We often think of finance as pure mathematics, but in fact our financial decisions are largely determined by psychological factors – our beliefs, fears and habits. This video will briefly consider how these internal installations affect our money affairs.
Fear and avoidance: Many people are afraid to risk money, even if this risk is justified and potentially beneficial. This fear is often associated with negative past experiences or the belief that money is evil or that wealth is unattainable. Such fear can lead to the avoidance of investment and missed opportunities for capital growth.
Belief in “sufficiency”: Another common psychological barrier is the belief that the available money is “enough”.
This may hinder the pursuit of financial stability and independence, even if the current level of income is sufficient only to meet basic needs. This belief is often based on the comfort of the usual lifestyle zone and fear of change.
Environmental influence
Our financial habits and beliefs are often influenced by family, friends and society as a whole. If your environment is dominated by negative attitudes towards money or there is no financial literacy, this can significantly affect your own financial decisions and results.
Rethinking the attitude towards money: The good news is that our beliefs can be changed.
Realizing how these psychological mechanisms work, you can begin to form a healthier attitude towards money, set realistic financial goals and make more effective decisions leading to financial well-being.