Time to read : 4 Minutes
Most people make reactive decisions when it comes to managing their money. This often happens because money decisions are influenced by emotions, such as the fear of losing money or worrying about making the wrong choice.
These emotions can lead to paralysis by analysis (being overly cautious), procrastination or avoiding opportunities to manage and address financial issues.
Similarly, the way many people handle money-related tasks is heavily influenced by their relationship with money. Tasks can include:
paying bills
budgeting
saving
investing
spending.
For example, if you grew up in a household where money was scarce and caused stress, you might avoid looking at your bills or bank account out of fear. This could lead to missed payments and financial anxiety.
On the other hand, if you see spending as a way to boost your self-esteem or cope with emotions, you might overspend on things you don’t need, jeopardising your financial stability.
So…
What is your relationship with money?
Do you have fond memories of it, or is it tied to feelings of guilt, scarcity and fear?
Your mindset about money is also shaped by cognitive biases like confirmation bias, overconfidence bias, and sunk cost bias. Let's look at each of these.
Confirmation bias
Occurs when you seek out information that confirms your pre-existing beliefs while ignoring or dismissing information that contradicts them.
For example, if you believe a certain holiday package is the best on the market, you might actively seek positive reviews and dismiss any negative ones, as they contradict what you want to believe.
Overconfidence bias
Can arise when you think you know the status of your finances very well and don’t bother checking if bills have been paid or income has been received. This could lead to overdrawing your account.
Sunk cost bias
This type of bias happens when you continue investing in something that isn’t yielding returns simply because you’ve already invested a lot in it. You keep going, despite your losses, because it feels harder to let go.
How biases impact your decisions
All these biases, emotional responses and your personal history with money influence how you manage your daily finances. Without a clear system, tasks like paying bills, budgeting, or investing can easily fall through the cracks, causing stress, and anxiety.
To avoid this, it helps to establish a routine for regularly reviewing your finances to monitor your progress, address issues and plan for both the short- and long-term.
Additionally, taking just five minutes to prime your brain and mindset can help you approach your financial matters calmly, rationally and with clear intentions.
Introducing the 5Qs Formula
I have developed a unique, proven, science-backed system to help busy people be intentional and effective. This system, called the 5Qs Formula involves asking yourself five key questions to prime your mood, thoughts, emotions, choices and behaviour… in just five minutes:
Question 1 What is your emotional temperature, and what are you feeling today?
Question 2
Part A What experiences, things or people in your life are you grateful for because they inspire you to be a better version of yourself?
Part B Think of a time you have received gratitude and appreciation from someone; how did it make you feel?
Question 3 What is working well for you right now, and what could be working better for you?
Question 4 What three things do you want to achieve today?
Question 5 How will you show up today?
By investing five minutes with the 5Qs Formula before tackling your money tasks, you’ll approach your finances with calm, rational thinking and with intention.
This process will help you make better financial decisions that align with your values and goals and you’ll be clearer about the steps you need to take.
Next time you do a regular financial review and check-in, try using the 5Qs Formula. It can help prime your mindset for clarity and composure, and reduce any potential anxiety and reactive behaviour that could negatively impact your financial decisions.
Bottom line
Using this formula gives you back control over your finances and your relationship with money. You might also consider incorporating it into your morning routine.
Remember, it only takes five minutes each day to prime yourself for financial success.
This is an adapted extract by Simi Rayat; psychologist and author of Productivity Joy: Be Effective and Feel Energised in just 5 minutes a day.
Disclaimer:
The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional.
