Psychology of Financial Planning

CHAPTER 7Sources of Money Conflict

Martin has been to three different financial planners in the past few years. During each visit, he acknowledges that he spends too much money on shopping, dining out, and other unnecessary luxuries. He asks the planner for help in creating a budget, promising to pay off his credit card debt as soon as he gets his spending in check. Once his debt is paid off, Martin expresses a desire to invest in his retirement and build up a savings account for emergencies. The financial planner shows Martin his options and together, they make a financial plan. Martin starts strong in the first couple of months. He refrains from going out to fancy restaurants and makes higher credit card payments with the money he saves. But inevitably, he falls back into his old behaviors of overspending. His credit card balances go up again, and eventually he winds up right back at square one. Martin's ideal version of himself, someone who is debt‐free, careful with his money, and has savings for the future, is not aligned with his actual behaviors. Out of shame, Martin stops communicating with his financial planner. When the credit card bills start piling up again, Martin seeks the help of a new financial planner in the hopes of aligning his real self with his ideal self. The cycle continues.

There are many sources of money conflict. Some are external struggles with others whereas others are internal. In most cases, when people think of sources of money conflict, their ...