Many of your everyday decisions can be explained by looking at underlying psychological factors.
And that includes your spending and saving habits. Let’s explore why the psychology of money is so important, and how to use it to your advantage.
Have you ever thought how are you particularly impacted by psychology when it comes to money?
The answers to seemingly simple questions reveal a lot about what you think about finances. Like for example, when you find yourself hungry after a hard day at work, which of the following is your most prevailing train of thought?
Bret A. Moore, Psy.D explains, “How we pay our bills, save for a rainy day, or whether or not we ship a few dollars off to our retirement account, that inner voice we all have is guiding us down our financial paths. The good news is that we are in control of our thoughts.”
It is you who needs to decide and take responsibility to view things differently.
For example, one one hand, if you’ve taken in the consequences of your parents’ or grandparents’ poor money management habits, you might tend to be more frugal.
On the other hand, if your parents never instilled financial self-discipline in you, you might be more prone to making impulse purchases.
Psychoanalyst and business advisor Prudy Gourguechon lays this idea out, “Every family has its own particular psychology of money. What can be talked about, who should be in control, what money responsibilities are assigned to what gender, how important money is or is not.”
No matter what psychology of money you’ve acquired from your experiences, it’s important to seek out further education. Of course, by taking the time to read this article, you’ve already made the choice to expand your knowledge of financial matters 🙂
But don’t stop here! Read up on the latest money psychology studies or borrow a book related to psychology of money from your local library.
Changing the way you think about money is one key step to improving your finances. Here are a few lines to mentally recite to yourself when a financial decision arises:
These simple lines can lay the foundation for developing a new psychology of money and changing your life.
The brain loves easy answers. If you’re hungry and your credit card number is already in your browser’s “auto-fill” feature, making purchases online is quick and easy.
Clear that information from the browser. You’re less likely to make an impulse purchase if you have to type your card number in again.
Use cash for your shopping needs. When you pay with a debit card, all you see on the receipt are digits, not the actual loss of paper dollars. Debit and credit cards offer a level of emotional detachment that you should avoid.
You want to actually feel your wallet get a little lighter every time you buy something. This encourages you to spend less.
Sometimes it feels good to give into impulsive decisions, even if there are consequences to those actions. Force yourself to wait before making big purchases.
Interested in a new computer? Spend a week or two thinking over your decision, rather than making a sudden purchase you might regret later. Want some snacks at the grocery store? Finish shopping for your essentials first. This gives you time to reflect on the differences between needs and wants.
Diet experts often recommend having an accountability partner. You’re less likely to cheat your diet if you know you’ll be letting your partner down.
Apply this same advice to saving money. Find a friend or family member who’s also trying to cut back on spending. Agree to a certain condition, such as not eating out for a week, and keep each other on track.
It’s as simple as that, pals. We challenge you to dare! Change is one step away.
Raven’s genuine interest in behavioural economics and her expertise in psychology, acquired during her Master of Professional Studies (MPS) in Applied Behavioral Economics at Dyson Cornell College of Business make her the perfect candidate to approach all the personal finance topics through the perspective of an individual’s psychology.