Psychology of Financial Planning

Introduction

Many of us know what we should be doing around money, but we fail to put this knowledge into action. Consider the following examples:

• Our epidemic of overspending and undersaving
• Buying when the market is high and selling when it is low, doing the exact opposite of what's in their best interest
• Trying to get rich quick
• A lack of diversification
• Saying they want one thing but failing to follow through
• Having trust issues around money
• Blowing a bonus, inheritance, lottery win, or even a big sports contract
• Failing to put a Will or Trust into place
• Getting rid of money out of feelings of guilt
• Providing financial support to adult children when the client can't afford it and/or the children misuse the money
• Having trouble saying “no” to requests for money from family and friends, even when they know they should
• Chronic money conflicts with spouses, partners, and family members
• Lying about, or hiding, financial actions from a partner or spouse around money
• Failing to follow through on financial advice, even when they requested it
• Feeling too anxious to spend money even when they can afford to
• Sacrificing health, relationships, and emotional well‐being in the pursuit of more, even when by all objective evidence they have enough
• Avoidance around money issues
• A lack of motivation, creativity, and passion in occupational pursuits

Many of these difficulties are due not to a lack of financial literacy, but to a client's psychological conditioning. As such, a basic knowledge ...