not you will end up unsatisfied and tripping. The solution is to stop comparing yourself with others, well not entirely - but limiting this to a very healthy level.

Associating wealth with success, happiness or virtue can be very tempting to lead you to a point where you keep comparing yourself with friends, colleagues, siblings and other family members. This could potentially tank your feeling of self worth and sow seeds of self-doubt if you earn less than them or if you strongly feel you have less than they do.

When you are passionate about what you do and it brings out the best of your potential, it does not matter if you earn less in comparison to others unless you make it a point and start the comparisons which can lead you to doubt yourself.

The key is to value and appreciate your decisions and personal achievements which means that your self-esteem will not be influenced by the money and the lives of others.

Does having no money mean zero self-esteem?

Whatever the case, your net worth will affect you and how you see yourself, your confidence and also how you act.

Our minds are strong and they process things depending on what they perceive as proof of something they believe is true. This means that no amount of positive thinking will work for you if your mind cannot visualize it.

By your mind seeing your reality which could be anything from wisely managing your money or investing it, then the best is to start investing in what your mind sees to give it proof that something is going on in the right direction.

Also, your beliefs drive your behaviours which cannot sustain themselves unless you address the underlying beliefs about yourself. If not, you will begin to self-sabotage.

Our self-esteem is the sum of the beliefs we have about ourselves and if we are worthy, then our dreams are validated and become worthy of our attention and time.