In the decades of my involvement in financial planning, financial psychology has been an increasingly important part of what we do. In the olden days, financial advisers just wanted to know about the numbers – the value of your savings, your income etc. Now, we want to know about what you would like your financial resources to do for you, and we want to talk about your risk personality.
In America, some advisers will ask their clients to lie on a couch and to open up about their childhood. Don’t worry, there are no plans for a couch in our meeting room!
However, our money memories can help us to improve how we manage money, and they can give you a better understanding of your own behaviour. There are a few questions which you can ask yourself that will help you to explain why you do and don’t do certain things:
- What is your earliest money memory? What was the first big purchase you made? What did you learn from your parents or grandparents about money? Our early memories relating to money can help us clarify our own attitudes and beliefs with regard to finances.
- What do these memories mean to you? If you could change one thing about what you were taught as a child about money, what would it be? Many of the memories that stand out for us have a significant impact on what we do today. Thinking about these memories and discussing them can be beneficial to understanding our current behaviour.
- What do you want to do with these insights? With more insight, we can decide whether we want to adopt different solutions to our money challenges. There may be some things that you would like to do, but, for some reason, you just don’t. Thinking about our money memories can help us to uncover what is stopping us from taking a logical course of action. Similarly, you may find that you worry about money, when there is no realistic cause for concern, particularly when our lives are changing (e.g. when we move into retirement) and it’s possible that our early interactions with money are behind this.
Uncovering our money memories can be a powerful way of changing behaviour and can result in a more satisfactory relationship with our finances, in turn, leading to a more contented retirements.
Philip Wise | email@example.com
Managing Director and Chartered Financial Planner