7 ways that your mind can sabotage your money

Have you ever avoided checking your bank account because you are afraid of what you will see? Or were you surprised by buying the motivation against your best rule?

You are not alone. Our emotions and leadership can take up doubtful money decisions. Understanding the reason for this – and how to prevent it – begins to understand behavioral financing.

Behavioral financing is the field of study that explores how psychological factors affect financial decisions.

“This explains why people often make financial decisions that challenge logic – such as excessive spending, avoiding bills, or staying in debt courses – not because they are not responsible, but because emotions such as fear, disgrace and tension lead the behavior,” said Nathan Astl, an accredited financial specialist. “It comes to understanding” why “our options, not just the numbers.”

People tend to have some cognitive biases, which can negatively affect their financial decisions. Common preferences include:

This is the psychological tendency of individuals to prefer heavily to avoid losses over equivalent victories. For example, the loss of $ 100 is usually more painful than the fun she felt to get $ 100.

“Our decisions and actions tend to money to be afraid to lose them instead of the risks needed for development,” said Dr. Dan Bilsen, an accredited financial processor.

It often makes people make conservative decisions excessively, or even irrationally, with their money. For example, you may stick to an arrow that loses its value longer than you should avoid the loss of the loss, although it is better to sell it and invest money in a good arrow.

Excessive confidence is the belief that you know more about a specific topic than you really know.

This can make unattended financial options, such as facing a lot of investment risks without appropriate research or ignoring the recommendations of the financial advisor. In other words, excessive confidence bias can lead to expensive errors because your decisions depend more on self -insurance than objective analysis or difficult evidence.

This is a cognitive bias that makes you depend on the first part of the information you receive, and it is a “anchor” for all future decisions. There are several ways in which you can play bias with regard to your financing.

For example, let’s say you want to buy a house, and see a list of a house with a modern price reduction. You may feel you have to make an offer in this particular house because you get a good discount and save money. However, more research may reveal that the property is still exaggerated for the market or requires costly reforms that will cancel any perceived savings.

As an investor, the bias of installation can occur when focusing on the initial purchase of the share or the last highlands, which affects a losing investment in the hope that it will recover.

It is human nature to do something simply because anyone else is, such as buying the latest iPhone when your current phone works well, or is waiting in a queue for hours to try a new restaurant because it has become a virus on social media. This is known as the herd mentality. But when it comes to your money, moving on the vehicle may cost you.

For example, during a gathering in the stock market, people may rush to invest in fear of being lost, and during contraction, they may be terrifying only because others-regardless of whether their investment portfolio makes sense or tolerance with risks.

Familiarity occurs when people prefer the things they know or understand easily in exchange for new or complex situations. This is not always bad, but when it comes to financial resources, the bias of familiarity can ignore better options in favor of what is comfortable.

For example, you may adhere to Traditional savings account From the National Bank, where you opened your first account 20 years ago, although you can Earn 10 times more benefit on your savings By switching to an online bank.

This indicates the habit of money processing differently depending on where it came from. For example, you may receive your salary every two weeks and immediately divide it into different budget categories to avoid excess spending. But when you get The end of the year bonus Or recover taxes, this money is more likely to spend freely without putting it on your budget – although it is still an income for which it has worked.

The fallacy of the gambler is the belief that past events affect the possibility of future results in random situations. It depends on the concept of the gambler who was subjected to many successive losses and believes that it is “deserved” to win – so it increases their bet, although the possibilities have not already improved.

For investors, this can mean adhering to the arrow because a series of losses means that it is likely to recover soon, or sell the arrows because it was very long and is likely to collapse soon.

Ultimately, this is due to the nature of human feelings and a deep root method to treat them to protect ourselves.

“Our minds are not wireless to what we will consider good money decisions today. Our minds are wireless to survive,” explained by Dr. Balin. “Our ancestors have survived the minds that helped them avoid danger and abandon the resources available to them at the present time. It is not different today with money.”

Allowing emotions to take the driver’s seat when managing money is a dangerous game. It can affect your spending, provision, debt management, investment decisions, and more – in the end it prevents you from reaching your financial goals. But if emotions hinder sound financial decisions, this is not your fully wrong.

“We are not rational creatures when it comes to money; we are emotional,” said Estl. “Many people carry” money stories “that are formed through early experiences, cultural expectations, and even generations shock.”

For example, ASTLE, if you grow up watching your parents, they argue about money, you may avoid unconsciously Budget As an adult. However, you can take steps to change these behaviors. “The real financial change begins when we get to know these patterns and create space for new more healthy behaviors,” Acel pointed out.

We have asked experts to get the best tips on overcoming feelings and behavioral biases to make more intelligent financial decisions. This is what they said.

1. Name your accounts and use the visual sermon

If you save a specific goal, such as your child’s total tuition or a family vacation, name your savings account to reflect it. In this way, whenever you log in to your bank account, you get an additional payment of motivation to continue saving for this goal.

Pallesen said that visual signals are also a good way to inspire you to save you and remind you of what is important. For example, look at your children’s photos before discussing household finances with your partner. Record your favorite hobby image of your computer screen as a reminder of what you are looking for in retirement. Create a vision panel with a friend to see and enhance the things and values ​​you strive for in your life.

It is common to focus on losses, but try to track your victories as well. “Many people will monitor their account balances, but they often review things out of their control, such as the stock market movement,” Pilson said. “Instead, track your savings rate and compare it for your past.”

For example, he said, if you currently provide 10 % of your income this year, learn if you may collide by 15 % at the same time next year. Then follow your progress in a spreadsheet or magazine. “The tracking and vision of progress is a great way to build a momentum of health financial habits,” Bilson added.

If you are discussing a driving purchase process, stop it and put the purchase for 24 hours. It gives you this time to think about why you feel that you need it and whether you can really carry it. After some time, you may decide that the purchase is not worth it, which helps you avoid making the rush decision that you will regret later.

Do not be afraid to ask for help from a trusted friend or financial therapist to help you move in complex feelings related to your money. They may be able to help you see things from a different perspective and provide solutions to help you overcome these obstacles.

It is common for you to fear the unknown, but avoid the balances of your bank account and the budget will not help you feel safe in managing your money. “Astl said, “Lighting time to register short -free access with your money,” Astl said.

Read more: 5 Psychological funds to reduce spending and increase savings