Overcoming psychological barriers in managing your finances

Perhaps you’ve known and heard about financial management a hundred times. And if it’s not new to you, it is something you’ve been looking forward to improving in your life. But despite constant learning and trying, it seems unreachable, and you might be close to giving up. It’s a perpetual cycle of sitting down, working out a budget, and trying to stick to it yet still find yourself running out of money and ending up in debt.
But hang in there because even experts acknowledge that finance is easy to understand yet difficult to implement. If you wonder why you’re having a hard time managing your finances and not making it to your desired financial freedom, you probably need more than money management tips. There are many psychological barriers we need to overcome in life, our finances is one of them.
According to a financial psychologist, our brain is naturally wired to do things wrong around money. Since we all have these innate tendencies to mismanage our finances, we might need to break free from them to make long-term changes in our financial behaviors. Here are some of the ways you can overcome potential pervasive psychological barriers in managing your finances.
Examining the psychological barriers
The first step to overcoming psychological barriers is to know what they are and how they can manifest in your financial decisions. Most of the time, they may appear as normal reactions to certain circumstances. Because they are inherent and already part of your being, it might be hard to detect them and harder still to change them.
Bear in mind that improving your financial behavior requires change. Since these psychological barriers are resistant to change, they can keep you from moving forward to financial freedom.
Psychological barriers can be in the following forms:
Selective perception
Our perceptions spring from how we interpret the different stimuli around us and empower us to explore and make decisions about everything, including our finances. But to avoid a stimuli overload, we use selective perception to focus on what motivates and attracts us.
With so many stimuli surrounding you every day, how you manage your finances might be impaired. For instance, advertisers may use strategies to draw your attention to the striking attributes of the product they want you to buy.
Conformity
Conformity occurs regularly in our social worlds. Sometimes, we are aware of our actions, but we often behave without much thought. Because we want to fit in with the people around us, we tend to behave in ways that we know we shouldn’t. That includes our financial decision-making.
Anyone has the tendency to keep up with friends and neighbors due to conformity. When you see others purchasing a new car, eating at a fancy restaurant, or having a great vacation, you might be triggered to do the same thing.
Homeostasis
Our body has needs to reach and sustain a certain state of homeostasis or balance. If something is out of balance in the body, it creates some needs that drive us to reduce the unpleasant state of tension by looking for ways to satisfy them. Thus, financial behavior could be attributed to the pleasure we get when some needs or wants are fulfilled.
Because your brain is wired to reduce any tension or anxiety, you might tend to make unsound financial decisions, such as buying an unnecessary new pair of shoes or eating an expensive dinner.
How to overcome psychological barriers?
Of course, knowing the manifestations of each psychological barrier isn’t the end. But now that you are aware of them, you can better take actions to minimize their negative influence on your financial decision-making.
There are several ways to overcome them, and we’re highlighting a few of them below.
Be specific with your goal
If you want to improve your financial management, you must be specific with your goal. It might help to ask what aspect of your finances you want to enhance. If your goal is to maximize your savings, or eliminate personal debt, save up for a specific amount. By having a specific goal, you can better focus on it and tune out stimuli that are irrelevant.
But it’s also worthy to note that there might be events that are out of your control. For instance, an unexpected unemployment can be a significant block on your goals. If you find yourself in that situation, you might need to take out a loan to cope until you get another job. It wouldn’t hurt to look for a Bad Credit Loan for unemployed people.
Limit social media
Nowadays, social media has become an additional and influential source of conformity and peer envy. With the various pictures and videos online, you’d be more exposed to negative social influence. If you’re the type who easily gets overwhelmed by those things, it might help to limit your time on social media.
Delay immediate pleasures
Buying the bag you’ve seen online might feel good to have at the moment. But give yourself more time before you add it to your cart. You can wait for fifteen minutes or more to process whether you actually need the bag or not. By delaying immediate pleasures, you’re providing an avenue to control impulses that won’t help you achieve financial freedom.
Takeaway
Overcoming the psychological barriers in your finances is easier said than done. But when you make an effort to discipline yourself and manage urges, you can get better results in your financial goals. Just bear in mind that doing this is not an overnight process. It might take longer than you want to but learn to celebrate every little change you’ve made from the start.