We all have seen a million reactions when the bill hits the table after a long lazy meal with friends. The time taken to get the wallets out differs, there is never a consensus on the mode of payment, 1 wise guy indicating the contribution figure while the other is snatching the bill screaming he will pay it off!
Ever wondered that even when you all are in the same age bracket and maybe earn around the same yet, why the way you handle money is so different? Why is one always prompt in payments while the other nose deep in debt? So what exactly defines these behaviour patterns and attitudes?
Let’s first understand what we mean when we say financial behaviour and financial attitude.
Financial attitude is a state of mind of a person about finances which is generally a resultant of his background and environment.
Financial behaviour concerns with a humans action with respect to money management.
We can say that both are closely related and part of the same family. The first affecting the later.
Where Do You Get Your Financial Attitude From?
Our financial attitude is closely related with who we are as a person, our persona, capabilities and vulnerabilities. Following are the few things which are monumental in building your financial attitude:
1. Childhood and Upbringing
Like many things in our life, our financial attitude also begins to take shape very early on in our lives. Money is something we closely associate with our parents and declare them as the first ATM of our life. Hence, the way our parents handle money, their spending habits the way your lifestyle is shaped up plays a very crucial role in defining our understanding of how important is money for a happy life and how readily it is available!
2. Knowledge and Awareness
If you don’t know what is up how will you ever understand it? Thus, awareness is the first major step in shaping up these early childhood perceptions. The more you know about personal finances via your friends, elders, colleagues and the continuous onslaught of mass media makes one curious about diving deeper. Financial literacy a.k.a financial knowledge helps one understand the nitty gritty of the options available and the suitability with oneself taking him one step closer.
3. Emotional Quotient
This is a very important factor which helps to arrive at what is good or bad, right or wrong. Your emotions will define your risk taking capabilities and decide whether you are ready to take control of your finances and have the confidence to look beyond the ordinary and put all that gathered knowledge in motion via one sound and calculated decision.
All of the above will give you a perception and vision by which you look at handling money, it may make you cautious and conservative or growth oriented and aggressive!
Where Do You Get Your Financial Behaviour From?
Your financial behaviour is a product of your financial attitude i.e. the financial attitude you form and continuously keep rebuffing is what makes you act in a particular fashion and define your behaviour.
For example, from someone who has seen his parents continuously struggling to make ends meet and maintain a lifestyle, money will be an extremely aspirational commodity. He/She will always be under the fear of making more money to not be scared by the left side of the menu card. Because of which, will always find ways to make more money either via clever means or by working long hours!
Thus, money is extremely crucial for a good life and you need to have a good amount always is the attitude while finding ways to make money and saving it is the behaviour.
Similarly to the above example one’s financial behaviour can be a derivation of multiple things like, handling a large sum of pocket money, near and dear ones being in the financial field, handling banking from a young age, being vocal about asking for help or knowing more etc.
FAQs
Financial attitude is a state of mind of a person about finances which is generally a resultant of his background and environment. Financial behaviour concerns with a humans action with respect to money management. We can say that both are closely related and part of the same family.
What is the meaning of financial attitude? ›
Financial attitude refers to an individual's perception, emotions, and beliefs about money and finance. It encompasses their opinions, confidence, and disposition towards financial matters.
What is the meaning of financial behavior? ›
It refers to the way a person manages their money, makes financial decisions, and deals with financial issues. Many factors influence an individual's financial behavior, including upbringing, culture, personality, education, income level, and personal experiences.
What are the indicators of financial attitude? ›
Financial attitude can help someone behaving toward the finance whether in financial management, budgeting, and how a decision will finally made. According to Furnham, in Herdjiono and Damanik (2016) and Gahagho et al., (2021) indicators of financial attitude consist of saving activity, budgeting and being economical.
How do you measure financial attitude? ›
The measurements of financial attitude in this study include financial anxiety, optimism, financial security, deliberative thinking, interest in financial issues, and needs for precautionary savings.
What influences financial behavior? ›
Their attitudes toward spending, saving and investing can shape our own beliefs and habits. For example, one study showed that when it comes to young adults, parental influence commonly tends to promote responsible financial decisions, while peer influence more commonly tends to encourage more loose spending habits.
What factors influence financial behavior? ›
5 answersFinancial behavior is influenced by various factors such as financial literacy, self-efficacy, religiosity, hedonic lifestyle, personal financial attitudes, socioeconomic characteristics, and personality traits.
What's your financial personality? ›
Personality traits
Savers are debt averse; they pay off their mortgage early. Spenders: People who want to enjoy their money now and worry about the future later. They don't save much and tend to borrow. Sharers: Those who want to share their money with family, friends, charities or their community.
What is behavioral finance with example? ›
So, what is behavioral finance? It's an economic theory that explains often irrational financial behavior, such as overspending on credit cards or panic selling during a market downturn. People often make financial decisions based on emotions rather than rationality.
What is the difference between financial behavior and behavioral finance? ›
The financial behavior is inherent in the subjects of both of the schools traditional and behavioral finance. The former, during the money management, rely on the rationality, while the latter — on the irrationality.
That said, learn the 10 most important financial indicators!
- Net margin. ...
- Fixed costs and variable costs. ...
- Gross margin. ...
- Average ticket* ...
- Return on investment. ...
- Breakeven point. ...
- Inventory turnover. ...
- Current liquidity. This financial indicator shows a company's ability to meet its obligations in the short term.
More specifically, having financial well-being is when you: Have control over day-to-day, month-to-month finances. Have the capacity to absorb a financial shock. Are on track to meet your financial goals. Have the financial freedom to make the choices that allow you to enjoy life.
What is the best indicator of financial success? ›
A company's bottom line profit margin is the best single indicator of its financial health and long-term viability.
How do you measure attitude and behavior? ›
In such studies, attitudes are typically measured using two main types of scales: either Likert Scales, where there are five response categories ranging between two extreme positions, e.g. strongly agree and strongly disagree, or using semantic differential questions, which contain a set of opposites, e.g. easy – ...
What is the money attitude scale? ›
The money attitude scale is a 3D-item scale that measures attitudes towards four money dimensions, namely, power/prestige, retention/time, distrust/anxiety and quality.
How do you use a positive attitude to change financial habits? ›
Six Steps to Creating a Positive Money Mindset
- Forgive Your Past Financial Mistakes. No one is perfect. ...
- Understand Your Thoughts and Emotions Surrounding Money. ...
- Realize That Comparing Yourself to Others is a Losing Game. ...
- Work on Forming Good Habits. ...
- Create a Budget That Brings You Joy. ...
- Remember to be Thankful.
Personality traits
Savers are debt averse; they pay off their mortgage early. Spenders: People who want to enjoy their money now and worry about the future later. They don't save much and tend to borrow. Sharers: Those who want to share their money with family, friends, charities or their community.
What is your financial personality? ›
Five common money personalities are investors, savers, big spenders, debtors, and shoppers. Debtors and shoppers may tend to spend more money than is advisable. Investors and savers may overlap in personality traits when it comes to managing household money.
