A key factor that many people forget to focus on, when it comes to personal finances is behavior. While it is also to be said that there are other factors as well – like a person’s expenses and income, behavior is certainly something that gets forgotten a lot.
Developing positive financial behavior is going to aid you a lot in lessening financial struggles. In this article, I will be discussing “Why is personal finance dependent upon your behavior” and more. Keep reading till the end of the article to find out more information about the same!
Personal Finance And Individual Behaviour
You may not realize it now, but everyday decisions and habits make a great impact on all of your personal finances. The way that you spend money, and save finances for the future – all of it depends upon your behavior.
This is the reason why it becomes very important to understand the relationship between personal finances and behavior. By getting to know about the financial situation, you are going to be able to take control of it.
A prime example of this is, humans have a tendency to overspend when anxious/stressed. Actively recognizing the pattern is going to aid in developing strategies for indulging in any kind of unnecessary expenses.
According to any FinTech Company, personal finance is greatly dependent upon the behavior of individuals as it influences just about everything, from long-term strategies for investment to individual behavior.
Tip: Why is personal finance dependent upon your behavior? To put it briefly, personal finances depend on 80% behavior and 20% knowledge. This determines that the way you behave with money determines the state and net worth of your finances.
Behaviors That Can Lead To Financial Struggles
Our behavior plays a very important role in determining financial stability. Due to this, there are a few common behaviors that lead to a person experiencing financial struggles. Here is a list of some common behaviors that lead to financial struggle:
1. Impulse-Buying
It is very easy to get swept away by the temptation of overspending and impulse buying. This is the most common form of behavior which leads to various financial struggles and actively impacts personal finances.
There are a lot of different factors that lead to a person overspending – receiving instant gratification, lack of proper budgeting skills, and pressure from peers/society.
Keep reading more to find out all about why is Personal Finance dependent upon your behavior!
2. Failure Of Tracking Expenses Properly
If you fail to track expenses and keep tabs on your budgetary spending, then you automatically risk financial uncertainty. You need to implement a proper form of budgeting technique so that you can track and allocate income only towards the things that matter the most.
3. Avoiding Credit Scores
Actively avoiding and ignoring credit scores is going to lead to financial consequences that are long-term in nature. Debt Management plays a very important role when it comes to personal finances, hence, it becomes essential to gain an understanding of how they work. So, that you can pay these back eventually and strategically.
Make sure you are not avoiding credit scores and paying heed to them.
Ways You Can Bring In Financial Discipline
Now that we are done covering “Why is personal finance dependent upon your behavior”, let’s move on with how you are going to be able to bring in Financial Discipline. Here is a list of some examples of how you can bring discipline into your personal finances:
1. Credit Card Over Expenditure
If you have a habit of making use of your credit card to purchase things that you can’t afford, this can lead to a significant amount of balance each month.
While a lack of financial education is reflected, it is ultimately your behavior that is causing you to spend more than whatever you earn. This is ultimately what leads to a financial crisis.
To break this cycle, you need to actively change your behavior by creating a set budget and sticking to it.
2. Holding Onto Various Losing Investments
If you have invested in a stock that has declined in value, rather than selling it, what you do is continue holding it – in the hope that it will actively recover. This form of behavior is more driven by your tunnel vision of focusing more on avoiding loss than considering other aspects of that investment.
In this situation what you need to do is study the long-term prospects and financial health of a company – if you determine that it looks rather bleak then sell the stock and reinvest into another that looks more promising.
3. Saving Up Money
If you have a habit of saving up a portion of your income every month, then this behavior too is driven by your values and mindset. Indulging in this behavior means you are prioritizing both long-term planning and financial security.
To reinforce this behavior, you can set specific goals for savings – retirement savings or even for making down payments on a house. By actively visualizing your goals and also tracking progress, you are going to be able to stay focussed on all of your financial priorities.
To Wrap It Up!
Working towards actively developing financial behaviors that are positive is going to lead in aiding you to take more control of the financial future. By gaining an understanding of the critical role that behavior actively plays in personal finance, you are going to be able to make many informed decisions.
Thank you for reading up till here. I hope you found the information regarding “Why is personal finance dependent upon your behavior” useful.
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