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Financial Psychology

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The global economic market is a thriving field of inquiry. We learn, grow, change and adapt as individuals and on a global scale when the market begins to drop, prices rise, global trades fall or rise: we change with the flow of the market, after all, we created this entity. There is an upsurge of research on the psychological influence of money,‘how does money affect people’s mind, behaviour, brain? ‘How and why do we choose certain financial decisions?’, ‘when do we decide to take risks?’. When we begin to break down this complex relationship between money and us, or more broadly, society, we carve way to investigate how money harnesses much of our conscious and unconscious driven behaviours.
You define the game. The game of investment, how you see the world, how you choose to create wealth while applying your own capabilities and strengths. When we think of investing, we associate the world of finance, the study and due diligence of economic cycles while underestimating the understanding of how individuals behave with money. We can read, predict, and make assumptions about the future based on history, but behaviours are innate processes that are not as easy as teaching a book of world economics. Individuals have a tendency to make decisions, take risks upon immediate gain. However, it is less often do we see individuals taking actions with the ability to capture and forecast visions of long-term rewards while holding off on potential immediate gratification.
Living in an instantaneous material world, our brain’s natural reward mechanism of pleasure and joy has become attuned with financial gain. With the rise in technology and artificial intelligence, we have become hungry for wealth, accumulation of things, a higher social status, and yet, this immediate pleasure, or reward, leaves little room for experience, choice, change, thought, failure, and success. We begin to fall into a game of luck, rather than thought.If we could pause, think, and rationalise past experiences, could our current investment behaviours influence our ability to appreciate the value of money?
How can we evaluate our relationship with money, from seeking immediate financial gain, to how we relate to money and what it means for us?
Our relationship with money is complicated, it influences our motives and ability to carry out a lifestyle we desire. The relationship between happiness and guilt is a recurring psychological process we go back and forth between when money is involved. We instinctively observe others, searching for a backbone for happiness. What does it look like? What does it mean to be happy? We see people become happy when they get a new car, buy a home, travel to exotic countries, indulge in an expensive meal. Our minds rationalise the experiences of happiness as a result of accumulating wealth, having financial freedom to replicate lives we see in the media, on movies, in magazines, in commercials or advertisements. Yet, why do we often feel guilty in our pursuit for happiness and why is it unexplainable? We spend, take risks, take out loans, and make decisions whilst seeking a happy lifestyle, but we feel guilty knowing we spend at times past our debt. We reach our goal, and the next desire begins and we cycle back into searching for financial flexibility to bring us closer to our next ideal of happiness.
If we become clear on what we should be doing with our money and become aware of our emotions that drive financial decisions, you can face the vicious cycle of money and immediate gratification
  • Create a financial plan.What are your current expenditures? Do you have any savings?
  • Become aware of your emotions.What is driving you to seek financial gain? What influences your emotions? How do you feel when you are spending? When you think about money, how do you feel? Why might you feel this way?
  • Review your past.What lessons did you learn about money growing up? What emotional connection did you have to money? How do these emotions affect you now? How have your past experiences influenced your financial drive today?
  • What emotions hold you back from acting upon financial advice?Do you feel pressured socially? Do you take into consideration financial advice? How does it make you feel?
When we observe our behaviour with money, we can take control of the trajectory of our financial freedom. We often strive for a life of more financial flexibility we may have had growing up. What values do we hold and do they get lost among the cycle of seeking financial gain? Our pasts, emotions and behaviours influence our investment strategies, our willingness to take risks, to foresee long-term financial opportunities. When we step back to observe our unconscious motives and behaviours, we can learn and implement our own strengths and weaknesses to review and captivate the power of our own minds to drive our financial decisions.