Psychology of Financial Planning

CHAPTER 6Financial Behaviors and Outcomes

Thus far, we have focused on all of the factors that impact what we do as related to money. Whether it be evolutionary traits, cultural and environmental factors, or financial flashpoints born out of our own experiences or those of our ancestors, we arrive at a set of beliefs around money that drive our financial behaviors. Unfortunately, in many cases, our responses and behaviors are inconsistent with our own personal goals. There are numerous financial behaviors that can have a significant impact on our clients' financial well‐being (see Figure 6.1). In Part III, we introduce strategies and tools that the financial planner can adopt to address many of these financial behaviors, all in helping the client meet their financial and life goals.

Many of our clients have great financial behaviors. For starters, many have acquired sufficient assets that necessitate the assistance of investment advice from a financial planner. Typically, this requires the ability to delay gratification, prioritize future goals over near‐term rewards, save, invest, and resist impulses to act irrationally, such as taking excessive risks or falling for get‐rich‐quick schemes. However, good financial health is not necessarily the norm, and the average American is in terrible financial shape. Financial planners often encounter problematic financial behaviors with clients from all different economic backgrounds. Even if most of their clientele have good financial ...