Psychology in Finances

With regards to money and finance a lot of the things we do are motivated by the psychology of how we view money.

Some people dispose of it easily, some save it, some risk it, some invest it and others never have enough.

If one thing is true, it’s that money has been and always will be a divider among people. Those with more money are sometimes individuals we tend to look up to but this shouldn’t always be the case. Although they aren’t always correlated, money tends to equate to status.

At the end of the day money is a tool. Some utilize it for good and some don’t. More often than not it is a means to our sustenance but how and what we spend it on also tends to define what kind of people we are. And when I say what kind of people we are I don't mean good people or bad people. I just mean what kind of spending habits we have and what kind of saves we are, and how our value system works.

The Psychology of consumers who carry debt is usually quite different than those that don’t. Consumers with extensive debt are often in survival move just looking for a way out of their current situation. They aren’t thinking as much about their finances as they like to or as you would think. They are just in survival mode, trying to make it out onto the next day and find a way to move forward in a positive direction.

Survival Mode

If you carry burdensome credit card debt, it can really leave you feeling like you are trapped in a situation where you just can’t find room to breathe. It’s not a great feeling and at times it can make you feel like you are so stuck that you just don’t know what you’re doing anymore. Until you figure out a way to resolve it, you are essentially just fighting to get by. This is survival mode and once your caught in this state, it becomes really hard to get out. More importantly, it becomes harder to think about the future and set yourself up for the long term when you're struggling to make it in the short term.

Bad Mood Leads to Bad Financial Decisions

Sometimes we as consumers make bad financial decisions. A lot of times those bad financial decisions could be because we are in fact in a bad mood and have a bad state of mind. When our mood changes or state shifts, it can help us reset and get us out of our funk. It's crucial that we avoid making emotional decisions and avoid emotional spending.

Practicing Gratitude

Practicing gratitude is a great way for us to change our state and allow for positivity to take over. That alone can allow us to make better financial decisions. Regardless of our situation we need to remember that things are always solvable and things could always be worse. Whenever we have challenges it’s best to take them in stride. When we are grateful and hopeful, things tend to work themselves out.

Short Term Satisfaction vs. Long Term Return

When we focus too much on the short term, we deny ourselves the opportunity for long term growth. For example, if you want to achieve investment returns and want to make realized gains via the stock market or other investments like cryptocurrencies, you’ll have a much harder time doing so if you are holding onto a short-term mindset. Granted, not everyone has the opportunity to think about the long term, it’s much harder to do so when you are struggling in the short term. However, if you are ordering out to eat every night and spending frivolously via online shopping when you could instead be making investments, you may have a short-term mindset problem.

All in all, our attitude towards money and budgeting and investing are all things that shape how money works for us and shapes how we spend our money. We all have a different psychology towards money and it's reflective of the things we buy and the things we value. Whatever the case, we need to let money work for us to the best of our ability and work within our nature. We've all had different upbringings and due to this have a different money mindset.