For those that have never been used to money, it’s possible there may be something in the subconscious holding us back from making more.
It’s almost as if money is a bad thing and getting more of it will be a terrible thing.
Are these negative thoughts holding you back from getting more money?
Start here – Traditional economic models assume we are rational decision makers.
Behavioural economics disputes this, saying this is about real people in the real world.
Humans pursue money because of what they can do with it.
Money can’t buy you love, happiness or good health but it can buy you plenty of other things.
Your average human might want to spend their money as follows:-
It might be worth looking at what differentiates those with cash and those without.
A foundation theory of the psychology of money is prospect theory.
The findings show that investors dislike losses about twice as much as they like gains of the same magnitude. Traditional economic theory would suggest this should not happen.
The theory of behavioural finance maintains that our wealth, emotions and attitudes have a significant influence on our investment behaviour. Are they wrong?
We all know, and too often, when faced with a big decision on whether to buy or sell an investment, many people ignore fundamental analysis and allow their emotions to take over, perhaps no small amount of greed, and they end up making poor financial decisions as a result.
Overcoming the heart with the head.
A good investment strategy often means following your head rather than your heart.
It is essential to understand and recognise the impact of emotions on financial decisions and avoid making the wrong choices, for the wrong reasons.