By Sarah Newcomb


Subtle changes in word choice from flow words to root words or from future tense to present — and even engaging in a foreign language — can help promote rational financial decision making.


What separates those who maintain great wealth from those who lose it?

According to Dr. James Grubman, owner of Family Wealth Counseling, there’s a psychological difference between the people who maintain wealth and those who do not. A neuropsychologist and financial expert with more than 20 years of experience, Grubman has learned what financial planning books don’t teach. “What I have seen,” says Grubman, “is that those who make the transition from thinking about money in terms of income to thinking about money in terms of assets are the ones who successfully adapt to wealth, and maintain it.”

Of course, sound financial planning, motivation and personal discipline continue to be crucial to growing and maintaining wealth. Yet cognitive and behavioral scientists are beginning to understand how non-conscious factors such as the subtleties of language affect the way we make money decisions.

Here are three ways that the words we use can affect our wealth.

Flow Words vs. Rooted Words

Grubman’s revelation about the words income and assets exposes vital contrasts between the terms. Income is a flow word. Abstract in essence, it connotes movement and the flow of money into one’s life from elsewhere. Asset, on the other hand, is a rooted word. It is concrete, suggesting something material. Because of the solid feeling of the word “asset,” the thought of spending assets triggers a stronger feeling of loss than the notion of spending income. What’s more, thinking about money in terms of income reveals a lack of insight into its source.  An asset is the spring from which a stream of income flows.

So how can you put this knowledge to work in your own financial life? As much as possible, trace your income back to the asset from which it flows. Financial capital such as stock, bonds or other funds produce income in the form of dividends and capital gains. Skills and time invested as labor earns a paycheck. Rental income is a product of real property.

In addition, look carefully at your spending changes during times of larger inflows. Does your spending rise to match income? If yes, this could be an indication that you’re not thinking about money in terms of its underlying assets.

Finally, remember that assets can lose value if not maintained. Job skills go stale unless they are honed and updated, properties deteriorate without maintenance and updates, and portfolios can shift based on what’s going on in the market. Remembering that income flows from assets should focus you on maintaining and building the value of your assets in order to ensure a steady income stream.

Strong vs. Weak Future Tense

The way a person speaks about time can also influence financial choice. Some languages are forceful with their use of past and future tense, as in English where one says, “It will rain tomorrow.” Those with weaker future tense, like Chinese, proclaim, “It rains tomorrow.” A study at UCLA that people who speak languages with strong future tense do not save as much money on average as those who use weak future tense. The researchers who performed the study suspect that the difference in future-oriented financial decisions stems from the psychological distance produced by strong future tense. If the present and the future are starkly separate in one’s wording, then the feeling of cohesion between present actions and future reward may also be broken in two.

Strange as it may feel, learning to speak about money in the present tense may help your bottom line. Instead of saying, “I will rebalance my portfolio in April,” try to adopt the more time-neutral, “I rebalance my portfolio every April.” This mental gimmick has the added benefit of acting as a commitment device. The words themselves serve as a pledge to perform the action when the time comes. Failing to follow through would be breaking a promise to oneself — something most people find very uncomfortable.

Native vs. Non-Native Languages

Researchers at the University of Chicago conducted several studies [2]where multi-lingual subjects were presented with financial choices written in their non-native language. Compared to those who were given the same options in their native tongue, those who read the foreign language made more prudent choices overall. Those who would normally play it safe were willing to venture into risk, and those who tended toward very high risk made more balanced choices.

“When using a foreign language, we find that people are less biased, less loss averse,” says Boaz Keyzar, the principal researcher for the studies. “The words in a foreign language simply don’t carry the same depth of emotional resonance, and as a result, our decisions are less affected by emotional reactions.”

Investing can be prone to emotional biases such as overconfidence and loss aversion. If you speak a second language, try using your non-native tongue the next time you plan to invest. If you use online tools, or read articles about investment, you can try having your browser translate them into your non-native language. While it is far too early to know how much of an impact this type of intervention may have on long-term portfolio management, reducing the amount of emotion involved in financial planning is generally a sound approach.

It is no secret that the way we speak to others has a strong impact on how we are perceived, and how successful our interactions will be. The lesson from cognitive science is this: When it comes to money, the way we speak to ourselves is equally important.


This article was originally published on and reproduced here with permission.

[1] Link to paper:

[2] Link to study:

Sarah Newcomb

Sarah Newcomb

Behavioral Economist at Morningstar
Dr. Sarah Newcomb leads behavioral research for Morningstar’s HelloWallet unit, where she works to integrate behavioral science into digital financial management applications. Ms. Newcomb holds a Ph.D. in Behavioral Economics, a Master's degree in Financial Economics, and a Master's Certification in Personal Financial Planning. She lives in Washington, DC.
Sarah Newcomb
Sarah Newcomb

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