Money & Psychology – Part 1

For the next few weeks, I want to discuss money and psychology. What are some of the tactics of marketing that can cause us to consume irrationally?

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Podcast Details:

Podcast Title:  Money & Psychology – Part 1

Podcast Series: The Maven’s Keys to Financial Contentment

The Maven’s Keys to Financial Contentment is my idea that true financial contentment can be found when an overlap of money and beliefs occur.  Many people ask the question of how to be “financially content” and this is a discussion to uncover those answers.

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The 5 Ways to Spend Money
For the next few weeks, I want to discuss money and psychology.I’m going to begin this series with a concept I read in Ron Blue’s Book “Master Your Money”. And I’d like to use that as context to set up the first part of this discussion. He mentions a lot of things in this book and I highly recommend it for its principles and content.

There are 5 ways to spend money he says:

1) Tax Payments
2) Debt Payments
3) Giving
4) Lifestyle Support
5) Saving

I bring this up because of these 5 ways there are some that are pretty constant…the first 3 ways are going to be “constants.” No matter how much you try, most of your income will be spent in those categories.  Taxes alone can take almost 40-50% of what you make over your entire life span…even when you die!

So this means that lifestyle support and saving fall to the bottom of the list in priority and proportion of income remaining to allocate there. Further, if you are over-consumptive in nature, you will have even less to save and invest.

And this is where “marketing” psychology comes into play.   I’ll discuss this more in Parts 2 and 3 of this series for you.  But, in short, you have to realize that the greatest marketing companies which are out to sell a good or service understand this hierarchy (of spending) and they are vying for a piece of the pie. They are hoping and putting a lot of effort into the “bet” that you will regard #4 over everything else on the list. Therefore, they use various tactics to make you consume more, when in reality a large portion of that consumption is unncessary at the time you consume it or AT ALL.

Next week, we’ll discuss some of those tactics that are being used “against us.”

#finlit
#behavioralfinance
#behavioraleconomics
#moneymindset
#psychology

 

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About Me:
Dominique Henderson, CFP® is founder of DJH Capital Management, LLC., a fee-only, registered investment advisory firm specializing in comprehensive financial planning and wealth management.

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Author: The Maven of Financial Literacy

Dominique is owner of DJH Capital Management, LLC. a full service, comprehensive financial planning firm helping individuals build roadmaps to reach their financial dreams.