Your money habits can make or break your financial life. It does not matter how much money you earn. What matters are the decisions that you will make regarding how it will be used.
In truth, your preferred habits will play a role the financial decisions that can change your life. This is why you need to be careful about that habits that you will allow yourself to develop and get used to. The thing about these habits is they are instinctive. They become an integral part of your behavior that in most cases, you no longer think when you act on them. It is important that you learn how to choose the right money habits so it will only lead to the good financial behavior that will lead you to the growth of your personal net worth.
What is tricky about your financial habit is they are contagious. It goes both ways. You can influence the behavior of other people and they have the same effect on you. In fact, a study done by the American Institute of CPAs and published through the AICPA.org proves that financial peer pressure does exist. When Millennials are asked about their financial behavior, they usually have similar traits as their peers. 78% of young adults admitted that they have adapted the same money habits as their friends. In fact, 66% said that they consciously try to keep pace with their peers in terms of living arrangements. 64% feel the same way about their choice of clothing.
While there is nothing wrong about you wanting to keep up with your friends, you need to be cautious about how you are doing it. If it means that you have to rack up sizable credit card debts, then you may want to step back and analyze if the money habits you are showing is still healthy for your financial life.
Signs you are easily swayed by financial peer pressure
Succumbing to financial peer pressure is not really for everyone. Some people act as the influencer in the sense that they help others pattern habits according to their own. There are those that are on the other end in which they can easily be swayed by their friend’s money habits.
It has to be noted that not all influences are bad. You can save money through the influence of friends. But before you can identify how you can filter out the good from the bad influences, it is important to learn if you are highly inclined to adapt the habits of the people around you.
There are certain signs that will tell you if you can easily be influenced by the people around you.
Most of the stuff you own are things that you friends also have.
If you look at all your possessions and you find that there are several similarities with those of your friend’s, then you know that you either influenced them or they influenced you to make the purchases. It can go both ways but the important thing here is that within the group, someone is influencing others to buy all the same stuff. It does not have to be an active influence that they literally tell others to buy the same purchases. It can be a passive influence that will seem like each individual is making a choice but they are in fact, highly motivated by the money habits of others.
You do not aspire to own something unless it is owned by your friends.
Do you get the urge to buy something just because you saw a friend own it? When you shop with friends, you end up buying stuff that you never intended to. That is an indication that you are more likely to succumb to peer pressure. In some cases, it may not even be a friend. It can just be someone you know. Make sure that you will not give in to these urges if they are not necessary in your life. Although may think that you earn the same amount of money, your financial situation will always be unique compared to those of your friends. You may have other financial obligations that they do not have. They may be able to afford that purchase but the same is not true with you.
Opinions of other people matter to you.
Lastly, you know that you can easily be swayed by money habits of other people when you find that the opinion of other people matter to you. There is this innate need in us to be accepted by others. This is what leads us to seek out the opinion of other people. According to an article published on BeingHuman.org, as much as we need food and shelter, we also need acceptance. Even in the past, we needed to group together so we can survive by hunting in groups. Belonging to a group requires acceptance and that need in us fuels the importance of other people’s opinion. But here’s the thing – how important is it to you? Getting the opinion of other people is okay but make sure that you do your own thinking too. Do not blindly agree – think your way through it first.
How to keep yourself from contagious financial habits
We are not entirely saying that you should not let yourself be influenced, you just need to learn how to filter which influence will be worth your while. These is a connection between your money habits and your financial decisions because acting on your habits usually make you feel good. When that positive feeling is there, it helps you make a solid decision about your finances. After all, your emotions are one of the strong influencers in your life.
Here is a video of Professor David Tuckett, a member of the UCL Psychology and Language Sciences. He is explaining the role that emotions play in making financial decisions.
It is not yet a complete study but it is interesting that he said how emotions invested in a financial decision will help in the motivation of reaching a particular goal. That is part of the investment that you will personally make in your decision to act on certain money habits.
If you are intent on curing compulsive buying habits that are ruining your finance, here are some tips that we have for you.
- Buy stuff on your own. If you have to make a purchase, just do it on your own. This is one of the ways you can curb the most dangerous money habits there is – overspending. In addition to that, you may want to make a list of what you need to buy. Bring that list with you and do not go beyond that list.
- Look for a financial goal buddy. This will be a person that you will reveal your financial goals to so they can help tell you off if your decisions will take you further from your target. In most cases, this is a person with the positive money habits that you want to have – or at least, you both aspire to have the same financial behavior. It does not even have to be someone that you have known for a long time. It can be someone new. According to an article published on LiveScience.com, changing behaviors sometimes require someone new in the group. That way, they can bring something new to influence you with.
- Keep track of your finances. Identifying the good financial habits mean you have to start tracking where your money is going. That will help you identify what are the leaks and what should be prioritized. When you know your priorities, you will have the motivation to change any bad money habits that you may have.