The Life Cycle Effect

Are you young and reckless, or old, wise and conservative? While your age doesn't necessarily determine your attitude towards taking risks with money, it is generally true that the younger you are, the more time and opportunity you have to recover from any loss that you might make from taking risks. Taking on the responsibilities of a partner and children usually means a more cautious approach with your money, as does moving into retirement when loss of employment income reduces your ability to replace lost savings.

The Belief Effect

Your beliefs about money are instilled in you as a child. Think back to the things that your parents used to say about money, for example, 'money doesn't grow on trees', 'money is the root of all evil', or 'you have to have money to make money'. These beliefs, which are usually deeply embedded in your subconscious mind, can have a profound influence on your relationship with money in either a positive or a negative way.

The Wealth Perception Effect

One person's perception of how wealthy they are is not the same as another's. Whether or not you consider yourself to be wealthy will determine what you do with your money. For example, it is a well known phenomenon that when house prices rise significantly, home owners feel wealthier and are more inclined to borrow money to spend on their lifestyle.

The Experience Effect

Most people have had at least one bad experience with money or have heard of others who have, and these memories can influence behaviour and attitudes towards money. Business failures and share market crashes are two examples. Good experiences can also have an impact and the recent boom in property investment is an example where stories of fortunes being made have prompted new investors to enter the market in droves.

The Motivation Effect

Some people have a high level of motivation to be wealthy and some don't. There's not necessarily anything wrong with not being motivated to be wealthy - it's just that people measure success in different ways. For some people, success may mean living life in accordance with their values, such as being considerate to others, having a wide circle of friends, caring about the environment, or contributing to the community. Money is often of little importance in itself to such people and they don't aspire to accumulate a lot of it.

As you can see, your money personality is complex and it is influenced by many psychological factors that you may not even be consciously aware of. However, understanding your money personality will open the way for you to have a good relationship with money and to enjoy a richer and happier life.

Article by Liz Koh

Liz Koh is a financial adviser. A copy of her disclosure statement can be obtained on request and free of charge by calling 0800 273 847.

Ph: 0800 273 847

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www.moneymax.co.nz

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