There is a growing interest in the role of psychological elements in financial decision-making around the world.
Instead of concentrating on financial capabilities, more people are now more concerned with their financial and psychological well-being.
Are you familiar with the phrase “more money more problems”?
The reality is that money cannot solve all problems yet it remains very key to the smooth running of life for everyone. Being in charge of your financial wellbeing is key to being in control of your different facets of health in relation to money.
Financial well-being is influenced by a wide range of psychological elements. One of the major influences on financial well-being is a person's sense of control over their finances and their level of confidence.
Self-control is the ability to manage oneself, especially one's emotions and wants under challenging situations. Whether it is a situation of more money, more problems, or basically- no money- then self-control plays an enormous role in balancing your financial life.
Financial self-control is the ability to postpone, prioritise, rechannel or avoid spending money altogether on things that are both essential or non-essential.
How much do you agree or disagree with statements like "I find it difficult to stop harmful financial habits" or "I enjoy planning and preparing for the future?" Your response to these two shows the measure of your self-control which also determines your future in terms of financial wellbeing perspective.
According to Saving Behaviour: Economic and Psychological Approaches, a research paper by Ellen K. Nyhus from the Universitetet i Agder, a wide range of financial behaviours, such as saving for the future and avoiding debt can be explained based on an individual’s self-control.
In the short and long run, those with higher self-control are more likely to handle their money wisely than those with lower self-control based on the findings in this paper.
A considerable impact has been discovered on both components of financial well-being, current money management stress, and predicted future financial security
Self-control is more prevalent in those who have it than in those who don't. Generally, if there is no self-control when it comes to money matters, there is a possibility of experiencing current money management stress going by the study.
Future-focused persons are more likely to be financially secure in the future.
Psychological factors have a greater impact on financial well-being than socioeconomic characteristics.
The answer to this is a resounding yes!
Like we have seen above, financial behaviours which include making decisions such as whether to save for the future and avoiding debt can be explained based on a person’s self-control levels.
Financial discipline and self-control are learned behaviours rather than natural qualities. This implies that they will take some effort to acquire.
Just like workouts and exercises to keep fit have to be repeated, it is the same with increasing your financial self-control. The starting point is understanding that your own finances aren't as difficult as you would believe.
In order to get started on the correct path, all you need is a willingness to read and some basic math skills. You also have to consider your goals and stick to them.
Here are a few tips to get you started.
This is more than just having good points written on paper but also making sure to see them through. For instance, saving money in the abstract isn't going to get you any closer to your own financial goals than doing nothing at all.
However, saving a few hundred shillings a week is a plan that will help you deal with whatever comes your way since you already have a strategy you’re implementing.
Create a financial plan since this is the only way to know if you're on the right track financially. Take into account all of your spending and define what is practically doable. Track your progress toward your goal by setting particular benchmarks for yourself at specific points in time.
A weekly, monthly, or yearly spending plan is only effective if you stick to it.
Depending on the relationships you have, you can let those close to you know that you're trying to save money so they do not derail your plans but help keep you on track. Begin by setting attainable goals.
It's easy to tell which of your weekly expenses are essential and which aren't if you budget carefully and keep track of everything that comes out of your account.
Don't be afraid to scrutinize every expenditure. You may find that some activities are simply too expensive for you to justify under your present savings plan, while others may not be worth the effort at all.
Consider other methods of payment if you have recurrent bills that are automatically deducted from your checking or savings account. A gym membership may be traded in for twice-weekly outdoor training with buddies, or those vegetables you buy from the local supermarket could be found elsewhere, for a fraction of the cost.
You can save a lot of money by doing little research and comparing prices. The habit of financial maturity is one of the most fundamental aspects of good financial self-control, and by limiting your weekly spending and evaluating alternative purchases, you begin to establish this habit.
In order to achieve your weekly, monthly, and annual savings objectives, consider consulting a financial planner that can provide you with a fresh point of view. A good financial advisor can also assist you to identify the areas in which you are falling short of your financial goals.
Advice from a financial planner will help you know exactly where you can save more money and what is preventing you from doing so on a weekly basis. This will help you save more swiftly and painlessly toward your financial goals.
1. Don't buy things on the spur of the moment. Take some time to consider whether you actually require the thing, or if you can wait till you do.
2. Determine what you need and what you want. You don't want to spend a lot of money on something you'll later regret.
3. If you're looking for inspiration, find someone who has a similar way of handling money to the one you want to emulate. When you witness others exercising self-control, it will be much easier to do so yourself.
In a previous article, we discussed emotions, and shopping or spending money has often been cited as a cheaper alternative to addressing issues that could be psychological. Retail therapy is offered as a solution to some situations and it's possible you've heard of it as well. Now, a person's emotional issues can be made better with a trip to the mall, and loneliness, isolation, and boredom are all possible causes of an emotional void.
There's no substitute for financial wellbeing and self-control. In our various financial statuses, it is the key to handling everything from an informed perspective.
When we're bored or lonely, it's easy to get worried and want fast gratification to make us feel better. At least for a short period of time, buying stuff fills that void. To avoid falling into this, start by working on your self-control.