4 Sources Influencing Financial Behaviour

financial behavior

There seems to be a conspiracy of sources influencing how we spend and save money.

Problem behaviors have us seeing fiscal problems day in and day out, in the corporate world and also in our private lives. Most quick fixes don’t work because there is no single cause.

According to Joseph Grenny, David Maxfield, and Andrew Shimberg, authors of How to 10X Your Influence, a recent study shows that

“If you want to confront persistent problem behavior, you need to combine multiple influences into an overwhelming strategy. Influencers succeed where others fail because they “overdetermine” success. Instead of focusing on a single root cause, they address all the root causes by combining a critical mass of influence strategies.”

So what are these root causes? There are ten, basically grouped into two categories called the four life values and the six influences. We’ll start with the four life values.

  1. Inner values—psychological and spiritual

Inner values are very personal. Our identity, our social identity, our desire for freedom and independence, safety and security, the right to worship (or not) in the way we want to, and many other facets of our self realization are influences that help us set goals, priorities, and frame the behaviors that lead to fiscal security. These inner values also shape our sense of purpose and meaning in life, according to Smart About Money, a LifeValues Quiz. They impact the very principles by which we choose to live.

  1. Social values—our families, friends, and communities of concern

Social values are all about belonging, relating to others in meaningful ways. This includes how we handle money and what we spend it on. Providing for family, friends, and others, budgeting, and other money matters are partly decided by our unique family histories and cultural upbringing.

  1. Physical values—health and environment

Physical values are all about the tangible world and the state of our health and well-being. They determine our choices about our healthcare and environment, but also include our attitudes toward beauty and comfort.

  1. Financial values—sustainability, appropriateness and sufficiency

Nearly everyone is concerned about how long their money will last, whether financial choices we make are the right ones, and whether we have enough money for our needs. But in the long haul, financial values are not so much about what we do with our money as how we feel about it.

There are also six influences that fall into three sub-categories (personal, social, and structural). They are:

  1. Personal motivation
  2. Personal ability
  3. Social motivation
  4. Social ability
  5. Structural motivation
  6. Structural ability

According to Grenny:

”The first two domains, Personal Motivation and Ability, relate to sources of influence within an individual (motives and abilities) that determine their behavioral choices. The next two, Social Motivation and Ability, relate to how other people affect an individual’s choices. The final two, Structural Motivation  and Ability, encompass the role  of nonhuman factors, such as compensation systems, space, and technology.”

This means that the first two influences will come from within, kind of like the personal values in the life values category. Our own ideas about ourselves and our identity will affect our behavior, including how we handle money.

The next two relate to our social values, and are direct links to how our behavior is defined in regards to provision, giving, and the like. Money is handled in this realm based on the motivation to spend or save and the ability to do what we want to with our money.

The last two concern those non-human factors that still have a great deal of say in how we handle finances. For instance, we are bombarded by advertising messages encouraging us to spend money to have more things.

Our behavior is not only learned, it is also internalized. The influences we face will have an impact on our financial strategies, but ultimately to be informed is to have more choice.

Image credits to : Chris Beckett

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About the Author: Jay

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