The Role Of Ego In Financial Behavior

When we start to articulate what matters to us, we often grapple with our sense of self. Understanding who you are, and who you desire to be, relates to the concept of ego. Your ego is the part of your identity that you consider yourself.  Ego mediates between the conscious and unconscious to provide a sense of personal identity.  We typically associate having a “big ego” with having a large sense of self-importance, yet ego is not necessarily negative. Ego, rightly understood, relates to self-worth and self-respect. 

Ego plays a strong role in your financial behavior.  It can be an asset to adhering to your values, or it can move you in a direction that won’t serve your long-term interests.  When you have strong self-respect and are clear on your values, your ego helps to orient you in your decisions.  When your sense of self-worth is based upon outside approval, your ego will become conflated with others’ values and opinions.

I recently sat down at the computer to select some tile for the backsplash for the kitchen in the addition.  I decided that I would select some white tile, instead of a 3-4 inch quartz backsplash that matched our counters.  I generally knew what I wanted, but was clear I did not want square or rectangular shaped tiles.  Before I knew it, I had spent hours looking at tile: white, iridescence, metallic accents, large, small.  Finally, I took a moment to visit a bath store one afternoon, where the owner showed me some brand new 2019 tile.  It was $27/square foot.  As far as decorative tile goes, that wasn’t that expensive, but considering I had spent about $2/square foot on the bathroom tile, it was an increase by a factor of 10.  

After I went home, I did some price comparisons, and was surprised to find that the  $27/square foot tile was $42/square foot at Home Depot, 36% more.  I immediately began comparing prices, and wondering if perhaps $40/square foot for a small space wasn’t so much, considering we were well within budget.  When I recalled I could get quartz at a vendor in the $40/square foot range, my mind jumped to the idea of having a stone slab on the wall.  I found myself imagining how impressive that would look.  It would be unique, yet timeless.  It would standout, without being ostentatious.  

Later that evening, I thought about why I had jumped from wanting white ceramic tile to a slab of decorative stone.  Strictly speaking, I could afford both options, even though the latter cost 8-10 times the former.  The question I had to face was why I suddenly was so enamored with this new idea.  Was it the novelty, or something else?

I recognized that ego was the driver behind my new interest.  Specifically, I was imagining how this new special design feature would be viewed by others.  It was their accolades I wanted to hear.  I clearly loved the idea of this creative new design element, and I respect that about myself.  But, if I were truthful, that new stone and quartz would not make me much happier than simple white ceramic tiles.  My ego, that part of me that relates to my own sense of self-worth, didn’t care that much.  It was only when I allowed others to dictate my self-worth through putting their opinion above my own, that I felt the draw to purchase something else.

Ego, when driven by a strong sense of what you value, helps in making purchase decisions.  When you allow others’ opinions to drive your sense of worth, ego slips out of alignment with your goals and values.  The moment I reflected on what was driving my excitement for a purchase, I realized I was stepping away from what mattered to me. Ensuring you make financial decisions related to who you are, as opposed to who others make you out to be, is a clarifying and freeing step in making financial decisions that align with your values. 

Photo by Janko Ferlič on Unsplash