How Our Beliefs About Money Affect Our Goals

The great writer Flannery O'Connor once remarked, "Free will does not mean one will, but many wills conflicting in one man."

And that's true - we are a collection of warring impulses, all jockeying for prime position. This observation is especially true when it comes to how we view money. Consumer society seems to measure success in dollar bills - but we're also told that money is no guarantee of happiness.

We all want to be financially secure. Unfortunately, too many of us are failing in that regard. Total American credit card debt topped $1 trillion in 2023 - an average of $5,733 per cardholder. Further, studies have shown that half of Americans couldn't come up with $2,000 in the event of an emergency, not to mention a projected retirement savings shortfall for most Americans.

Clearly, we understand the importance of intelligent financial decisions. Unfortunately, we're often failing to put our good intentions into practice.

Much of this can be traced to our conflicted psychological relationship with money. Intellectually, we know that we're supposed to save. We know that we're supposed to budget and avoid unnecessary expenses. Interestingly, another set of impulses within us is working to counteract our best-laid plans.

These are the same impulses that tell us to privilege today over tomorrow. We rationalize wasting thousands of dollars on luxury items. Or, ignore the bills we can't pay because "maybe they will just disappear." These are the beliefs and biases that undermine us. There's good news, however - through setting financial goals and creating a plan for achieving them, we can minimize the influence of these beliefs.

Looking for ideas? Here are a few to consider:

• If you have difficulty putting good intentions into practice, consider breaking down your goals into smaller pieces. Give yourself a few things that can be accomplished quickly and easily. Poor financial decision-making is a pattern; you need to break that pattern by creating a new one.

• Even the savviest financial person has to contend with cognitive biases. It is essential to cultivate awareness of these biases and work toward mitigating them.

• Set realistic goals. Aim for too much, too soon, and you'll likely get discouraged. It's also important to think about what you want. Money is just a means to an end. How can it help you achieve satisfaction and happiness?

• Keep a meticulous budget and write your goals down on paper. Make these things tangible. Your brain privileges ideas that are expressed on paper.

• Think about your future self in an empathetic fashion. It may sound rather abstract, but studies have shown that people who have done this (via an age-progressed photo) are more likely to make sound long-term financial decisions.

The Takeaway

When it comes to reaching financial goals, we're often our own worst enemy. By recognizing this fact, we can take steps to "outsmart our programming" and let the impulse toward sound financial decision-making come out on top.