One of my other interests besides finances has always been criminology. Previously, I wrote about the Broken Windows Theory and how we can apply that to our financial mindset. Today, I’ll use another criminology theory called “Labeling Theory” and apply it to our finances too.
What Is the Labeling Theory?
First, let’s take a look at what the Labeling Theory is from a criminology perspective. You can find a more comprehensive breakdown here, but I’ll give you the gist of it. For the most part, the Labeling Theory comes down to how others view you and how you think others perceive you.
The main idea of Labeling Theory is that our behavior can be modified by external judgments or “labels”. When certain people or groups of people are viewed to be criminals or deviants for whatever reason by a society or a community, those people are more likely to conform to that view.
It’s kind of like a “self-fulfilling prophecy” if you will. Essentially, the members of those groups of people feel that no matter what they do, they will be seen in a certain way and will therefore be treated as such. Instead of fighting the “labels”, they more or less conform to it since they feel it’s how they will be seen anyway.
The idea here is that if they are going to be treated based on certain behavior, they might as well act that way anyway, regardless of their true nature.
There is a lot more that goes into the theory, but for our purposes here today, that’s about as deep as we’ll go.
How Can We Apply This to Ourselves?
There are tons of ways we can apply the Labeling Theory to our own lives. We all have certain views of ourselves and how we think others view us as well. I think we can all relate to the pressure we sometimes feel to fill a role in our family, group of friends or even at work.
Maybe you’re seen as screw up, the fixer, the friendly one, the shy one, the leader, or one of a million different roles in any group of people. When this is the case we can feel compelled to fill that role and act a certain way in certain situations to fill that role, whether we want to or not.
Many of us will simply accept these roles and act accordingly without trying to change the perspective on ourselves.
How About Our Finances?
When it comes to our finances, I think this is more about how we already view ourselves. When we label ourselves as “bad with money”, we’re more likely to actually be bad with money. It’s too easy to keep behaving in the same manner when we view ourselves a certain way. You might make a mistake or do something that isn’t the best and think “Well, I’m bad with money, it’s just who I am”.
When this happens, there is less accountability, no feeling of shame or remorse, nothing making us feel compelled to change our behavior. By labeling yourself as bad with money, you’ll very likely continue to be bad with money.
Change Your Label
The solution for labeling ourselves is simply to relabel ourselves. If you don’t perceive yourself as bad with money, then you’ll have a better chance at changing your behavior. By labeling yourself as “good with money” or at the very least “learning to be good with money” you can begin to change your money mindset.
By “relabeling” yourself in your head you can see positive effects. As I said earlier, you’ll have a new mindset about money and that is a HUGE first step. You’ll also start holding yourself accountable when you do mess up.
Instead of brushing it off and not worrying about it because “you’re bad with money”, you’ll be more likely to not only identify a mistake you might have made, you’ll see two things happen.
- You’ll be upset about it
- You’ll come up with a way to fix it or avoid making the same mistake again
Think of it as learning any new skill. You try, you mess up, you learn to correct what you did to do better next time. This is the same idea, only with your money.
When you see yourself as good with money, you might think “I should know better than this, it won’t happen again” or “I know I made a mistake, how can I fix it”. Once your mindset is that of holding yourself accountable and fixing your mistakes, you’ll be well on the road to successfully managing your money.
No matter who you are, there can be tons of external factors that mold and shape our behavior. In some ways, we don’t mind fulfilling those expectations, but in many cases, we should try to “relabel” ourselves.
When it comes to finances, we should be our own biggest critics. If we don’t hold ourselves accountable, then who will? It all comes down to your mindset, whether it be financial or anything else. Viewing yourself in a positive way will help you be better at whatever it is you want to improve at.
When we expect more from ourselves, we’re more likely to correct mistakes and learn how to avoid making the same ones in the future.
Jeff is a fan of all things finance. When he’s not out there changing the world with his blog, you can find him on a run, a Mets game, playing video games, or just playing around with his kids.