The subject of money can be sensitive for some people; it can cause people to shy away and avoid talking about it. We don’t always know how to instigate a meaningful conversation when it comes to asking for advice, whatever our financial position may be.
This is one of the reasons why at Lyfe Wealth we use Money Habitudes, an interactive tool designed to help you understand your beliefs and behaviour when it comes to money.
Simply put, your Money Habitudes are the attitudes you have towards your finances and how you value the activities surrounding them, such as spending and saving. They are based on your repetitive financial behaviour over a prolonged period of time. Money Habitudes are a reflection of your past, current and future consumption habits. They are the what, where, when, why and how of your daily to lifelong spending patterns. The intention of the exercise is to evaluate areas of poor habitudes with the goal of adjusting them to align with long-term financial security and aspirations.
The way the assessment works is with the use of 54 cards (either physical or virtual) containing simple questions such as ‘I save or invest some money each month’ or ‘When I go shopping, I have to buy something’. After each card is read, you allocate it to one of three categories: ‘That’s me’, ‘That’s not me’ or ‘Sometimes’, based on how you consider your behaviour to be in regard to each question.
Once you have completed all the cards, you take the ‘That’s me’ pile and turn them over to reveal the different habitude categories they represent. There are six habitude types, and most people display a dominant type which reflects their main habitude behaviour. The types are:
- Security: motivated by minimising risk and maximising protection to feel in control
- Planning: motivated by targeting goals and achievements
- Status: motivated by maintaining an image and being accepted
- Giving: motivated by saving and growing money to help others
- Carefree: motivated by distancing themselves from money, not a priority
- Spontaneous: motivated by freedom and experiences
Whichever habitude you have the most of is likely to be your main personality when it comes to money. These types of habitudes will be primarily influenced by your environment, which in turn is normally defined by your family upbringing, community, religious association and the media.
The Importance of Understanding Behaviour
By understanding your financial behaviour and your beliefs towards money, Money Habitudes can be utilised to gain insight into what you value most in life. This might be evident in frivolous expenditure on cheap materialistic goods, maintaining a high-quality jet-setting lifestyle, or meticulous saving for future generations.
We are all prone to the occasional impulse buy or investing more in certain items or experiences than our peers, but by looking at the big picture we are able to ask real questions. Identify why. Consider the sacrifices you make by managing your money in a particular way – they could be related to your career, relationships or personality. Whether your habits complement or conflict with other aspects of your life, they should be acknowledged and compensated for accordingly.
Money Habitudes can also be used to determine areas of trouble. Financial problems are often related to other underlying problems such as low self-esteem, guilt, addiction, anger, depression, etc. This is useful to understand – by accepting our situation, we can begin to make positive changes required to overcome such challenges.
Most of all, Money Habitudes broaches the often tricky of topic of finance in a non-threatening manner. With this process in place, we can help to define subconscious motives and beliefs which impact decision making and different purchasing mindsets.
Used in Financial Planning
At Lyfe Wealth, we have incorporated the Money Habitudes assessment into our financial planning methodology. We use this approach to better understand our clients and their independent habitudes in order to build integral rapport and trust. This allows us to streamline our entire process, for a more personalised and efficient service that is relevant to each unique client.
In many ways, our services go hand in hand with financial coaching. Our aim is to educate those we serve, as it is within our mutual interest to see them succeed. We want to make sure that they will have enough money, no matter what happens.
Money Habitudes helps us to benchmark your current habits with your aspirational behaviours. In addition, we can get an initial feel for your risk tolerance and comfort zones when it comes to investment strategies.
By evaluating your money habitudes, you can ultimately achieve three things:
Discover Your Roadblocks
What limitations do you associate with being in your current financial situation? Do these have a psychological impact on your wellbeing? Are you comfortable with what your retirement looks like, and what could you adjust that would benefit you in the long term? Is your short-term spending impacting your ability to fulfil your future goals?
Instigate Real Change
Once you have assessed your roadblocks, you can implement genuine change. Having reflected upon what needs to be altered, we can begin working on solutions guided towards real results. How can we ensure that your expectations are met in terms of wealth management, inheritance tax, insurance and estate planning?
Gain a New Perspective
Money Habitudes will help you to understand yourself and why you manage money the way you do. You will recognise how people may perceive you as a result of your habits (e.g. open minded, responsible, charitable). We each value different things in life, and the tool can help you to learn why you tend to invest in more aspects of your life than others and why. By exploring your money habitudes, you can feel rejuvenated, wipe the slate clean and start to manage your finances with complete control and total transparency.
We’ve certainly witnessed the benefits of using Money Habitudes first hand. We’ve seen our clients become more relaxed and thoughtful in their conversations about money, at the same time forging stronger relationship with their partners. Financial independence is all about creating the right path, and it starts with you.