Rask - Behavioural finance 101: Your money mindset [Part 2 of 12]
The podcast emphasizes the significance of recognizing and understanding one's relationship with money, which is often established by the age of seven. This mindset can greatly influence financial success and decision-making. The hosts discuss common behavioral patterns such as self-sabotage, avoidance, and the stop-start pattern, which can hinder financial progress. They stress the importance of awareness and setting up systems to manage these behaviors effectively. Practical advice includes setting up bank accounts for specific purposes, implementing spending bans, and using tools like journaling to track and understand financial habits. The discussion also highlights the impact of money mindset on relationships, particularly in couples, and the need for open communication and understanding of differing financial backgrounds. The episode concludes with the importance of starting small, focusing on one habit at a time, and gradually building better financial behaviors.
Key Points:
- Recognize and understand your money mindset, often set by age seven, to improve financial success.
- Common behavioral patterns like self-sabotage and avoidance can hinder financial progress.
- Awareness and systems are crucial for managing financial behaviors effectively.
- Money mindset impacts relationships; open communication is essential for couples.
- Start small by focusing on one financial habit at a time to build better behaviors.
Details:
1. 🎙️ Welcome to the Australian Finance Podcast
- Beta shares, a leading ETF provider in Australia, sponsors the podcast, supporting its mission to educate listeners about financial topics.
- Serving thousands of financial advisors and over 1 million investors, Beta shares plays a critical role in the financial landscape.
- The company manages tens of billions of dollars for investors nationwide, highlighting its significant influence and expertise.
2. 📢 Disclaimer: General Financial Information Only
2.1. Podcast Disclaimer
2.2. Podcast Introduction
3. 🧠 Financial Mindset and Behavior: An Overview
- Financial behavior goes beyond transactions, impacting bank statements over time. This relationship suggests that financial habits are deeply intertwined with personal values and principles.
- Goal setting is crucial for financial alignment. Revisiting the first episode on goal setting is recommended for understanding how personal values influence financial goals.
- Practical examples include setting specific financial targets that reflect personal values, such as saving for a family vacation, which ensures that financial decisions are meaningful and aligned with one's core values.
- Listeners are encouraged to assess their financial habits by identifying key values and setting goals that reflect those values, thereby fostering a more intentional relationship with money.
4. 🔍 Exploring Money Mindset's Impact on Financial Success
- Money mindset significantly influences financial success, affecting all aspects of life.
- Research indicates that money mindset beliefs are typically established by age seven, making later changes challenging.
- A poor money mindset can lead to patterns such as self-sabotage and avoidance, hindering the effectiveness of financial plans.
- Understanding and improving one's money mindset is crucial for overcoming obstacles and achieving financial goals.
- Financial advisors often encounter clients whose poor money mindset creates roadblocks, even with a solid financial plan.
- To improve money mindset, individuals can engage in self-reflection and adopt positive affirmations to reshape their beliefs.
- Successful examples include individuals who have shifted their perspective from scarcity to abundance, thereby improving their financial outcomes.
5. 🔄 Patterns of Behavior: Stop-Start and Avoidance
- The 'stop-start' pattern is a common behavioral issue that affects various life aspects, such as fitness and financial goals. This involves intense periods of activity followed by inactivity, leading to inconsistent progress.
- An example is given with fitness goals, where individuals may exercise diligently for two weeks and then stop for a month, indicating a lack of sustained commitment.
- This behavior is also prevalent in financial management, where individuals may set New Year's resolutions with a detailed budget and goals but fail to maintain the momentum.
- The CEO of a major bank highlighted the importance of consistent habits over mere financial success, noting that even with significant wealth, his problems remained unsolved due to inconsistent personal practices.
- Key to overcoming the 'stop-start' pattern is developing a mindset and daily habits that support ongoing progress, rather than relying on sporadic bursts of effort.
6. 🛡️ Strategies for Managing Money Habits and Mindset
6.1. Maintaining Motivation and Systems
6.2. Habit Formation and Journaling
6.3. Avoidance and Self-Sabotage
6.4. Common Mistakes and Misconceptions
7. 🧩 Tools and Techniques for Financial Self-Awareness
- Recognizing and acknowledging behavior patterns related to money is crucial, as these are often established by age seven and cannot be changed overnight.
- Awareness of financial behavior patterns helps identify whether they serve as superpowers or limitations, allowing for strategic adjustments.
- Setting systems and parameters, such as guardrails, can help manage poor money mindsets, like guilt around spending, by creating intentional spending habits.
- Transitioning from understanding patterns to implementing strategies involves setting up systems that align with one's financial goals and values.
8. 💬 The Role of Money in Relationships
8.1. Personal Financial Management Strategies
8.2. Impact of Money on Relationships
9. 📈 Building Positive Money Habits: Goal Setting and Reflection
9.1. Awareness and Impulse Control
9.2. Goal Setting and Reflection
10. 🔄 Habit Stacking and Behavioral Change
- Habit stacking involves incorporating new habits into existing ones, such as using the time while waiting for dogs to do their business to study a language on an app.
- Using small, consistent actions, like habit stacking, can lead to significant behavioral changes over time, similar to compound interest in finance.
- Integrating new habits slowly, one at a time, rather than attempting to make multiple changes simultaneously, increases the likelihood of success.
- Tracking behaviors and emotions using a notes app can provide insights into personal reactions and help identify patterns or triggers.
- Acknowledging and reflecting on emotional responses, such as to an electricity bill, can lead to better self-awareness and understanding of personal triggers.
11. 📚 Resources and Recommendations for Financial Growth
- Incorporate journaling and to-do lists to effectively manage work stress and clear mental space, enabling focus on financial growth without distractions.
- Explore books like 'Psychology of Money' and financial independence courses to understand spending habits that lead to happiness, with practical exercises for self-assessment.
- Read 'Good with Money' by Emma Edwards for insights into financial literacy and practical money management skills.
- Consider money coaching and financial advice to enhance personal finance management and decision-making skills.
- Engage with community platforms to share experiences and learn from others' challenges in overcoming financial behavioral issues. Participate in forums or podcast discussions for collective growth.
12. 📊 Understanding BetaShares and the NASDAQ 100 ETF
- BetaShares has been operating in Australia for over 10 years, serving over 1 million investors.
- The NASDAQ 100 ETF (ticker: NDQ) is popular because it provides Australian investors exposure to leading US companies like Apple, Microsoft, and Tesla.
- The ETF targets the NASDAQ 100, focusing on forward-facing industries such as tech, consumer discretionary, and healthcare, which have long-term growth potential.
- The ETF does not focus heavily on financial companies, emphasizing growth and innovation through investments in AI, robotics, healthcare, and cybersecurity.
- Companies in the ETF have outperformed the broader US market with revenue growth up to four times faster due to heavy reinvestment in R&D.
- The NDQ ETF charges a yearly management fee of 0.48%, deducted automatically.
- Australian investors use the NDQ ETF for core portfolio investments or as satellite exposure to top global firms.
- Investors are advised to read the product disclosure statement (PDS) and target market determination (TMD) available on the BetaShares website.