How our expectations, fears, beliefs and attitudes affect our financial decisions

MONEY and financial wealth are important aspects of anyone's life.

Kathleen Gurney, a California psychologist who has researched the emotional aspects of wealth management, said: "We love money, or we hate it, or we fear it, or we worship it, or we enjoy it - but we certainly never ignore it."

We adults like to believe that we have a good understanding of money and our own financial standing. Most of us have bank accounts, credit cards and some sort of savings plan . But how many know how we really feel about money?

It's called the "psychology of money" and is a term used to describe the intrinsic financial behaviour. It includes how our expectations, fears, beliefs and attitudes affect our financial decisions.

Money can be perceived as a driver to prosperity or to poverty. When viewed as a driver towards prosperity, we see money as a tool to creating a better future, which suggests an optimistic outlook. It reflects positively at our risk tolerance of a particular financial opportunity and in general, forecasts a proactive behaviour when investing or spending money.If we see money as a driver towards poverty, it means that we don't believe that things will work out. This suggests a pessimistic outlook, fear and most likely we are reactive when it comes to investing or spending money.

Both outlooks have their place in financial decision-making processes: thoughts of prosperity may guide us to better investment opportunities, affording appreciation of the possibilities of different levels of risk-taking. Thoughts of poverty provide the boundaries as to how much risk we are willing to take. The trick is to find the right balance between the two.

Then, we need to consider our money personality. Different personalities will affect the way they will deal with money issues or opportunities. Our perspectives and the way we relate to day-to-day activities will have an effect on the way we treat money. Knowing what our strengths and weaknesses are, and what our spending (or saving) style is, will assist in understanding how and why we relate to money as we do.

Our history is another important psychological factor. Childhood experiences involving money will forge behaviours in adults. The way our parents related to money in our childhood will influence the way we will behave towards our money and financial plans for the future. We might repeat our parents' behaviour or rebel against them, but money is a topic that will tap into our memories and past experiences and will, as a result, create responses that may derive purely from emotions, rather than from knowledge or logic. With time and practice, we can learn to recognise our financial behaviour and tendencies. Once we can define how we really feel about money, we can learn to balance these feelings to improve the way we communicate and handle money issues, making our financial planning behaviour more efficient and therefore broadening our chances of financial tranquillity and fulfilment.

• The writer is a financial adviser of Bryan Hirsch Colley and Associates. Email bryanh@bhca.co.za