Behaviours Drive Finance Outcomes
Published on: July 15, 2019
Behaviours can drive your finances
At some point in our lives,most of us decide we want to save more, be a little smarter with our money. Think back to the last time you set yourself a financial goal. If you’re like most people, you probably had some lifestyle factors or behaviours that both contributed to your decision and impacted whether you successfully reached your goal.For example, maybe you like buying your lunch every day at work or regularly visiting the pub with your mates. While there is absolutely nothing wrong with any of these behaviours, they have obvious impacts on your finances.
So, why are behaviours so important to our financial success?
Behaviour drives decisions
Thinking about your behaviours towards money, it’s often easy at a surface level to identify what’s impacting your finances. I’ve often heard people say, “I really should go out less,” or “I shouldn’t buy a coffee on the way to work everyday”. While denying yourself something isn’t always the answer, we need to understand the ramifications of the decisions we make.
Our behaviours around money are often learnt during our upbringing. Those formative years of watching our parents and family members manage and react to money contribute to how we view it today. If you grew up in an affluent household where money was never an issue, you would have a different frame of reference to someone who grew up in a family living from pay cheque to pay cheque.
While there isn’t a’right’ set of answers, it’s good to understand that your behaviour towards money will come from your past experiences, because those behaviours drive decisions. They lead to us forming habits that impact our cash flow.
Too much of anything is often not a good thing
One thing that’s really interesting here is that there are both good and bad sides to all behaviours. Reading this, you might assume I am suggesting that you need to be incredibly conscious of your money, saving every dollar you can. I’m actually not saying that at all.
I’ve seen scenarios where people have saved and scrimped their entire lives and while they may have a good amount of working capital they’ve missed so many life experiences that in the end, they regret it. It works the same in reverse: Spending all your money and saving/investing little will give you the opposite problem.
Luckily, I believe there is a happy middle ground that really works.
Be aware and prepared to change
So what can you do to start the process of understanding your behaviours towards money?
Firstly, be aware of your behaviours and beliefs and why you have them. Understanding why you’re doing something, like saving for your wedding or preparing to start a family, gives you clarity around what you want to achieve. It also helps you understand which behaviours will be positive for that goal and which ones won’t.
Secondly, be prepared to change. Sounds easy right? Actually, it’s oftenthe hardest step. The reality is that to achieve the goals you have set, you’re going to have to modify some of your behaviours. Be prepared that this will most likely be jarring and,while some behaviours might be easy to let go, others won’t be.
Often it pays to think about substituting something instead of dumping it altogether.For example, if social interactions with your friends are crucial to your happiness, then rather than dinners out or multiple nights a week at the pub, think about inviting your friends over for drinks at home instead. Modifying what you do is much easier than trying to remove it completely. If you take the fun out of something, you’re more than likely to revert to your old behaviours.
We have a really interesting way of approaching and understanding your behaviour when working with us at Life Money Co. Click here to learn more.
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