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How your behaviour affects your financial wellbeing?

When you're working towards your financial goals, you might be faced with all sorts of hurdles along the way. But could your own behaviour be the biggest stumbling block of them all? 

Becoming financially secure doesn't just happen overnight. First you need a plan, and then you need to put in the hard yards to see it through. 

But even with a watertight financial plan, life has a habit of throwing unexpected challenges our way which steer us off course. In many cases these challenges may be beyond our control, like being retrenched or losing a loved one. But what about the factors you can control, like your own financial behaviour? 

For most people, our financial behaviour is governed by our attitude to money. This affects the ways we spend, save and invest. For instance, do you always stay within your budget or do you have the occasional blowout? Have you put money aside for a rainy day? Or are you like one in six Australians who are struggling with credit card debt?*1

Being aware of your financial behaviour can be an important step in your financial journey. By ditching your bad financial habits, you can instead focus on doing the things that will get you where you need to be. 

Here are some red flags to look out for. 


Clever marketing techniques  Think you're too smart to be swayed by flashy advertising? Salespeople and marketers use behavioural economics to manipulate our purchasing decisions, so you might be less immune to their methods than you think. Maybe you can see past 'free' offers, buy-one-get-one-free discounts and 'gift with purchase' rewards, but there's a good chance you've spent money during a sale or a limited-time offer on something you could do without.

Thinking expensive is best  Research has shown that people inherently expect cheaper items to be inferior. In one study, participants tasted a variety of wines labelled with randomly selected prices. In each case, they stated that the higher priced wines tasted better than the seemingly cheaper ones.*2 This kind of irrational value assessment can lead you to spend more than you need to. 

Analysis paralysis 

When you're faced with a variety of purchasing options, it's hard to know which one is right for you. And if the choices seem too overwhelming, sometimes it feels easier to not make a decision at all. This is one of the reasons why many people don't take up financial products and services that could genuinely improve their financial wellbeing, like a high-interest savings account or an investment portfolio to build wealth for the future.

Copycat spending Ever bought something because your best friend or a family member did? While there's nothing wrong with basing your spending decisions on personal recommendations, it can sometimes make you blind to the options best suited to you. This is especially important when you're choosing financial products: everyone's situation and needs are different, and so your financial plan should be tailored just for you. 

Excessive optimism If you're in good health, with a stable job and a happy home life, you may think things will never change. But in a recent study, unexpected life events were found to be the single biggest factor preventing people from reaching their financial goals.*3 These life events may include health problems, accidents and injuries, relationship breakdowns, business failure or job loss, or taking on a care role for an elderly family member. Sometimes the financial fallout of these events can be catastrophic, but we'd still prefer to think the worst will never happen to us. As a result, many people don't plan for the unexpected – for instance, by getting the right insurance to protect them against financial loss. 

Going it alone You're in control of the decisions you make, but nobody's perfect and we could all use some support. That's why it helps to get guidance from us whenever you're facing a major financial decision. We can also help you along the way by clarifying your long-term goals and teaching you day-to-day strategies to improve your financial behaviour.

1 Australian Securities ASIC, Credit card lending in Australia, 2018.

2 L Schmidt, University of Bonn, How context alters value, 2017. 3 UNSW & Financial Literacy Australia, Explorinng financial wellbeing in the Australian context, 2017.

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