The Psychology of Money: Understanding Your Relationship with Finances by Steven Mangra

As Steven Mangra suggests, money is more than just a tool for survival; it’s deeply intertwined with emotions, behaviour, and personal identity Our relationship with money shapes our financial decisions, and often, we’re unaware of the psychological factors driving these choices. By understanding the psychology of money, we can develop healthier financial habits and make decisions that align with our long-term goals

Emotional Connections with Money

Our emotions heavily influence how we handle money. Feelings of fear, insecurity, or even happiness can trigger impulsive spending or conservative saving habits. For instance, during times of uncertainty, many people hoard money out of fear of scarcity, while others may splurge as a coping mechanism for stress Identifying these emotional triggers is essential for gaining control over your finances. Awareness of how emotions affect financial decisions can help manage these impulses and lead to more mindful spending and saving

The Impact of Early Experiences

Our upbringing and early experiences with money also play a significant role in shaping our financial behaviour If you grew up in a household where money was scarce or treated as a source of stress, you might develop a scarcity mindset, leading to anxiety around finances On the other hand, those raised in a financially secure environment may approach money with more confidence but could be at risk of underestimating its value Understanding your financial background allows you to identify limiting beliefs or habits that need changing

Cognitive Biases and Decision-Making

In addition to emotions and upbringing, cognitive biases affect our financial choices Confirmation bias, for example, leads us to seek information supporting our beliefs about money, even if those beliefs are flawed. Loss aversion, another common bias, makes people fear losing money more than they value gaining it, which can prevent them from taking calculated financial risks

By recognizing these psychological patterns, you can develop better financial habits Reflecting on your emotional and cognitive relationship with money allows for more balanced, informed decisions, paving the way for economic well-being Understanding your psychology is the first step toward mastering your money.