Money is one of the biggest stressors. Financial stress can even trigger a crippling feeling and have psychological and physical health consequences. For most of us, it's probably more likely to make a guilty conscience. Instead of doing more to save for retirement, we often suffer from procrastination.

I think we would all like to be the homo economicus when we have to make financial decisions. Only in the rarest cases can we really include all information and switch off our emotions. According to Nobel Prize winner Daniel Kahneman, 90 percent of our financial decisions are emotional. Of course, we shouldn't make decisions lightly and based on gut feeling, but greater financial well-being requires greater awareness that emotions play a key role in financial matters. More self-reflection and mindfulness can contribute to financial health.

So how do we get healthier financially?

First, it is important to understand how our attitude towards money and financial behavior has developed. This is because this happens much earlier than most people think. At the age of seven to nine, our financial habits, which we carry with us into adult life, are already solidifying. Our childhood is therefore definitely formative, for example whether we can do well later on, whether we would rather blow everything on the head or be very economical. So when we look at our financial habits today, it's helpful to remember the past and reflect on what has shaped you and is still moving you.

Second, — and this fits in wonderfully with childhood experiences — in Germany we barely talk about money. But we should! We don't talk about it because it's considered rude or even taboo. Even as children, we learn “You don't talk about money.” Talking about money is often associated with shame. Because we are often led to the misconception that others certainly have much better control over their finances than we do ourselves. This shows that talking about money actually increases financial well-being. You can exchange ideas, get inspired or get help.

Third, we must be nicer to ourselves. We all make mistakes — even when it comes to money. Instead of blaming ourselves, we should focus on self-reflection. Were there any reasons why we decided or acted this way? Can we end a solution or learn something from it for future decisions? We often don't address our own financial needs and behaviours. Mindfulness can increase our financial well-being here.

Fourthly, we must pay more attention to the fact that finances are individual and personal. We all have different requirements, are in different life situations and have individual needs, wishes and goals. Rules of thumb are often not really practicable. Nevertheless, we feel bad when we are unable to comply with them. Instead of being demotivated, grab your personal spending overview and see if you could use your money for something else after all.

Fifthly, “Life can be messy.” We can suffer a variety of financial shocks. This could be the loss of a job, a separation, or the loss of a loved one. But something can simply break down, such as the car or the washing machine. It is precisely for such situations that we should have a nest egg so that we can bridge difficult times or extra expenses and not end up having to say that this event has prevented us from preparing.

Sixthly, we must trick ourselves. We know how important saving and retirement planning are. Unfortunately, it is often more difficult for us to set aside money for the future than spending money in the present. This is because our brain is programmed in such a way that it prefers immediate satisfaction (e.g. by buying a super chic winter coat). Saving can even feel like a loss sometimes, as it limits our spending budget in the present tense. It's a dilemma. But we can also use our own programming here. Because we can often imagine better behavior in the future, even though we probably won't implement it in the end. Everyone knows it: You tell yourself that you're going to eat healthier from Monday, but you can really hit it again today. But when the time comes, people will probably choose a burger instead of a salad on Monday as well. But if you have already shopped for a salad, it increases the chance of eating healthier. So plan to save money for the future and combine this project with automation, e.g. a standing order. For even more trickery, it's best to specify the savings amount. This makes it harder for us to use what we have saved for something other than the intended purpose.

Seventh, we need to celebrate more. Small successes and progress are important, they strengthen us and help us stay on track. Instead of just paying attention to major milestones, we should also pat ourselves on the back when we have set up a standing order for a savings goal or a savings plan for retirement planning.

Maybe it just needs money dates. With ourselves. With friends. An hour with a delicious coffee or glass of wine, where we reflect on our finances.

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sources:

Daniel Kahneman (1979) Prospect Theory

Cambridge University, Whitebread, D. & Bingham, S. (2013): Habit Formation and Learning in Young Children Havard Business Review (2021): Why Are We So Emotional about Money?

Beshears, J. (Havard Business School), Milkman, K. (Wharton School of Business), Burke, L. & Fahey, A. In money.com (2016): The Science Behind You Don't Save (And What To Do About It)

Vox Media (2022): Money is emotional — but personal `nance advice rarely accounts for that

Börsch-Supan et al. (2018): Saving Regret

TED Talk (2011): Shlomo Benartzi — Saving for Tomorrow, Tomorrow

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