If we’re completely honest, financial planning is more than punching numbers, swiping cards or pocketing some change. When it comes to the decisions that we make regarding how we manage our money or plan for our finances, we cannot deny that things like psychological or behavioural factors come into play.
Importantly, understanding ourselves and our relationship with money and how they enhance or even limit our financial wellbeing is just as important, because they can help us to make more effective financial decisions.
That’s where this blog comes in, because today’s read is dedicated to helping you identify and understand some of the main behavioural factors that influence your financial decisions. Let’s get to it.
- SOCIAL INFLUENCE: Felling the need to spend on anything that you’ve been seeing others around you with lately? Maybe something trending or faddish? No judgements here… but maybe what you’re experiencing is the effects of ‘social influence’. Our financial decisions are often influenced by the people around us, whether its social media influencers, our friends or families, their opinions and behaviours can impact how we approach money management.
- DEFERRED PLEASURE: In some instances, we think about sacrificing short-term rewards for long-term benefits. At this point, you’re experiencing delayed gratification. So how does this impact your financial well-being? Statistically, people who are able to delay gratification are more likely to save for the future, while those who seek immediate rewards may struggle a bit more with financial planning. Practising to delay gratification can be a win for you and your money!
- BIAS: Our financial wellbeing can also be impacted by some types of bias such as the tendency to rely too much on the first information we receive when making money decisions. This bias can impact our financial planning by influencing how we perceive the value or cost of goods and services. Always try to be aware of your biases to make more sensible financial decisions.
- TOO MUCH CONFIDENCE: Overconfidence is another behaviour that can lead to risky financial decisions, such as overestimating investment returns or underestimating potential losses. Be aware of your own biases and limitations to avoid making ill-informed financial decisions. Plus, getting advice from VM financial experts can help ease the effects of overconfidence.
Take the time to reflect on your own behavioural tendencies and how they may be impacting your financial decisions. Awareness and deliberate actions can play a big part in helping you steer through the difficulties of financial planning. Let’s talk more, here
