HOW BEHAVIORAL FINANCE SHAPES YOUR FINANCIAL DECISIONS
- Derek Hagen
- Oct 2
- 3 min read
❝Humans are not built to be perfect. We are built to survive, often at the expense of our long-term goals.❞ -Dan Ariely
Money decisions aren’t just about math. They’re about psychology.
If you're interested in values-based financial planning, here's how to work with a Money Quotient-trained financial life planner.
We like to think we’re logical, but most of us have stories that sound like this:
Selling a stock feels impossible if it means “locking in the loss.”
Spending an inheritance feels harder than spending our paycheck.
The first house price we see becomes the yardstick for every other house.
These aren’t random quirks. They’re patterns psychologists call biases, or mental shortcuts that help us survive but sometimes work against our long-term goals.
SPOTTING THE PATTERNS
Behavioral finance gave us a language for these shortcuts: anchoring, recency bias, loss aversion, and mental accounting.
For example:
We fear losing $20 more than we enjoy finding $20.
We put money in “mental buckets” (vacation fund, bonus, inheritance) instead of seeing it as part of a whole.
We look at what’s happening right now and assume it will keep going.
The value of this first layer is awareness. We all have blind spots, and noticing them gives us more freedom to choose differently.
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Money Scripts® are subconscious beliefs we have about money that we learn these we are growing up in our family systems. A Money Script can be anything, but they tend to fall into four categories. Learn what categories your Money Scripts fall into. |
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BUILDING BETTER SYSTEMS
But awareness only gets us so far. Knowing the term “loss aversion” doesn’t make the fear of loss go away.
The next step is design. We can build systems that work with our tendencies, instead of against them.
Here’s what that can look like in practice:
Loss Aversion → Instead of focusing on what you might lose, reframe choices around what you’ll protect or gain in the long run.
Present Bias → Automate savings and investments so you don’t have to choose between “spend now” and “save later” every month.
Status Quo Bias → Set smart defaults. Automatic rebalancing or contribution increases help you stick to good habits without extra effort.
THE TOOLKIT YOU ALREADY HAVE
Behavioral finance isn’t about labeling yourself irrational. It’s about recognizing that you’re human and using that knowledge to your advantage.
When you design your environment with these principles in mind, you:
Make saving and investing easier.
Reduce the chance of emotional mistakes.
Align today’s choices with tomorrow’s goals.
You don’t need to be perfectly rational to make progress. You just need tools that fit the way your brain actually works.
Behavioral finance gives you those tools—not as labels, but as systems that help you turn intention into action.
Because at the end of the day, money decisions aren’t about being flawless. They’re about being human—and setting yourself up to thrive anyway.
You get one life; live intentionally.
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REFERENCES AND INFLUENCES
Ariely, Dan: Predictably Irrational
Ariely, Dan & Jeff Kreisler: Dollars and Sense
Clements, Jonathan: How to Think About Money
Kahneman: Daniel: Thinking Fast and Slow
Pompian, Michael: Behavioral Finance and Wealth Management
