Have you ever tried to set a financial goal only for it to fail? Don’t be discouraged, this is very common, as with any New Year’s resolution or bucket list item, goals are easy to set, but hard to maintain. At the Financial Wellness Center we are here to teach you methods that will support your financial journey. Setting financial goals starts with understanding our behavior and our psychology, what works and what doesn’t.
Positive Psychology: Asebedo, S. & Seay M. (2015)
Often when we look at fixing our finances we are thinking about how to escape dire situations. But, instead of just surviving in the final destination of our finances, we can use positive psychology to build a healthy relationship with money. This way we not only survive, but thrive financially.
Finances should be about building a foundation for ourselves and allowing growth to be made. At the same time, keeping our pockets tight and never treating ourselves to fun experiences because we are afraid to spend, won’t help us be fulfilled either. Positive Psychology introduces the idea of creating a balance and prioritizing your wellness.
The next time you set a financial goal or build a budget, look at your current lifestyle: How often do you like to go out? What hobbies do you prioritize? Is travel an important part of your life? You can account for all of these factors in your budget, picking and choosing what you can afford based on your income, needs, and savings.
Budgeting doesn’t have to be rigid and more often than not, your budget will fail if it is not realistic. Setting goals that you can actually maintain long term will be better for your finances and your overall wellbeing.
The HAPA Model: Schwarzer, R. (2008)
The Health Action Process Approach (HAPA) is a model mostly used for health behavior, but let’s try applying it to our finances. Through this model, look at your financial goals from the viewpoint of what can help or hurt your motivation to complete them.
Let’s break it down using an example!
Goal: Save 30% of your income by only spending a maximum of $40 a week on eating out.
There are three factors that contribute to your intention to actually work towards this goal:
1. Self Efficacy: how strong you think your self control is when it comes to spending on eating out and saving. Believe it to achieve it!
2. Outcome Expectations: what you think will result in you being able to save 30% of your income. Imagine what your life will look like when you complete your goal.
3. Risk Perceptions: what you will give up by giving yourself a spending limit. This can look like saying no to going out with friends or putting in more time to make meals at home.
Once you get through all these steps, there needs to be action planning, so you have a solid path towards your goal. You will also need maintenance of your perceived self-control, so you don’t doubt yourself and give up. Lastly, you need coping planning, so that if you overspend one week, you plan for the next week, and continue on without feeling discouraged.
This model walks you through the action, maintenance, and recovery of a goal. With all these steps in mind you can apply this model to your finances.
Theory of Reasoned Action: Fishbein, M. & Ajzen, I. (1975)
Are your goals your own?
Another theory we can use for understanding financial goals is the Theory of Reasoned Action. This looks at how other people impact our goals by combining our personal attitudes and subjective norms, which is the attitudes of those around us. Both of these factors feed into our intentions to complete a task, leading to our behavior.
Let’s break it down using the example from before!
Say you want to save 30% of your income by setting a limit of $40 per week on eating out. Your personal attitudes would be how you as an individual feel about making that change. Is this limit something that you feel is important to maintain your savings? The subjective norm would be how your friends, family, and people in your community would feel about you making this change. Do people in your life value saving or spending more? Would they be supportive of this goal or react poorly?
Believe it or not, other’s perspectives can heavily impact if you are going to make an intention to actually complete your goal. Without a strong intention, there is not going to be an active change in your financial behavior.
Look at who you surround yourself with and if their values align with your own.
Next Steps
Now that you understand what contributes to you actually completing your goals, you can set yourself up for success. Spend some time creating your dream budget and goals and going through each step you will need to get there. Pay attention to barriers that might get in your way and support systems that will make your goal easier to complete.
Understanding your psychology is the first step, the rest is up to you!
About the Author:
Aida Hassani
Bobcat Financial Coach Content Creator
Aida is a BFC Content Creator alumna at the University of California, Merced.
Read more about her here!
