What bad money habits do you have?
What was the last bad financial decision you made? How did that impact you financially and emotionally?
At some point in life, we’ve all made a money mistake we wish we could take back. Sometimes, it’s because of a simple error in judgment or a bad call. Other times, our emotions and beliefs about money are to blame.
That’s where behavioral finance comes in. It’s about figuring out why people make the decisions they do (even when their decisions fly in the face of rationality). And it looks at everything from herd behavior to personal bias.1
Behavioral finance is an extremely complex field (because humans are complex creatures). But here’s the major takeaway: if you can put emotions and assumptions aside and focus on rational decision making, you’ll be empowered to make better choices. And that can mean better financial outcomes.
My advice?
Know your money mindset. Be aware of what triggers you to stress out about money, so you can find better ways to manage your emotions and impulses.
Also, make sure you have a sounding board. A financial advisor can help you understand more about your money mindset. He or she can also talk you off a financial ledge, be a coach, and be your accountability partner. And that can keep you on track toward the financial future you’re working for.
