The Impact of Behavior on Finances

"The impact of behavior on finances."

According to Notoatmodjo (2010), behavior is an activity or action of the organism or being in question. Human behavior encompasses a wide range of actions and activities, such as walking, running, sleeping, eating, drinking, and so on [1].

In the context of finance, behavior holds significant influence. Morgan Housel, a renowned financial writer, states that managing money well has little to do with intelligence and more to do with behavior [2]. This indicates that behavior has a substantial impact on an individual's finances.

Several influences of behavior on finances include :

1. Behavior in Daily Habits

Daily habits play a crucial role in one's finances. Income and expenses occur in daily life, so habits formed in these aspects significantly affect finances. Uncontrolled shopping habits and a lack of budget planning can lead to financial difficulties in the future. Conversely, saving habits and effective budget planning can have a positive impact on future finances.

Therefore, understanding how to manage daily habits, especially those related to finances, is a crucial step in building a solid financial foundation.

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2. Behavior in Facing Risks

Every individual has different behaviors when facing risks. Some prefer taking higher risks for greater returns, while others opt for a more conservative approach. Understanding one's personal risk profile and how it influences financial decisions is essential for building a sound portfolio.

3. Behavior in Saving and Investing

How individuals save and invest reflects their financial behavior. Some choose to save in banks, invest in the stock market, and so on, which can significantly impact their finances. Learning how to save and invest wisely can help individuals manage their finances prudently.

4. Behavior Towards Debt

Behavior towards debt also has a significant impact on one's finances. Habits of paying debts on time and managing debt wisely contribute to maintaining financial health in the long run. Conversely, accumulating debt without a well-thought-out management plan can create a heavy financial burden.

In summary, the impact of behavior on finances is substantial. Behavior can shape the direction of an individual's finances. Through understanding, careful planning, and risk management, individuals can build a stable financial foundation and achieve more successful financial goals.

Mushpih Kawakibil Hijaj, Shariavest Writer.

This text was translated from Indonesian to English using ChatGPT/Google Translate.

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References :

[2] Morgan Housel, The Psychology Of Money, Indonesian translation edition by Zia Anshor, Tangerang Selatan : Penerbit Baca, 2022, page. XV