Updated on 02.05.09

Maturity and Money

Trent Hamm

The one absolute requirement of a money manager is emotional maturity. If you don’t know who you are, the stock market is an expensive place to find out.
Adam Smith

I ran across that amazing quote from Adam Smith (an 18th century economist that’s often seen as the father of modern economics) the other day at the library and it’s stuck with me.

If you want to manage money effectively, you have to be emotionally mature. You have to know who you are – not who other people tell you you are or who you think you are. You have to know what you actually need and be able to distinguish between what you need and what you want.

This isn’t just a question of stock investing, either. It applies to everything – the ability to make good consistent spending decisions, the ability to plan ahead for the bigger things in life, and the ability to set goals and priorities and then work towards them.

To put it simply, those hallmarks of emotional maturity simply aren’t held by everyone. I should know – I don’t believe I was emotionally mature at all until I was able to emotionally digest the birth of my first child.

I was able to set goals – but I was rarely able to follow through with them unless my hand was held along the way, either with advising or with other carrots.

I was able to handle all of the basics of personal finance, like paying bills and such – but I wasn’t able to put it in a bigger context, that my choices would affect the rest of my life.

I was able to bargain hunt quite well – but I wasn’t able to really ask bigger questions, like whether or not I needed this item at all.

Worst of all, I was able to see that things weren’t adding up – but I wasn’t able to make the changes necessary to get my financial house in order.

To put it simply, I didn’t know who I was or what I was striving for in life. It took a lot of soul-searching for me to figure it out – a lot of late nights spent holding my infant son, thinking about my life, and talking to my wife.

Once things began to click into place, though, most of the basics of personal finance began to make complete sense to me. My checkbook and credit cards went from being dangerous weapons to being useful tools.

Emotional maturity doesn’t come to each person in the same way or at the same time – nor does it always come all at once. I know people in their fifties and sixties who still have no idea what they want in life (and unsurprisingly, they’re deeply in debt). I know teenagers who already have things figured out and know what they want from life. I know people who are extremely good at saving every dime they make – but they don’t know what their future holds and haven’t even considered starting a retirement plan. I know another person who has a great life plan in place, but often comes dangerously close to undermining it because of his bad spending habits.

Instead, I believe emotional maturity is a journey for each person. We’re all at different stages on that journey – some have barely started, others are well centered. I also believe that there is no true destination along this journey and that you often stop along the way.

How can you continue along your own journey of emotional maturity? Here are five suggestions that helped me figure out my place in life.

Figure out what you really love. Not what you’re supposed to love, or what you think others expect you to love. What do you love? What fills you up with so much joy that you can barely stand it? For me, it’s my family and my writing. The answers may not be as simple for you, and if you really think about the question, you may find that the things you think you’re supposed to love aren’t the things that you really do love.

Throw out the magical thinking. Many people get stuck in the trap of envisioning a great conclusion to some process in their life, but they don’t consider how to get there at all. They instead spend all their energy bopping along to the image of that happy conclusion. Emotionally mature people recognize that you’ve got to work and plan to get there. Look at the things you envision for your future and ask yourself what your plan is for you to get there.

Focus on tolerating and controlling your moods and feelings. It’s very easy to simply ride our emotions and let them lead us. We splurge in happiness, isolate ourselves in sadness, act impulsively in anger, and flee in fear. An emotionally mature person is able to recognize these emotions and not let those emotions change our behavior (at least, not in an uncontrolled fashion). You might have enough control to not punch a wall when you’re mad, but do you have the control to not change your investments when you’re afraid of losses?

Obviously, for some people, this can be much more challenging that it can be for others. The real purpose here is to always attempt to improve your control from where it is now, not to suddenly become a person with perfect emotional control.

Address every avenue of your life that brings you guilt (and other negativity). Many people load themselves up with emotional baggage. Instead of dealing with the problems in their life, they attempt to avoid them or postpone difficult situations. Emotional maturity means thinking about these situations, facing these situations, and doing what you can to resolve them with emotional control.

Accept that you will fail – and learn from it. Don’t assume that everything you touch turns to gold and, even more importantly, when you do fail, be willing to examine that failure honestly and figure out what went wrong. For example, if a relationship fails, don’t simply blame the other person – instead, look at yourself and ask yourself what you did wrong.

These are all steps along a journey towards emotional maturity – and, as Adam Smith points out, emotional maturity goes hand in hand with good money management.

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  1. Su Prieta says:

    You are right that emotional maturity hits all of us at different times and at different stages in our lives. The difficulty is in ascertaining when we have actually arrived at emotional maturity. I’d like to think that I have arrived there… based on many of the factors you mention. But, I’ll still have bumps and tics in any of these categories at different times that lets me know it is an enduring process. Emotional maturity is most likely a continuous journey, not merely a destination.

    Thanks for your post.


  2. Randy says:

    I have to take issue with your quote from Adam Smith. This was from the personal finance author, not the 18th century Scottish economist. Smith’s “Wealth of Nations” was published in March 1776; the stock exchange was not established until 1796 behind a wall in New York. So the economist would be in no position to give advice on the maturity needed to succeed on Wall Street.

  3. Bill says:

    The quote is from “The Money Game”, by economist and author George Goodman, aka “Adam Smith”, his pen name.

    It is a good book, as is “Supermoney” which he also wrote.

  4. Bill says:

    The quote is from “The Money Game”, by economist and author George Goodman, aka “Adam Smith”, his pen name.

    It is a good book, as is “Supermoney” which he also wrote.

  5. jadekitty says:

    This article has perfectly articulated why my husband and I can’t pay off his/mine/our debt. Thank you.

  6. That’s a very interesting thought that smith raises, especially as we are often quick to perceive economists as money grabbing self centered individuals. I think it just goes to show that what is more important is emotional maturity rather than greed.

  7. LisaB says:

    From Wikipedia:

    George Jerome Waldo Goodman (August 10, 1930 —), is an American economist, author, and broadcast economics commentator, best known by his pseudonym Adam Smith (which intentionally evokes the 18th century Scottish economist of the same name). He also writes fiction under the name “George Goodman.”

    That may be the source of the confusion.

    The quote is deep, though and the message is clear!

  8. Eric says:

    I think you’re thinking of http://en.wikipedia.org/wiki/George_Goodman

    and not the 18th century Adam Smith, who, I do not think, ever wrote about money managers.

  9. A in NC says:

    Wow, Trent, what a great post! And so timely for me personally. I like you, have done some emotional growing and it is showing in my improved finances. I feel lilke I have grown up with you some and really like it.
    MAturity does come at different times in our lives and in different areas.
    You hit the nail on the head on this one.
    Thanks for writing.
    I continue to enjoy your blog very very much!

  10. Johanna says:

    There were stock exchanges in Europe before there was one in New York. But it does indeed appear as though Trent has got his Adam Smiths mixed up.

  11. leslie says:

    Are you sure about the quote from Adam Smith? It doesn’t sound very 18th century to me….

  12. bradc says:

    Stock markets did exist pre- Wall Street but I tend to agree that Trent is quoting the wrong Adam.

    Though if you google the quote you’ll find several other places that have credited it to Adam Smith, Political Economist.

    I can’t imagine that the term “money manager” was part of the industry vocabulary in the 1700’s

    Probably Adam Smith of “The Money Game” fame.

  13. William says:

    Yes, this quote is from The Money Game, by the other Adam Smith.

  14. The other Bubba says:

    …uh, doesn’t pass the smell test. You read this at the library, but don’t know which Adam Smith it’s from? How is that even possible?

    Sometimes I get the feeling you’ve created a persona for this blog that doesn’t quite coincide with who you really are.

    Little inconsistencies, stuff like this… makes one wonder.

  15. Jason says:

    Great post! It’s nice to see your articles related to psychology. That is a huge component of personal finance, and you always bring a lot of good points to light.

  16. Nice post Trent. Regardless of the origin of the quote, the point is still great. And I agree about Emotional Maturity is a journey, for some it’s more difficult than others, but sooner or later we all go on it.


  17. Ditto on the failure bit. I like to think of failure (or any adversity, really) as an opportunity to see what I’m made of. How will I react? Will I come through an improved version of myself on the other side it?

    We don’t get many opportunities to prove our mettle, and these are some of those golden chances to do so.

  18. I love that quote by Adam Smith. I’m reading his “Wealth of Nations” right now, and it’s pretty hard going, but there are definitely some little gems there.

    Brilliant mind and the father of capitalism. :)

  19. jreply says:

    Adam Smith is the pseudonym of George Goodman,
    the financial author, money manager, board member, and TV show host.

  20. Syble says:

    Hi Trent,

    You are so right. Money issues are not solved by budgets and are so intertwined with emotions. Unless you have the insight to what motivates and rewards the way you manages money, the best of intentions are easily sabotaged. People are generally motivated by security, freedom, acceptance, status, making a difference, etc. Once you know what means to you, it’s easier to plan how to get those needs met in other ways and subsequently easier to get a handle on your money. Check out Money Habitudes, a quick, easy and fun deck of cards that provide great insights and conversations.

  21. Two of the most expensive emotions related to the stock market are greed and fear.

    They tend to make people buy high and sell low as opposed to the other way around . . .

  22. Great quote (regardless which Adam). Emotional maturity is one thing that allows us to avoid “keeping up with the Jones’s.” When we know who we are, there’s no need to compare ourselves with others and what they have. Thanks for the post. Good stuff to think about.

  23. Michael says:

    Trent’s thinking Whig Adam Smith would use a silly modern phrase like “emotional maturity” is just another good example of how tearing through books about history is not enough to understand history.

  24. Moneyblogga says:

    Yikes I submitted before I was done >:<

    I agree with you Trent. Knowing who you are is vital to being able to step back, see the big picture and make decisions accordingly.

  25. Saver Queen says:

    Wow – figuring out who you are and what you really want out of life – it seems simple but it’s actually a rather difficult endeavor, especially because it seems to always change. I”m going through the process of re-evaluating everything I’ve been taking for granted -assumptions of what I thought I wanted. Reevaluating my goals. It’s true that your financial decisions are linked to these internal beliefs, so it’s important to figure out for many reasons.

  26. Guys, does it really matter which Adam Smith said it? The point sticks. Your missing the forest for the trees.

    Stop, ignore his mistakes, and move on.

    Does the point resonate with you less knowing it’s not from ‘the’ Adam Smith and merely the Adam Smith of “The Money Game?” To me it doesn’t matter. The point of life isn’t to get everything 100% correct, sometimes we make mistakes. Trent still got the point across, and it is still a valid point. Stop analyzing the wrong thing. Stop being an editor and start being a philosopher.


  27. Jessica says:

    @Nate *claps

    Yes, this article is a great one (regardless of where the quote comes from). I know I’ve been thinking about how I’ve matured in life, but I never made the correlation with how I spend my money with it, but I do think that there is one. I think that my biggest problem is controlling my emotions, because when I get upset, I often get these VERY STRONG urges to do something impulsive, like jump on a train, or buy expensive things. I’ve gotten MUCH better at not listening to them, I would just like to think that the next step is not having them at all.

  28. IRG says:

    Trent, good article and one that I hope will lead to many, many more on the topic of emotional maturity and how it manifests in how one personally handles finances and investments.

    It’s of interest to me in that there are many parents who demonstrate NO emotional maturity in just about anything, including finances. Is it any wonder that so many reach alleged adulthood and have no sense of responsibility to themselves (let alone others) about money?

    For many who come from severely dysfunctional families, and all that brings on sooo many levels, money issues are about far more than money. (In fact, I wish this was a topic you and others addressed but it’s one that is often overlooked since there’s a lot of shame in talking about one’s families and these type of issues and if you haven’t experienced it, it’s often impossible to write about it.) In fact, money problems are usually NOT about the money but about much deeper emotional issues.

    Emotional maturity is a struggle for so many because so many have no role models growing up (and today, not so many in the workplace or elsewhere either, for that matter. )and no models elsewhere.

    You learn what you see or are exposed to and with no exposure to mature adults and behavior, for example, it’s hard to learn and grow responsible.

    And frankly, given the society as a whole, you can’t even learn from your neighbors anymore either. (And let’s not bring up religion. A lot of the folks who have stolen from investors and companies are allegedly “religious.”)

    I hope you consider, if you haven’t already, at some point, creating and giving classes for kids AND their parents (together, in one room) about many of the topics you cover.

    I read your blog because you are one of the few who manages to get to the real heart of money issues, which ARE emotionally based, no matter what many think. You therefore bring a reality to all your advice that many ignore. And it makes your advice more relevant.

    The people who read your work are “the choir” as it were. I hope you can find a way to bring your work to a broader audience…those who aren’t even yet aware of how your work could help them.

    One last bit. You suggest “tolerating” your emotions. I would say, one has to do much more. One has to carefully examine them. Don’t just accept them without really considering their source. Until you get to the source, you’re just managing them, which can be difficult–and is the reason so much does not change in behavior. You need to face them, go thru them and really question how they control your life…until YOU understand and then, with a conscious choice, alter them to better serve your life.

    Emotions exist. They are neither inherently good nor bad until we act on them. Denying them leads to as many issues as acting on them.

    You are sooo on target in advising others to deal with their emotional baggage. If we really look closely, we will see the root of so much of our choices and behavior. Self-sabotage comes from within.

    What I’d love to see someday is articles, courses, etc. created by you and a psychologist with your same POV. Now that would be something.

    Thanks again for a thoughtful and thought-provoking post.

  29. Sheri says:

    Thank you so much for this post! As usual, you have given your readers nourishing food for thought. I have always had a hard time figuring out what I love, as opposed to what others expect me to love, as you said. This leads inevitably to some kind of guilt. Your post connected all the dots.
    PS How did you get so wise at such a young age!?

  30. Michael says:

    Sheri: he didn’t.

  31. NYC reader says:

    Lack of emotional maturity, not being comfortable in one’s own skin, can lead to all sorts of bad decisions in life, not just in financial matters.

    Often we self-medicate by excess; excessive spending, excessive drinking, excessive risk-taking. We’re trying to make ourselves feel better, we’re trying to cover for our perceived or real inadequacies, we’re trying to buy instant happiness and contentment without the heavy lifting required to really achieve them. It’s only natural that our finances bear the brunt of our futile attempts to present the veneer of success via the “right” clothes, cars, houses, and possessions. We’re trying to convince everyone, including ourselves, that we have made it. We’re trying to be accepted.

    Emotional maturity goes hand-in-hand with new internal definitions of success, happiness, and contentment. Trent shows this change in his life when he describes being incredibly happy and content playing and napping with his kids, vs. having piles of boxed sets of trading cards, DVDs, video games etc. His new internal definitions are driving his financial actions, not the external definitions and expectations of acquiring collections of flashy expensive stuff.

    Once a person makes the internal change, her/his valuation of the expensive ephemera and clutter is diminished. It becomes easier to make wise and frugal choices, because it doesn’t feel like giving up something. Somewhere in this process, we stop worrying about impressing others, or being accepted by others. We accept ourselves. That’s when we get out of the mindless consumerist rat race and make better choices for ourselves and our families.

    I’m reminded by something that Lily Tomlin said, “The problem with winning the rat race is that even if you win, you’re still a rat.”

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