Have you ever thought about money and how it affects your psychological tendencies and behaviors?
So should you.
The world recovering from a pandemic may have rearranged our overall understanding of how best to manage personal finances, especially when it comes to preparing for immediate plans and the future, says Claire Classen, consumer financial education specialist at Momentum Metropolitan.
We are all programmed, from an early age, to respond in certain ways to financial challenges, says Klassen.
“It is important to engage in introspection to break the cycle of debt and bad financial decisions and to positively change our attitudes and behaviors towards money. For this reason, South Africans must develop a sharp focus on improving financial behavior which will help disrupt the cycle of debt and poor financial decision-making that is prevalent in society says Klassen.
“A corollary to this pattern is self-motivating financial problems, which means that a SA’s general financial psychology can be categorized as stressful and lead to poor financial decisions.
“So, There is no better time than the present to take control of your personal finances and start building to maintain a healthy figure for your wallet/pocket.
“Building to maintain a healthy figure for your wallet/pocket, in this case, would mean putting the numbers aside for a moment, and being clear about why you do the things you do with your money; how do you spend your paycheck? why do you spend carelessly or why do you hoard money? Are you present, in the moment, Or are you making absentee decisions with financial consequences.”
She says understanding the psychology behind our personal relationship with money is critical to making positive changes in our attitudes and behaviors.
This requires introspection, especially when we find ourselves repeatedly making poor financial decisions that lead to over-indebtedness. By reflecting on our past actions and thought patterns, we can identify the underlying beliefs and emotions that drive our financial behavior and make conscious efforts to change them.
Stressing the need for constant self-reflection on the sun“In terms of money, Klassen suggests checking your credit report regularly or printing out a detailed bank statement from the previous month to assess your spending habits. We must honestly analyze the effects of our relationship with money, including our spending habits,” Klassen says.
This hands-on exercise, she says, can “reveal uncomfortable truths about wasting money on unnecessary or impulsive purchases.”
By confronting these patterns head on, you can gain a clearer understanding of your financial priorities and make informed decisions about how you allocate your resources.
“Enhancing self-awareness through self-reflection can have a positive impact on our financial decision-making. By reflecting on our past financial experiences, we can gain insights into what led to negative outcomes and learn from them.
“This could include examining whether these outcomes are a result of our poor financial decisions or due to external factors beyond our control, such as macroeconomic trends. By doing this, we can become better prepared to make informed financial choices and feel more confident in our ability to cope with financial challenges,” says Klassen.
She offers these tips for making better financial choices:
- Budget and adjust it regularly: Create a monthly budget and adjust it regularly according to personal life events. This will help you maintain a healthy figure for your wallet/pocket.
- Track your expenses: Understand how much your lifestyle costs and make sure you don’t spend more than you earn. If you are, consider reducing your lifestyle costs, finding a higher paying job, or finding ways to earn extra money.
- Avoid impulse buying: Consider impulse buying and learn about the impact of subliminal advertising, which may subconsciously influence your spending patterns.
- Prioritize bills and savings: When you have extra money, prioritize paying your bills first. With the money left, consider depositing it into a separate savings account.
- Prepare for economic fluctuations: If you receive an annual salary increase, mentally prepare for expected price hikes and economic fluctuations that can affect personal income and spending.
- Plan for the future: Consider how you can use your income to grow yourself and achieve your financial goals. Also, plan by preparing for retirement or protecting your business or family from financial loss.
- Seek professional advice: If you are struggling to manage your money, seek professional advice from a registered financial advisor.