Financial Psychology: How Money Influences Your Decisions

Introducing “A Rich Life,” a new column by Shaun Maslyk, Certified Financial Planner and Certified Financial Behaviour Specialist, that explores how financial psychology can help us understand our real-life money stories.

Money. Money. Money…

Pause for a moment and notice what you feel when you read the word “money.” That immediate reaction reveals a lot — it’s tied to emotions, memories and the stories you’ve built around money. That instant response is the psychology of money at work.

Why understanding the psychology of money matters

We rarely appreciate how deeply money affects our emotions and behaviour. Yet money shapes nearly every financial choice we make — from everyday spending to long-term planning. If you want real change in how you manage money, or simply to feel less stressed about it, exploring the emotions and beliefs behind your decisions is essential.

You don’t need a doctorate to do this. The aim of this column is to translate evidence-based research from financial psychology into practical, approachable insights so you can better understand your own money mindset.

Why information alone is not enough

Common financial advice assumes that if people had the right information they would automatically make better choices. But “knowing” and “doing” are two different things. We can consume endless books, podcasts and courses, yet still struggle to change habits.

Even with abundant resources, many people continue to feel money is a leading source of stress in their lives. That gap between knowledge and action is where financial psychology matters most.

What’s missing

Understanding money behaviour means paying attention to the psychological forces that drive our choices: emotions, unconscious beliefs, cultural messages and social pressures. Without this awareness, information alone won’t create lasting change.

Enter financial psychology

Financial psychology — also called the psychology of money — examines why people behave the way they do with money. It studies cognitive biases, emotional reactions and social influences that shape decisions. Instead of focusing on numbers and formulas, it focuses on the human side of money.

Why does one person chronically overspend while another hoards cash? Why do we keep repeating the same financial mistakes despite knowing better? The answers usually lie in unconscious beliefs and emotional patterns formed by family, culture and life experiences.

If you want to change persistent money habits, start by exploring your own financial psychology. It’s not an overnight fix, but it leads to more durable, meaningful change.

“Until you make the unconscious conscious, it will direct your life and you will call it fate.”

—Carl Jung

Here are some common behavioural tendencies that shape financial choices:

Confirmation bias: We tend to seek information that confirms what we already believe and dismiss evidence that contradicts us. This can lock us into unhelpful money habits and prevent learning. To counteract it, deliberately expose yourself to alternative viewpoints and question assumptions before making decisions.
Loss aversion: People generally feel losses more intensely than gains of the same size, which can make us overly cautious or lead us to hold losing investments too long. Recognizing this bias helps you make more balanced, evidence-based choices rather than emotionally driven ones.
Overconfidence bias: Overestimating our knowledge or control can lead to risky financial moves. Examples include taking speculative bets or underestimating the need for diversification. Being mindful of limits and seeking objective feedback helps temper overconfidence.

How financial psychology can help you

Therapy, counselling and reflective financial coaching create the space to notice how your thoughts, feelings and actions align — or don’t. That self-awareness is the first step to changing repeated patterns. When you slow down to examine the “why” behind choices, you can replace reactive habits with intentional strategies that support your goals.

We weren’t evolved to manage modern money

Human psychology evolved for survival in uncertain environments, not for decades-long financial plans. Our ancestors focused on immediate needs rather than saving for distant futures. Those instincts — attentiveness to the present and heightened emotional responses — helped survival but can work against us now.

Recognizing that these instinctual tendencies are natural reduces shame and makes change more possible. Once we see how our wiring influences financial decisions, we can design systems and habits that compensate for those instincts.

How to begin changing your money story

Start by accepting that many financial regrets and recurring mistakes are meaningful signals pointing to beliefs beneath the surface. Exploring those beliefs helps explain why certain patterns repeat.

Try this short reflective exercise to get started:

Putting it into practice

Spend five to ten minutes answering these prompts:

What does money mean to you?
How do you make decisions about money?
What beliefs do you hold about wealth, earning and saving?
How do you feel when you think about money?

For deeper insight, draw a large oval on a blank sheet and sketch one image inside the oval for each question. Next to each image, write a single word that captures the emotion you feel. Finally, read the whole page and summarize the moral of your money story in one sentence: “In this picture, the moral of my money story is…”

The bottom line

Bringing unconscious beliefs into conscious awareness is the foundation for reducing financial stress and changing behaviour. Financial psychology helps you notice primal money reactions, understand their origins, and then take practical steps to manage them. That process creates space for clearer decisions, healthier habits and greater financial well-being.

Shaun Maslyk is the host of the podcast The Most Hated F-Word, which explores the psychology of money and helps listeners understand their relationship with it. As a Certified Financial Planner and Certified Financial Behaviour Specialist, Shaun offers practical guidance on improving financial well-being.