We are making more difficult decisions than ever...
Should I sign up for this 40-year mortgage?
Is this a good time to cut the long tails? (And niche down on business projects?)
Will the market accept our 5% price increase?
In today's fast-paced corporate landscape, ensuring one's finances are optimally structured is more crucial than ever. Whether you're an established professional navigating a robust salary package or a decision-maker determining the best avenues for budget allocation, understanding your subconscious financial patterns can provide a distinct edge.
Decipher Your Financial Decisions
Deep within our decision-making process lie inherent mental models - patterns that shape our financial choices. These behaviours, rooted in psychology and influenced by our environment, can be both an asset and a hindrance. For many, these mental models are the cause of low financial confidence preventing good decision-making.
A simple guide to shifting your money mindset
Investing time into debiasing your financial mind will go a long way to helping you make decisions that lead to increased profits and wealth. Below we look at three mental models that impact your financial decisions as a professional and key decision-maker.
The Herd Mentality Challenge
In a world brimming with financial trends, it's easy to align with popular sentiment - and do what others do. However, decisions - such as those involving investments (personal or business) - should be rooted in comprehensive research rather than fleeting trends.
Before aligning with a popular financial move, conduct thorough due diligence. This step ensures that choices are grounded in fact rather than simply following the crowd. Create an advisory board, or a team of people that you go to for a different perspective on opportunities that arise.
Navigating Emotions in Finance
Emotional triggers can often sway financial decisions. For example, a momentary health inspiration might lead to purchasing a premium gym membership, which might later remain underutilised. When we are emotionally aroused, the logical part of our brain is compromised and unable to operate optimally. As a result, we tend to make subpar decisions.
In business: it is easy to get emotionally involved in projects that you have been working on for a long time, or struggle to let go if you believe the outcome of the project will significantly impact you. Regularly cross-check your motivations for making the decisions you make to ensure they are rooted in your true values and not greed, unhealthy competition or familiarity.
Personal finances: implement structured plans such as setting up automated savings or utilising budgeting tools to maintain consistency in financial choices. Do this to ensure that you are still able to carry out the decisions you make when you are operating optimally, such that your financial output and performance will not be compromised.
Deciphering the Action Bias
The inclination to act immediately, especially in uncertain situations, can sometimes yield less-than-optimal outcomes. For instance, making quick investment moves based on preliminary news can be premature. Action bias tends to rear its head when we are in a space of unfamiliar discomfort, fear the unknown, and feel as though we must act and ‘do something’.
In moments of uncertainty, prioritise gathering more comprehensive information. Often, allowing decisions to be well-informed, even if delayed, can prove most beneficial. Remember: deciding not to act is also a decision, and oftentimes a great one!
The subconscious mind plays a major role in the decisions we make every day. If you feel as though you are making sub-par decisions for reasons that feel out of your control, combined with feeling like you have limited financial knowledge, financial coaching or mentoring may be the answer.
At Mind Over Money, our expertise is grounded in the nuances of behavioural finance, drawing from the realms of psychology and practical financial skills. We are dedicated to enhancing financial comprehension for professionals and leaders alike, translating insights into actionable strategies. This often manifests as supporting business leaders in building financial confidence in areas such as budgeting, reading financial information and overcoming mental barriers, or supporting individuals with navigating their own personal lives.
To harness a deeper understanding of behavioural finance and its impact on your financial choices, we invite you to connect with Mind Over Money. Together, we can streamline financial trajectories, ensuring they mirror your professional ambition and the broader objectives of your organisation.