How Paying Taxes Affects Your Brain

by | Mar 14, 2021 | News Room Media

How Paying Taxes Affects Your Brain

March 14, 2021 | Larry Light

Financial advisor Rick Kahler, president of Kahler Financial Group in Rapid City, S. D., knows that paying taxes, as well as parting with money in general, has an emotional side. Recognizing this reality is vital for anyone who pays anything, which is everyone.

Larry Light: How does paying taxes affect a person’s psyche?

Rick Kahler: If you don’t think paying taxes is emotional, try this. When you read, “money and taxes,” what are your first uncensored thoughts? Are they words like happy, excited, fun, invigorating? Or maybe drudgery, obligation, boredom, anger?

Light: I understand that people’s reactions to events are called “scripts,” in psychological parlance. How does this translate into financial matters?

Kahler: The average person has 50 to 200 money scripts that are often subconscious. There are four general categories of money scripts—Money Avoidance, Money Status, Money Worship, and Money Vigilance—and most of us have one that’s dominant.

Light: Tell us about them.

Kahler: Money Avoiders believe money is bad and anxiety-provoking and rich people are greedy. Their main emotion is fear, and they may believe they don’t deserve money. Their thoughts around tax filing may include: “I’m incompetent,” “I don’t understand,” “I just don’t want to deal with it,” “I don’t earn enough to spend much time on this,” “Those who don’t pay their fair share are greedy and evil,” or “This is too much work.”

Some Money Avoiders will hire a tax preparer, then when asked for the supporting documents may respond, “What do you mean, ‘Where are my receipts?’ I thought you would figure all that out.”

Light: And the second type?

Kahler: Those with Money Status scripts equate net worth with self-worth. They may hold beliefs such as: “People are only as successful as the amount of money they earn,” and “If something isn’t ‘the best,’ it’s not worth buying.” Their main emotions are pride and insecurity.

Their tax-related thoughts may include: “Look how much I pay in taxes; I really do my part,” “Those who work so hard to pay less in taxes are cheating,” “I can afford to hire the best professionals, and I pay much less in taxes than my peers,” or “Let me tell you about all the ways I avoid paying taxes.”

Light: And then there are the Money Worshippers.

Kahler: Money Worshippers will have beliefs such as, “Things would get better if I had more money,” “More money makes people happier,” and “Money would solve all of my problems.” Their main emotion is anger.

At tax time, they may have thoughts like these: “The government is taking my hard-earned money and wasting it,” “I must avoid paying taxes no matter how much it costs me,” or “I can cheat a little bit, they will never know.” They would also feel anxious around not fully disclosing what they owe.

Light: And the fourth type?

Kahler: Those with Money Vigilance will have money scripts like, “You shouldn’t tell how much money you have or make,” “Money should be saved, not spent,” and “I would be a nervous wreck if I didn’t have money saved for an emergency.” Their main emotion is anxiety.

Their tax-related thoughts could include: “I’m afraid I won’t do it right and I’ll get audited, fined or thrown in jail,” “I need to triple-check everything,” “It’s my patriotic duty to pay as little in tax as legally possible,” “Hiring a tax preparer costs way too much, I can do my own,” or “It’s nobody’s business how much I make or pay in taxes.”

Light: Well, it’s good to know what kind one is, to at least get a handle on how you are dealing with the prospect of paying the Internal Revenue Service a bunch of your hard-earned cash.

Kahler: There must be a category for those whose money scripts help them prepare calmly for tax season and write a check to the IRS with a sense of serenity. I have yet to meet anyone from this group.

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