Money and financial wealth are said to be the most sensitive and important aspects of any adult's life, after his or her children's welfare.

Money and financial wealth are said to be the most sensitive and important aspects of any adult's life, after his or her children's welfare.

Adults would like to believe that we have a good understanding of money and of our financial standing.

But how many of us know how we really feel about money?

A term called "psychology of money" is often used to describe the intrinsic parts of financial behaviour. It includes how our expectations, fears, beliefs and attitudes affect our financial decisions. Understanding how we truly feel about money may be the key to improving our financial standing and to becoming more successful and efficient in making money-related decisions.

When trying to understand the inner layers of our behaviour towards money, we need to consider a few key issues.

If we see money as a driver for prosperity, it means we see money as a tool to create a prosperous future, which suggests an optimistic outlook towards our own finances. If we see money as a driver to poverty, it means we don't believe things will work out. This suggests a pessimistic outlook and most likely we are reactive when it comes to investing.

Both outlooks have their place when it comes to making financial decisions. Thoughts of prosperity may guide us to better investment opportunities by allowing us to appreciate the possibilities of different levels of risk-taking while thoughts of poverty can provide us with the boundaries as to how much risk we are willing to tolerate.

Then we need to consider our money "personality". Different personality types will have different outlooks on money and the best way to use it or invest it. Our own perspectives and the way we relate to our day-to-day activities will most likely have an impact on the way we treat money. Knowing what our strengths and weaknesses are, and what our spending or saving style is, will definitely help us understand better the way we relate to money, and why.

Another important psychological factor that affects the way we feel about money is our history. Childhood experiences involving money impact on our adult lives. The way our parents related to money in our childhood years may have a direct impact on the way we behave towards our own money and financial plans for the future. We may even repeat the same money behaviour we saw in our parents.

It takes time and practice, but we can all learn to recognise our own behaviour when it comes to money and finances. Once we understand how we feel about money, we can learn to balance these feelings to improve how we handle our money-related issues, making our financial planning behaviour more efficient.

l Bryan Hirsch is a director of Pioneer Financial Planning. Visit www.pioneer.co.za