EXPLORING THE PERSONAL OF PERSONAL FINANCE:

Transcription

1 EXPLORING THE PERSONAL OF PERSONAL FINANCE: Understanding the Underlying Drivers of Money Behaviors Jennifer M. Staley Lesley Mace The views expressed are mine and not necessarily those of the Atlanta Fed or the Federal Reserve System.

2 OVERVIEW Introduction Financial Wellness: What is it and how to cultivate it? The Four LifeValues Learning from Life Values Additional Resources

3 Introduction

4 Financial Health: Common Questions & Concerns Regardless of job title, educational level or affluence, nearly everyone is concerned with the following: Sufficiency of their money. Do I have enough? Sustainability of their resources. How long will my money last? Appropriateness of their financial decisions. Is this the right choice for me?

5 The Path to Financial Wellness

6 HOW DO WE GET THERE? Financial Fitness Freeway Income Wages, pay stub, W-2, etc. Types & Establishment of Financial Accounts Taxes Spending Household bills/spending patterns/budget Borrowing Types of, Access to & Use of Credit Understanding Credit, Accessing & Making Sense of Credit Report, Building Solid Credit History Saving Establishing saving behavior & account (s) Investing Types of retirement/investment accounts Insurance Health/Life Insurance Renter s/homeowner s Insurance Vehicle Insurance

7 Financial Wellness: What Is It and How Do We Cultivate It? Wellness is an active process through which people become aware of and make choices toward a more successful existence. -National Wellness Institute Financial Wellness has several components: One s objective economic status One s subjective perception of your economic status One s financial behaviors One s satisfaction with your financial situation

8 ARE WE THERE YET? HOW TO KNOW WHEN WE VE ARRIVED According to the Consumer Financial Protection Bureau (CFPB), financial well-being is the state wherein one: Has control over day-to-day, month-to-month finances Has the capacity to absorb a financial shock Is on track to meet his/her financial goals Has the financial freedom to make the choices that allow him/her to enjoy life* *Because individuals value different things, traditional measures such as income or net worth, while important, do not necessarily or fully capture this

9 Financial Education to Financial Wellness: A Visual Look Financial Education: An ongoing process that must account for changes in the core areas of one s personal finances Financial Well-being Financial Capability Financial Literacy Amended Charter: President s Advisory Council on Financial Capability. n.d. Department of the Treasury. Recommendation on Principles and Good Practices for Financial Education and Awareness Organisation for Economic Co-operation and Development. PISA 2012 Results: Students and Money: Financial Literacy Skills for the 21st Century (Volume VI) OECD Publishing. Management/oecd/education/pisa-2012-resultsstudents-and-money-volume-vi_ en#page4. Financial Well-Being: The Goal of Financial Education Consumer Financial Protection Bureau.

10 FROM AWARENESS TO ACTION Content knowledge is not enough Akin to Health Education and Behavioral Change Food Choices, Physical Activity Self awareness is central component of financial wellness and fiscal fitness Human behavior flows from three main sources: desire, emotion, and knowledge. - Plato Awareness Mindful choices Informed behavior

11 YOUR UNIQUE FINANCIAL HISTORY A Starting Point What is Your Childhood History with Money Primary messages? Good memories? Negative memories? Childhood experiences and financial habits as an adult?

12 YOUR CURRENT FINANCIAL BEHAVIORS Asking Questions and Using Insight To Inform and Reflect on Money Behaviors Questions Why do I want to buy this/these items? How do I make spending decisions? Am I actively engaged or passive and reactive? Does my decision-making approach help me or hurt me? Insight LifeValues & Money Scripts

13 TWO TOOLS FOR UNDERSTANDING THE UNDERLYING DRIVERS OF YOUR MONEY BEHAVIORS Klontz Money Script Inventory The Life Values Profile Quiz, Institute for Socio-Financial Studies

14 UNDERSTANDING INFLUENCES ON FINANCIAL BEHAVIOR: Klontz Money Script Klontz Money Script Inventory Aim: To identify one s primary (and often subconscious) belief patterns about money and understand their correlation with and influence on financial behaviors. Research: Money Beliefs and Financial Behaviors: Development of the Klontz Money Script Inventory, Journal of Financial Therapy (2011, Vol 2, 11) How Clients Money Scripts Predict Their Financial Behaviors, Journal of Financial Planning (Nov. 2012) Bradley Klontz, Psy.D, CFP, Ted Klontz, Dr. Sonya Britt, Ph.D., CFP

15 UNDERSTANDING INFLUENCES ON FINANCIAL BEHAVIOR: Life Values Quiz The Life Values Profile Quiz, Institute for Socio- Financial Studies Aim: To develop a LifeValue profile to understand how the four LifeValues categories influence decision making and behavior Author: Lois A. Vitt, Ph.D. Values-Centered Financial Education: Understanding Cultural Influences on Learners Financial Behaviors Tool: Life Values Quiz (free and available online) 20 multiple choice questions

16 UNDERSTANDING INFLUENCES ON FINANCIAL BEHAVIOR: Life Values Quiz The Life Values Profile Quiz, Institute for Socio- Financial Studies, (Vitt, L.) Tool: Life Values Quiz (free and available online) Values-Quiz.aspx 20 multiple choice questions Four Life Values Inner Physical Social Financial

17 LIFEVALUES QUIZ What are your dominant LifeValues?

18 THE FOUR LIFEVALUES Inner LifeValues Psychological and spiritual Physical LifeValues Health and environment Social LifeValues Family, friends, and communities of interest Financial LifeValues Sufficiency, sustainability, appropriateness

19 INNER LIFEVALUES Include our Identity and social identity Desire to worship (or not) as we please Need for safety and security Constitute our desire for Freedom and independence Control over our life, goals, and priorities Shape our Sense of purpose and meaning Principles by which we live

20 PHYSICAL LIFEVALUES Pertain to the tangible aspects of life Amount of space we need Degree to which satisfied and fulfilled by aesthetic stimulation and material possessions Actual health of our bodies and measures we take to secure that health Desire for beauty and comfort

21 SOCIAL LIFEVALUES Values of belonging and relatedness Family (spouse, kids, parents, extended family) Friends Neighbors, coworkers Community Peer groups, organizational groups

22 FINANCIAL LIFEVALUES These are your subjective values about finances, unrelated to how much money you actually have. Reflect: What we think or believe about our money and financial affairs How we value money and what it can do for us They may or may not be related to what you actually know about money or finance.

23 INNER LIFEVALUES High I Score Clear sense of self Invest in self-expression, seek own sense of purpose, want an environment that reflects who you really are Do whatever you can to achieve your goals and make your dreams come true More concerned with own future and less regard for others needs or demands Low I Score May be a little out of touch with your need for personal expression Plans for the future might not be fully developed Spend money on other people or to achieve a particular lifestyle Might unwittingly be depriving yourself

24 PHYSICAL LIFEVALUES High P Score Want income in order to achieve a certain lifestyle or standard of living Value prosperity in order to enjoy material goods and comfort Want to enjoy your home and surroundings Plan for a comfortable future Low P Score Materials and consumables have little interest for you More focused on people or job satisfaction than keeping up with the Joneses Spend for others or for safety or self-expression Modest plans for the future

25 SOCIAL LIFEVALUES High S Score Look after the needs of others more than your own Seek to work and play with people you care about Favorite goals involve family and/or your community Low S Score May tend to make decisions in your own self interest Personal goals tend to be more important than family or community goals Decisions are made with loved ones in mind

26 FINANCIAL LIFEVALUES High F Score Like your job just for the financial aspects Like to get a good value for your money Planner for both the long run and short run Enjoy hands on financial decisions Value accuracy, organization, and discipline Low F Score Budgeting is annoying Job satisfaction drives your work Automatic systems work well for you Spending is aimed at relationships or lifestyle Impulse buying Don t enjoy money topics

27 Questions to ask yourself: Do your scores from the LifeValues Quiz accurately reflect you? How do you see the 4 LifeValues play out in your work or personal life? How do you see the 4 LifeValues play out in your financial decisions?

28 USING YOUR LIFEVALUES TO MAKE DECISIONS For each financial decision, you can ask yourselves: Am I doing or choosing this because it will (or I believe it will): Make me feel more secure or in control? (Inner) Increase enjoyment of my surroundings or is good for my health? (Physical) Connect me with others? (Social) Be appropriate, given my resources? (Financial)

29 USING LIFEVALUES TO MAKE A BUDGET How to apply this to building and maintaining a budget? Ideas?

30 RESOURCES Free Courses, Tools, Topics, Newsletter & More Money Basics, My Financial Well-Being Plan, My Emergency Fund Plan, My Housing Plan, My Retirement Plan, My Transportation Plan National Endowment for Financial Education (NEFE)

31 RESOURCES

32 ECON LOWDOWN ONLINE COURSES

33 PAGE ONE ECONOMICS: FOCUS ON FINANCE

34 PERSONAL FINANCE 101 CONVERSATIONS

35 PERSONAL FINANCE 101 CHATS

36 NO FRILLS MONEY SKILLS

37 CONTINUING FEDUCATION

38 BUILDING WEALTH

39 BUILDING WEALTH

40 HAVE QUESTIONS? (504) Jennifer Staley (904) Lesley Mace