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October 20, 2022

The Psychology of Financial Planning

Financial Planning
Financial psychology is the association of an individual's thoughts and feelings about money and how they manage it. How is your relationship with money?

People with a positive relationship with their finances are more likely to manage them well. These individuals typically have a financial plan in place that they are following to help them confidently reach their financial goals.

Unfortunately, with 87% of American homes in debt, it's no shock that money is the number one cause of stress in the United States, leaving many worried, overwhelmed, and without a financial plan to help.

Let's take a look at how financial planning can strengthen your relationship with money and help you achieve financial peace of mind.

Emotions Attached to Money

How we were taught to view money growing up directly affects our emotions attached to topics concerning finances. Our very first interaction with money comes from watching and listening to our parents or other adults.

How was money discussed in your household? Was it discussed at all?

These perceptions alter our view of money, which often carries on into adulthood, which is why it is so very important to know How to Talk to Children About Money.

Our lifestyle plays another huge role in our emotional view of our finances as well. We often repeat cycles that have been modeled for us.

For instance, generational wealth is wealth or assets passed down from generation to generation. This can include family businesses or investments. If your family has a knack for investing and managing their money, and taught you these habits along the way, you will be empowered to repeat that same cycle.

Of course, the opposite can be said for the other end of the spectrum as some financial cycles can impact individuals negatively. If you grew up in a family that didn’t stress financial literacy and had trouble sticking to a budget, saving, or investing, you may be more inclined to follow the same pattern of accumulating debt or spending beyond your means.

When individuals have negative past experiences attached to their financial outlook, they are less likely to do the work to develop and follow a financial plan that will help them better their financial future.

The Importance of Financial Planning

Financial planning does not have to be a complicated system or plan, just something you can use to achieve your financial goals.

Remember, it’s okay to start small. Don't overwhelm yourself by trying to develop a 30-year plan. Consider immediate, short-term steps you can take.

Implement small goals such as:
  • Saving a certain amount of money per paycheck or month
  • Setting up auto-pay for your recurring monthly bills
  • Eliminating impulse spending
  • Crafting a realistic budget you can stick to
  • Evaluating and reevaluating what you spend, save, and prioritize each month

Your plan should be tailored to you and your lifestyle. As you reach small goals, start making larger ones and you will be on your way to our next topic, achieving financial peace of mind.

Achieving Financial Peace of Mind

No matter where your beliefs about money originated or your current financial situation, financial planning is an excellent tool for obtaining financial peace of mind.

Build confidence in your relationship with money by gaining knowledge about healthy money habits and learning how to prepare a financial plan. It’s a simple fact, people with a solid financial plan in place are more financially secure than those without one.

You should also strive to be more prepared and better informed as you prepare to make financial decisions that impact your financial peace.

For example, if your car breaks down and you need to either pay for repairs or purchase a new vehicle, you’ll need to take a look at your budget to see what makes the most sense for staying on track with your financial goals. If you don't have a budget or plan in place when these emergencies happen, making a wise, informed decision about your finances just became a lot more challenging.

Having a strategy in place to operate from gives you more financial freedom and empowers you to make better choices concerning your finances. Save the time and energy spent worrying about what you can and can't afford by developing a plan you can stick with as your guide through financial decisions.

The bottom line is, how you feel about money dramatically impacts your money management. Developing a financial plan that works in favor of you and your lifestyle will help promote healthy habits that will better your finances and help you reach your ultimate financial goals.

Take the guesswork out of managing your money by working with one of our CommunityAmerica team members to get you on the road to financial peace of mind. Schedule an appointment with a Financial Advisor or Financial Well-Being Coach, or stop by any local branch to get started.

Also be sure to listen to our Community Conversation podcast below, where we get into more on the Psychology of Financial Planning:

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About the Author
Professional Photo of Heath Burch
Heath Burch

Wealth Management By CommunityAmerica

Heath is a Private Wealth Advisor who currently sits as President of the Board of Directors for the Liberty Education Foundation, and previously served as President of the Board for Variety Children’s Charity of Kansas City. He also co-founded the Special Needs Planning Center.

Securities and advisory services offered through Copper Financial Network, LLC (“Copper Financial”), a broker-dealer and SEC registered investment adviser. Member FINRA/SIPC. Copper Financial is a wholly-owned subsidiary of CommunityAmerica Credit Union (“CommunityAmerica”) and makes non-deposit investment products and services available to its members. Representatives are registered with Copper Financial. CommunityAmerica and Wealth Management by CommunityAmerica are not broker-dealers or investment advisers. For important disclosures from Copper Financial please visit here.


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