Did you see a seemingly unmissable settlement and couldn't resist the temptation, but then realized the financial impact of your impulsive decision? This is a simple example of financial psychology.
Don't worry, you are not alone in this. In Brazil, currently, just over 61 million people are in default and the low discipline in financial habits is among the reasons for this.
Financial psychology has a theory and methodology so you can get around bad habits and gradually have more control over the balance between your income, expenses and your financial goals.
So that you know everything about the subject, check out what we will see throughout this post beforehand:
- What is financial psychology?
- Factors that influence financial habits
- How to use financial psychology to your advantage?
- Importance of financial education
Are we going to change the financial habits that hurt your budget and financial goals for good? Good reading on learning everything about financial psychology!
What is financial psychology?
Financial psychology evaluates the economic decisions we make, but from human behavior on them. It is interesting to think that our choices are not always logical.
On the contrary, emotion often stands out (often, unconsciously) in our decisions and attitudes.
At first it may not seem like it, but many of the impulses that lead us to buy something are related to our psychological. It is not by chance that, throughout the 19th and 20th centuries, some specialists dedicated themselves to assessing the integration between psychology and economics.
They identified a common behavior among people, which led to the elaboration of a concept known as economic psychology.
And believe me: your indebtedness, the difficulty in reconciling your income, your expenses and even the obstacles imposed for an efficient financial planning can have an emotional explanation behind.
Factors that influence financial habits
Our relationship with money can be worked on from a series of factors that, over time, we do not even relate to the financial habits that we practice throughout our lives!
See what these elements are!
The financial values that we watch relatives practice tend to shape – in part – the way in which we will relate to money when the time comes.
This is not always an openly discussed issue. Financial psychology can emerge from the silence between relatives, formulated only from observation.
So, if the compulsive consumption is present in the financial decisions of your parents and / or grandparents, it may be that the same applies unconsciously in your choices.
The same can be said about the cultural influence of our society. Here, we are talking about a broad spectrum, marked by the way UK citizens (in this case) act collectively with finance.
A simple example of this is that 67% of UK citizens are unable to save money. And that is influenced by many factors, of course, but the cultural aspect is also among them.
In fact, this can be a good way to start analyzing your own behaviors and gradually changing them. To give you a first push in that direction, we invite you to leave this article open on how to save on a daily basis and read it as soon as you finish this post!
In it, the Stanford researchers asked the children to choose only one sweet to eat. But if they waited a few minutes and resisted the immediate urge to quickly delight in the sweetie, they would receive more units of the treat.
After years of study, scientists realized that, for the most part, those who waited to get a better reward from researchers were more successful in life. Those who did not resist and succumbed to immediate pleasure pointed out more problems to have healthy financial habits.
We all have our “sweets” in life and, regardless of the factors that drive us, we must learn to listen to them and use more reason to mature our financial psychology.
How to use financial psychology to your advantage?
In order for you to be able to efficiently analyze the way in which you have assumed (good or bad) financial habits, a good dose of self-knowledge is necessary.
I.e: evaluating each of its decisions associated with the use or economy of resources. Check out some tips that we have separated on financial psychology below.
Analyze your standards
If there is a financial psychology in your daily life, it appears in your decisions. That is why, start to reflect whenever the desire for a purchase arises with intensity.
It is important to assess the importance of that potential acquisition, such as the need for the purchase, the relevance of it to you and even its usefulness in everyday life.
You may also want to compare it with a spreadsheet that you can do for financial planning in order to set a spending limit over the month to avoid overdue accounts and, consequently, the accumulation of debts.
Identify bad habits
What financial habits do you consider harmful at the present moment in your life? Are they shopping for groceries? The clothes and accessories? Purchases in the name of financial status?
Identify everything you are doing in disagreement with your values and become aware of them. This is the first step in assuming that financial psychology in your decisions is tied to a limiting factor that you have not even noticed before.
The best part is that once you notice this bad habit, you will be able to perceive it as soon as it arises in the form of an uncontrollable urge – and you will have more elements to contain that urge.
Set change goals
Knowing the financial psychology and the bad habits that surround your decisions, it is easier to make a plan of self-control and behaviors different from the current ones.
And the goals are essential to add more discipline. For example, the spending ceiling from an analysis of your expenses and income is an interesting way to keep your budget under control.
Monthly savings targets are also great for this. Identify a minimum amount to save and don't spend that amount for anything. Disregard it even from your income, starting to consider it as an unusable fraction for purchases and any other unforeseen cost in the month.
Furthermore, it’s important to note your spending so you can keep an eye on your overspending, to understand where your income goes.
Don't forget to write down the expenses and then evaluate them. This will ensure much more accuracy in identifying your bad habits and even recognizing the financial psychology that you currently have.
Make your money pay more
worth it consider the best investment options to put your assets in a safe place and that, in addition, it will gradually improve its income.
Depending on the option you choose, you can compose long-term goals, giving your income more protection and offering an efficient way to save for the future – regardless of your goal.
Keep an eye on the best alternatives in the financial market and find out about the different types of investments in the country. Thus, you identify the best option and start saving in a very short time, permanently changing the bad habits of your routine.
Importance of financial education
As you may have noticed, financial psychology is not a chain of which we are stuck and prevented from changing it: it is, a beam of light that helps explain the wrong decisions we make in full consciousness or unconsciously.
From this knowledge, you are able to undo (or at least recognize) habits that are harmful to the composition of a less shaky income and susceptible to dangerous defaults and that can generate common symptoms of financial stress over time.
Over time, the change is noticeable, as well as the economy. As much as it is a minimum amount saved month after month, only resistance against a bad habit is a significant victory that will be perceived in the medium and long term.
In this context, the financial education it is a powerful ally for the steps after identifying your psychology of financial habits.
From it, you are more aware of the best ways to retain and use your income, avoiding financial pitfalls that are difficult to get rid of once we let ourselves fall into them.
Help your team create healthy financial habits
Develop the Financial psychology involves analyzing habits including financial education as a positive resource for having a healthy relationship with money.
So you can help your company’s team get more out of the app’s benefits HR Consultant UKy. This tool is changing the way employees deal with their wages and generating more job satisfaction and motivation.
HR Consultant UKy can be one of the most valued benefits for those who work at your company. Talk to an expert and learn more!
Now, how about showing that you are going to change your own habits and start a new chapter in your life? For this, take the opportunity to share this post on your social networks and mark the friends who, like you, will make good use of the tips contained in this post!