The Psychology Of Finance

The Psychology Of Finance

How Money Scripts Affect Decisions
And Actions Related To Finances

By Tolen Teigen, Chief Investment Officer, FinDec.

As a financial planner, I am asked to create strategies and solutions to help people achieve their financial goals. Clients share their goals, and I create a road map with savings schedules that will guide them toward their target numbers. Using this simplified description, if all things remained equal throughout their lifetime, clients would ideally meet their goals.

But we know that life happens. We’re thrown unexpected curveballs; family emergencies arise; natural disasters destroy property; and world crises affect the markets—all of which cause people to rethink and often readjust their financial plans.

How people react to these outside influences, how they decide to save or spend their money and, most importantly, the reasoning behind their decisions all correlate to their relationship with money or their money script.

I’m talking about the behavior and psychology of finance. It’s something I use with my clients, and it’s a topic that I’m pleased is gaining momentum in the industry. For those not familiar with this notion, behavioral finance is the idea of helping people make better decisions based on how they view and react to situations involving money.